Ohio Wage and Hour Attorney Best Answer: Can an employer pay its employees with prepaid debit cards instead of paychecks? Are prepaid debit cards considered “money”? How do I find a lawyer to sue my employer for wage theft?
One of our employment attorneys was working with a new gender discrimination client, who had been sexually harassed by her manager. As part of the normal intake process, our employment lawyer asked the client for a copy of her pay stub. (This allows us to confirm the actual employer who is paying the wages and the amount of the wages).
In this case, the employer was paying its employees with “prepaid debit cards” instead of giving them a paycheck. Now, one might think that if an employee is supposed to earn $500 for the week and they are given a $500 debit card instead then the employer is still giving the full compensation to the employee. Well, maybe not, and in fact, there may be two separate questions to consider: (1) do the debit cards even qualify as “compensation” under the applicable law, and (2) is payment by debit card actually equal to a paycheck?
The Fair Labor Standards Act (“FLSA“) requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular hourly rates for overtime hours worked beyond 40 per week. The FLSA provides that employers who violate the law are liable to the aggrieved employees for their back wages and an equal amount in liquidated damages, plus reasonable attorney’s fees and costs. The Ohio equivalent of the FLSA is known as the Ohio Minimum Fair Wage Standards Act.
This “debit card versus paycheck” issued recently surfaced in Pennsylvania where a lawsuit was filed by several employees against the franchisee and owner of several McDonald’s restaurants. According to the 2013 lawsuit, thousands of regional McDonald’s employees were being paid exclusively by a prepaid debit card as opposed to receiving a paycheck. According to the lawsuit, this action violated Pennsylvania’s Wage Payment and Collection Law. The court so far appears to have agreed with the plaintiffs’ claim.
In a ruling by Judge Thomas F. Burke, the court determined that the interpretation of the state wage law required “wages shall be paid in lawful money of the United States or check.” The court denied a motion for summary judgment filed by attorneys for the employer, who owns and operate 16 McDonald’s restaurants. The employer argued payment with a debit card was “the functional equivalent” of lawful money or check.
It is important to note that while the court delivered a favorable ruling for the employees, it noted “reasonable minds could differ,” especially about an issue dealing with “advancing technology and consumer convenience.” Moreover, due to the statewide implications of the case, which involves “a controlling question of law,” the court allowed the employer the option to file an immediate appeal.
Interestingly, the lawsuit does not appear to include a claim under the FLSA, so it remains to be a question of whether the ruling in the McDonald’s case would have been the same under the FLSA. When comparing the Pennsylvania law to the Ohio Minimum Fair Wage Standards Act, the language in question appears to be pretty similar, with R.C. § 4111.01 providing “‘Wage’ means compensation due to an employee by reason of employment, payable in legal tender of the United States or checks…” From this language, it would appear that “debit cards” would not pass muster under the Ohio law as was the case in the Pennsylvania McDonald’s matter.
The opinion by the court does not address the tax implications of paying by debit card, including whether the employer was paying its share of payroll taxes or withholding and reporting the employee’s income. If not, both the employer and employees may find themselves in cross hairs of the IRS – which is another reason that it is best for employees in this situation to consult an experienced employment lawyer as soon as possible.
If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at The Spitz Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at The Spitz Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call (216) 291-4744.
The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me for …”, “My paycheck is not right…” or “What do I do if…”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.