Pa. Court Says Direct Deposit to Prepaid Cards is Illegal for Wages

by Ben Jackson 0

Direct deposits to a prepaid card do not qualify as “lawful money of the Unites States or check” according to a Pennsylvania Appeals Court. In the Case of Siciliano v. Albert/Carol Mueller, the court said that paying employees with a prepaid card did not satisfy state law, Bloomberg BNA reported.

The Pennsylvania General Assembly didn’t contemplate payments on debit cards when it passed the Wage Payment and Collection Law, Judge Anne E. Lazarus wrote Oct. 21 for the Superior Court of Pennsylvania. Money, undefined in the statute, is defined in dictionaries to mean bills and coins with value. The statute defines a paycheck as an order that directs a payer to pay someone on demand. Neither of these meanings includes debit cards, Lazarus said.

The American Payroll Association argued that there should be an exemption for payroll cards just as there is for bank accounts.

Payroll debit card accounts should be considered permissible direct deposits accounts, like when employees receive pay in a bank account, [Cathy Beyda, an attorney who serves as volunteer chair of the APA’s subcommittee on payroll cards] said. A bill she expected to pass the General Assembly in the next few days, SB 1265, would specify that depositing funds into an employee’s “payroll card account” would satisfy the requirement to pay in lawful money or by check.

The plaintiff’s attorney argued that there was no relationship established with the payroll card’s issuing bank, so the direct deposit exemption for banks did not apply.

(Read the story here:

The problem seems to be that two concepts have been conflated in the Court’s decision. It ruled that deposits to a “debit card” are not lawful money, and also that workers cannot be compelled to accept their wages in a way that costs them money. The latter principle is one that is well established in state payroll laws. But the ruling that direct deposits to the cards is not lawful money opens up a potential can of worms for anyone who chooses to use payroll cards to receive direct deposit of their wages. The court hedges a little on this issue.

The use of a voluntary payroll debit card may be an appropriate method of wage payment. However, until our General Assembly provides otherwise, the plain language of the WPCL makes clear that the mandatory use of payroll debit cards at issue here, which may subject the user to fees, is not. See note 4, supra


But the problem is that they have made a categorical definition that excludes prepaid cards.

The WPCL states that wages “shall be paid in lawful money of the United States or check.” 43 P.S. § 260.3 . The language is clear. A debit card is not “lawful money” and it is not a “check” as contemplated by the drafters of the WPCL. We agree with the learned trial judge, the Honorable Thomas Burke, Jr., that the Legislature obviously did not contemplate the concept of a payroll debit card when it adopted the language of section 260.3 in 1961.

They write that this is because the debit cards do not fall under the definitions and the payroll cards used by the plaintiff “forced the user to incur fees…unless the employees complied with the requirements of the bank/company issuing and managing the debit cards.” If this is the case, then it is hard to see how the cardholders do not have a relationship with a bank. More importantly, all prepaid cards and bank accounts – and certainly all check cashers — carry some kind of fees. Yet, to a non-lawyer’s eye (and possibly to future plaintiff attorneys’ eyes?) because the of the definition question, anyone receiving wages on a card potentially has put their employer in violation of the law.

The best hope is that the General Assembly passes the law mentioned above, because otherwise large groups of low-income consumers face the risk of being pushed back into an expansive cash economy.

You can read the judges’ opinion here:

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group

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