House File 707 - Introduced HOUSE FILE BY FORD Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the payment of wages by electronic funds 2 transfer pursuant to a payroll card and making penalties 3 applicable. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2780HH 82 6 ak/es/88 PAG LIN 1 1 Section 1. Section 91A.2, Code 2007, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 6A. "Payroll card" means a card issued by 1 4 a financial institution that enables the cardholder to 1 5 transfer the underlying funds to a merchant at the merchant's 1 6 point of sale terminal or to obtain cash by electronic access 1 7 to the underlying funds through an automated teller machine or 1 8 other electronic terminal authorized by the cardholder. For 1 9 the purpose of this subsection, "underlying funds" means the 1 10 amount of funds received from an employer by the issuing 1 11 financial institution in exchange for the issuance of the 1 12 payroll card to an employee. 1 13 Sec. 2. Section 91A.3, subsection 3, Code 2007, is amended 1 14 to read as follows: 1 15 3. The wages paid under subsection 1 shall be sent to the 1 16 employee by mail or be paid at the employee's normal place of 1 17 employment during normal employment hours or at a place and 1 18 hour mutually agreed upon by the employer and employee, or the 1 19 employee may elect to have the wagessent for direct deposit1 20 paid through electronic funds transfer, on or by the regular 1 21 payday of the employee, pursuant to direct deposit into a 1 22 financial institution designated by the employee or pursuant 1 23 to a payroll card issued by a federally insured financial 1 24 institution. 1 25 a. An employee hired on or after July 1, 2005, may be 1 26 required, as a condition of employment, to participate in 1 27 direct deposit of the employee's wages in a financial 1 28 institution of the employee's choice unless any of the 1 29 following conditions exist: 1 30a.(1) The costs to the employee of establishing and 1 31 maintaining an account for purposes of the direct deposit 1 32 would effectively reduce the employee's wages to a level below 1 33 the minimum wage provided under section 91D.1. 1 34b.(2) The employee would incur fees charged to the 1 35 employee's account as a result of the direct deposit. 2 1c.(3) The provisions of a collective bargaining 2 2 agreement mutually agreed upon by the employer and the 2 3 employee organization prohibit the employer from requiring an 2 4 employee to sign up for direct deposit as a condition of hire. 2 5 b. If the employer fails to send an employee's wages for 2 6 direct deposit on or by the regular payday in accordance with 2 7 this subsection, the employer is liable for the amount of any 2 8 overdraft charge if the overdraft is created on the employee's 2 9 account because of the employer's failure to send the wages on 2 10 or by the regular payday. 2 11 c. An employer shall not pay wages pursuant to a payroll 2 12 card pursuant to this section prior to paying to the issuing 2 13 financial institution an amount equal to the wages due the 2 14 employee plus any fees relating to the issuance of the payroll 2 15 card charged by the financial institution. An employee may 2 16 cancel an election to accept payment of wages by a payroll 2 17 card by delivering a written notice of cancellation to the 2 18 employer not less than ten days prior to the next payment of 2 19 wages. Wages paid pursuant to a payroll card shall be made 2 20 available to the employee on and after the employee's regular 2 21 payday and subject to the disposable earnings limitations from 2 22 garnishment under section 537.5105. 2 23 EXPLANATION 2 24 This bill relates to the payment of wages by use of a 2 25 payroll card. The bill defines a "payroll card" as a card 2 26 that enables the cardholder to transfer the underlying funds 2 27 to a merchant at the merchant's point of sale terminal or to 2 28 obtain cash by electronic access to the underlying funds 2 29 through an automated teller machine or other electronic 2 30 terminal authorized by the cardholder. The bill defines 2 31 "underlying funds" as the amount of funds received from an 2 32 employer by the issuing financial institution in exchange for 2 33 the issuance of the payroll card to an employee. 2 34 The bill allows the payment of wages to an employee by 2 35 electronic funds transfer pursuant to a payroll card issued by 3 1 a federally insured financial institution. Prior to paying 3 2 wages by a payroll card, an employer must deposit with the 3 3 financial institution issuing the payroll card an amount of 3 4 funds equal to the wages owed to the employee plus any fees 3 5 relating to the issuance of the payroll card that are charged 3 6 by the financial institution. The bill provides that an 3 7 employee may cancel the employee's election to accept payment 3 8 of wages by a payroll card upon written notice delivered to 3 9 the employer within 10 days prior to the next payment of wages 3 10 due the employee by the employer. Wages paid pursuant to a 3 11 payroll card are required to remain available to the employee 3 12 on and after the employee's regular payday and are subject to 3 13 garnishment only to the extent provided under Code section 3 14 537.5105. 3 15 A violation of any provision of Code chapter 91A is subject 3 16 to a civil penalty of not more than $100 per violation. 3 17 LSB 2780HH 82 3 18 ak:nh/es/88