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Paying with Out-of-State Payroll Checks and Payroll Bank Cards

Employees are paid generally in one of three ways: direct deposit, pay check, or bank card (similar to crediting a debit card). The law in California, Labor Code Section 212, requires that the employer pay the employee on pay day in full without discount. The statute goes on to say, that if the individual is paid by check, the check MUST include the name and a California address where the employee can cash the check without a check charge.

Some employers often seek to game the payroll process. This term applies when employers prevent their employees from getting their FULL pay on pay day, without any discount, by consciously creating an additional float. By gaming the system, employers create an additional 4-6 day float that allows employers to maintain or even increase their average bank balance for an additional four to six days. As a result, employers are able to effectively earn interest from money that legitimately belongs to their employees. Expressed another way, employers are earning money at the expense of their workers. Moreover, many banks provide greater perks to their corporate business clients who maintain large balances.

Here are some of the problems that unfairly burden employees when paying with out-of-state payroll checks:

  1. The issuance of out of state paychecks can cause employees to wait often a week or ten days for the out-of-state check to clear before the local bank will release the funds. If the employee needs money immediately, he or she is forced to go to a check cashing establishment and pay a check cashing fee. While the amount of this fee can sometimes seem nominal, forcing employees into this type of situation is unconscionable, and the practice of paying employees with out of state checks must be stopped.If an employee works for a minimum wage of $8.00 per hour and works 40 hours per week, he or she will be grossing only $320 per week; yet because the employee was paid with an out of state paycheck, he or she may have to pay a check cashing fee from $5 to $30. The employee should be able to spend this money to put food on the table, not to pay check cashing fees.
  2. Many employers pretend to be in compliance with state law when they issue checks drawn on local banks. However, as frequently happens, when the employee tries to cash his or her check, unless the employee maintains an account at the same bank as the employer, the bank assesses a $5 fee.
  3. Employees who are paid by a money card, are generally allowed to make one free cash withdrawal for each pay period, but not to exceed $400. Most employees who are paid with money cards are charged service fees for their ATM withdrawals. Once again, this illegitimate payment method is wrong because ultimately the employees are forced to pay these charges. My office has successfully litigated more than 30 of these types of payroll scams. If any of these payroll scams are occurring at your job, I want to hear about it. I strongly urge you to step up and protect your legal rights.