Michigan employers should take note that the state legislature recently passed a new law amending the Payment of Wages and Fringe Benefits Act, which was signed by Governor Granholm and became immediately effective on December 21, 2010, that may allow employers to implement significant cost savings by eliminating traditional paper paychecks for their employees.

The new law provides that an employer may require employees to receive wages only through direct deposit or through a payroll debit card if the employees are provided with (1) a written form (example below) allowing the employee the option to receive wages either through direct deposit or through a payroll debit card; (2) a statement indicating that failure to return the form within 30 days with the information needed to implement direct deposit will be presumed to indicate consent to receiving wages through a payroll debit card; and (3) written disclosure of certain terms and conditions related to use of the payroll debit card.

However, if employees are subject to a collective bargaining agreement, the method of wage payment may not be changed without negotiating with the union, unless the collective bargaining agreement provides otherwise.

To comply with the statute, payroll debit cards must have certain statutorily mandated characteristics, including allowing the employee to make one withdrawal or transfer for free per pay period and providing a method for unlimited balance inquiries without charge.  Employers may not "pass along" to employees any fees or costs incurred in establishing a direct deposit or payroll debit card payment system.

If you have any questions about the new law, or need assistance in implementing its provisions at your company, please contact John R. McGlinchey or Kristen L. Baiardi at (313) 566-2500.  

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DIRECT DEPOSIT OR PAYROLL DEBIT CARD ELECTION FORM

Employee Name:  ________________________________ 

Employee SSN: __________________________________ 

I choose:

____  To have my pay directly deposited to my account at the financial institution indicated below:

Financial Institution Name:  ___________________________________________ 

Bank Routing Number:  ______________________________________________ 

Bank Account Number:  ______________________________________________ 

Designate Type of Account (choose only one):

              ____  Checking Account               ____  Savings Account

Please attach a voided check.

PLEASE NOTE THAT, EXCEPT FOR EMPLOYEES CURRENTLY PAID BY DIRECT DEPOSIT OR ANY EMPLOYEE OF AN EMPLOYER PAYING WAGES BY PAYROLL DEBIT CARD TO 1 OR MORE OF ITS EMPLOYEES ON JANUARY 1, 2005, FAILURE TO RETURN THIS FORM WITHIN 30 DAYS OF RECEIPT WITH ACCOUNT INFORMATION NECESSARY TO IMPLEMENT DIRECT DEPOSIT WILL BE PRESUMED TO INDICATE CONSENT TO RECEIVING WAGES THROUGH A PAYROLL DEBIT CARD.

____  To receive my pay through a payroll debit card

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