McDonald’s Franchisee's Debit Card Scheme Declined

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By Jon Steingart

Oct. 24 — A McDonald’s franchisee’s practice of paying employees with payroll debit cards doesn’t satisfy a state law that requires compensation “in lawful money of the United States or check,” a Pennsylvania appeals court ruled ( Siciliano v. Albert/Carol Mueller , Pa. Super. Ct., No. 1321 MDA 2015, 10/21/16 ).

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.

Employers around the country will face new Consumer Financial Protection Bureau rules ( RIN:3170-AA22) regarding payroll cards that will phase in beginning Oct. 1, 2017. Among other things, the rules require disclosures such as overdraft fees and whether balances are protected if a card is lost or stolen.

Bank Deposits Qualify as Money or Check

The American Payroll Association filed an amicus brief telling the court that disbursing funds onto payroll debit cards should be allowed under an exception for direct deposits, Cathy Beyda, an attorney who serves as volunteer chair of the APA’s subcommittee on payroll cards, told Bloomberg BNA Oct. 24.

Pennsylvania’s banking code allows payments to be made by direct deposit into an account when the employee requests it, David Senoff, an attorney for the workers, told Bloomberg BNA Oct. 24. The request has to be voluntary and the employee has to have the opportunity to revoke it at any time, he said.

The wage payment law allows disbursements into bank accounts but not debit card accounts because of the banking code exception, Senoff said. As a condition of using the payroll cards, “the debit cards in this case clearly established that there was no banking relationship” between employees and the issuer, JPMorgan Chase, he said.

Payroll debit card accounts should be considered permissible direct deposits accounts, like when employees receive pay in a bank account, Beyda 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.

An attorney for Albert and Carol Mueller, the franchisee’s owners, said they are evaluating next steps.

Senoff is with Anapol Weiss in Philadelphia. Caroselli, Beachler & Coleman, L.L.C. attorneys William Caroselli in Pittsburgh and Lauren Fantini in Philadelphia and Michael Cefalo of Cefalo & Associates in Philadelphia also represented the McDonald’s workers.

Matthew Hank, Paul Sopher and Rachel Fendell Satinsky of Littler Mendelson P.C. in Philadelphia and Daniel Brier and Nicholas Kravitz of Myers, Brier & Kelly, L.L.P. in Scranton, Pa., represented the Muellers.

Alice Jacobsohn, senior manager, government relations for the American Payroll Association in Washington, D.C., represented the association.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

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