Legislation regulating the use of payroll cards authored by Assemblywoman Mariko Yamada, D-Davis, cleared its first legislative hurdle last week. AB 51 was approved 5-1 by the Assembly Labor & Employment Committee.

Payroll cards are a wage option for employers who provide employees with a card, similar to a debit or ATM card, which has an account attached to it. Each pay period, the employer deposits an employee’s wages into the account via the employer’s financial institution instead of using direct deposit or issuing a traditional paycheck. While this payment system decreases payroll costs for the employer, the employee can incur fees on withdrawals, point-of-sale purchases and services associated with the card when accessing their wages.

The payroll card system affects low-income and frequently unbanked workers because they cannot afford to lose any of their wages to banking fees, Yamada said in a news release.

AB 51 would create employer guidelines for the use of payroll cards by, among other things, prohibiting an employer from making use of a payroll card as a condition of hire or continued employment; requiring employee informed consent to use a payroll card; prohibiting employers from passing excessive fees to their employees, and; requiring employers to fully disclose the terms and conditions, including fee information, associated with the use of payroll cards.

AB 51 now moves to the Assembly Banking & Finance Committee.

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