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N.Y. DOL Fires Back at Industrial Board of Appeals, Global Cash Card

The New York Department of Labor has fired the latest salvo in the battle over the use of payroll cards in the state. The agency has filed an appeal that could jeopardize the outcome of a petition granted to Global Cash Card to revoke the N.Y. DOL payroll card regulations, which were due to go into effect March 7, 2017. At stake are rules that are considered so burdensome by the prepaid industry that—if restored—could force some payroll card providers out of New York.

Roberta Reardon, commissioner of the N.Y. DOL, filed an appeal April 17 against Global Cash Card and the state’s Industrial Board of Appeals, which granted Global Cash Card’s petition, with the New York State Supreme Court in Albany County. Reardon also filed April 24 a memorandum of law (MOL), supporting its appeal. (Note that in New York, the Supreme Court is a trial court and the Court of Appeals is the highest court in the state.)

The industrial board’s decision “should be annulled because it was arbitrary and capricious, and affected by multiple errors of law,” according to the MOL. Reardon maintains, among other assertions, that the board “fundamentally misinterpreted” the Wage Payment Rules by reading them as seeking to govern financial institutions and prohibit payroll debit card issuers from charging fees, when the rules only impose restrictions on how employers pay wages. According to the rules, financial institutions may charge fees as long as employers ensure those fees are not deducted from employees’ wages, and regulating such conduct is within the scope of the employment relationship and the commissioner’s authority to regulate the payment of wages, she contends. Also, Global Cash Card can’t challenge the rules because it hasn’t suffered any actual injury, and the rules don’t extend beyond the labor department’s purview to the point they’d be preempted by federal financial regulations, according to the MOL.

Defending its Turf

Reardon calls the Wage Payment Rules a reasonable exercise of the commissioner’s discretion. “This expertise includes issuing a series of authoritative opinion letters specifically concerning payment of wages by payroll debit card beginning in 2001, long before adoption of the rules, and when debit cards were a newly emerging method of paying wages,” according to the commissioner in the MOL. “In order to clarify, unify and codify this longstanding guidance, the commissioner acted well within her authority in adopting the Wage Payment Rules in 2016.” Reardon calls on the court to annul the board’s decision and grant any appropriate relief requested in the petition.

Labor Commissioner Reardon argues that the Wage Payment Rules are simply a codification of the Department of Labor’s prior counsel opinion letters; however, the rules represent a significant departure from the department’s prior position in almost every respect, including methods of cash access, disclosures and prohibited fees, according to Cathy Beyda, of counsel, Paul Hastings, and a payroll card expert. “The rules go beyond regulating the payment of wages by employers—they regulate the features of a financial services product,” Beyda tells Paybefore. “Thank you to Global Cash Card for sending a strong message to policymakers that they do not have unfettered discretion. The industry has proven that it can and will fight to hold you accountable.”

Global Cash Card has until May 29 to file opposition letters and the labor commissioner has until June 12 to file a reply. Beyond that, it’s the judge’s discretion to hold a hearing.

“Global Cash Card will continue to advocate for the rights of all workers in New York and across the country to have a choice in the way they are paid,” Joseph Purcell, Global Cash Card chief operating officer, tells Paybefore. “The Industrial Board of Appeals agreed with our position and we are confident this will be affirmed as this process continues.”

In the face of lawsuits, negative press and state regulatory actions, payroll cards have recently earned high marks from the Center for Financial Services Innovation (CFSI)in its first “Payroll Industry Scorecard.” In it, CFSI assessed the level of quality of the payroll card industry by collecting information from several of the largest program managers, including ADP, Comdata, First DataGlobal Cash CardNetspendTranscardUniRush LLC and U.S. Bank. These program managers collectively represent approximately 75 percent of the payroll card industry and received an A- for core features of a “high-quality payroll card product” and a B+ for their ability to “stretch beyond the basics, according to CFSI.

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