Pennsylvania Court Rules Payroll Cards Aren't 'Lawful Money,' Says Employers Must Pay Using Checks Or Dead Presidents

We have previously reported and blogged about challenges to paying employees through debit card-like "paycards." A recent Pennsylvania decision has amplified those concerns.

In a case of first impression, the trial court in Luzerne County, Pennsylvania found that paying employees through mandatory payroll cards does not comply with a Pennsylvania law, the Wage Payment and Collection Law, which requires "wages" to be paid through either "lawful money of the United States" or a "check." Siciliano v. Mueller, Case No. 2013-07010 (Pa. Com. Pl., Luzerne Cnty. 2015) (citing 43 P.S. § 260.3). Pennsylvania adopted this statutory language decades ago, principally to bar employers from paying employees in scrip (i.e., worthless Monopoly-style company money). But, if the Court's ruling stands, Pennsylvania employers may now face liability if they pay their employees through a debit card instead of cash, check, or — upon the employee's written consent — direct deposit. See 7 P.S. § 6121 (defining "check" to include direct deposit, if an employee requests direct deposit in writing).

Citing Black's Law Dictionary, the Siciliano Court reasoned that payroll cards are not "lawful money of the United States," because they are not "bills and coins" that have been approved "in a country for the payment of debts, the purchase of goods, and other exchanges of value." Nor are they a check, because they are not "an unconditional written order" to "pay certain sum of money on demand." Rather, the Court opined, payroll debit cards can only be turned into "lawful money" after a visit to the bank or ATM. Thus, the Court determined, the WPCL's "plain language" compelled finding that payroll cards did not comply with the WPCL's "lawful money" or "check" requirements. As a result, the Court effectively held that the employer's practice of paying employees through paycards constituted a per se WPCL violation.

To its credit, the Court recognized that reasonable minds can differ, and certified the case for an immediate appeal to Pennsylvania's Superior Court (intermediate appellate court). And the Court's opinion might not hold up on appeal. For instance, despite the WPCL's literal language, Pennsylvania courts have typically interpreted "wages" broadly, to encompass various forms of compensation — such as stock options and free rent — that are clearly neither "lawful money of the United States" nor "check[s]." See generally Braun v. Wal-Mart Stores, Inc., 24 A.3d 875, 954...