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Direct Deposit of Employee Wages

Q. I work for a cleaning supply company. Soon, all employees will be required to use direct deposit. I really prefer my check to be handed to me. My check tells me more than just my earnings. It also lists my personal and vacation time, my 401(k) contributions and my taxes taken out. Is it legal for my employer to require me to use direct deposit? Since it´s my money, it seems like it should be my choice.
 
A. Your employer may not switch your paycheck to direct deposit if you object.
 
The Oregon statute that dictates the medium of paying employees, ORS 652.110, states that "an employer and an employee may agree to authorize an employer" to pay wages due to the employee by direct deposit.
 
The Bureau of Labor and Industries interprets this language to mean that it is unlawful to require the direct deposit of paychecks.
 
Note, however, that even if you were to agree to the direct deposit option, your employer would still be obligated to provide you an itemized wage statement at each payday.
 
The law also requires that any direct deposit of wages be "without discount," meaning that the employer may not charge or deduct any fee for the electronic transaction.
 
Although the law prohibits making direct deposit mandatory for current employees, it doesn´t clearly address whether an employer could make direct deposit a condition of employment for job applicants.
 
The Bureau´s enforcement policy is not to take complaints from newly-hired employees on the issue of mandatory direct deposit, when the employer had given prior notice to the prospective employees that direct deposit would be required as a condition of employment. However, employers should consult with an employment attorney before proceeding with such a policy, because the courts may conclude, for public policy reasons, that making direct deposit mandatory is improper even at the pre-employment stage.
 
Employers who do use the direct deposit method of paying wages should be aware that doing so doesn´t change the strict deadlines for paying an employee´s final wages upon termination. However, the law says that even the final paycheck may be paid by direct deposit, "provided the employee and the employer have agreed to such deposit." ORS 652.140(4).
 
Although the Oregon law doesn´t specifically require it, employers would be well advised to obtain employees´ written consent before switching to direct deposit.
 
Q. Is it legal for an employer to pay wages by issuing employees a "debit card" that can be "swiped" at local banks or institutions for cash or merchandise?
 
A. Payment of wages by debit card is legal, provided that the arrangement meets the tests for direct deposit and for the "medium of paying employees" set forth in ORS 652.110.
 
Since the electronic deposit of wages to the debit card account is a form of direct deposit, the employee must agree to the arrangement, as required by the statute.
 
Also, the instrument of payment - in this case, the debit card - must be negotiable and "payable without discount in cash on demand at some bank or other established place of business" in the county where it is issued. The Bureau´s interpretation of this statutory language is that the employee must be able to receive the full amount of his or her wages by swiping the card and may not be charged any fee for doing so.

 

DISCLAIMER
 
Nothing on this website is intended as legal advice.  Any responses to specific questions are based on the facts as we understand them, and not intended to apply to any other situations.  This communication is not an agency order.  If you need legal advice, please consult an attorney.  We attempt to update the information on this website as soon as practicable following changes or developments in the laws and rules affecting Oregon employers, but we make no warranties or representations, express or implied, about whether the information provided is current.  We urge you to check the applicable statutes and administrative rules yourself and to consult with legal counsel prior to taking action that may invoke employee rights or employer responsibilities or omitting to act when required by law to act.
 
 
800 NE Oregon Street
Ste 1045
Portland, OR 97232
 
 
971-673-0824
 
 
 
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