Smart SpendingSmart Spending

Plastic paychecks shrink salaries, suit says

A single mom who says she was forced to accept a fee-heavy 'payroll card' instead of a check or direct deposit is taking a McDonald's franchise to court.

By Donna_Freedman Jun 18, 2013 9:03AM

Logo: Cash machine (Compassionate Eye Foundation/Getty Images/Getty Images)Paper or plastic? That is the question for Natalie Gunshannon, who's suing the McDonald's franchise that forced her to accept her wages in the form of a fee-heavy debit card versus a paycheck or direct deposit.

The class-action lawsuit, filed last week on behalf of Gunshannon and other former and current employees of a McDonald's in Shavertown, Pa., alleges that the payroll debit card, issued by Chase, carries numerous fees.

Among them: 75 cents for online bill payment, $1 for balance inquiries, $1.50 for ATM withdrawals, $5 for teller-assisted cash withdrawals and $15 to replace a lost or stolen card.

There's no charge for using a Chase ATM -- but the closest one is 60 miles from Gunshannon's home in Dallas Township, Pa. 

Why would an employer want to pay via debit card? Because it's cheaper.

Like direct deposit, it saves the cost of check printing and processing. But some workers can't or don't want to use banks or credit unions. For them, payroll cards are the only e-option left.

According to a report from the U.S. Office of the Comptroller of the Currency, banks make money from payroll cards in three ways (listed in order of importance):
  • Interchange fees, paid by merchants when workers buy things with the cards.
  • Monthly or service fees, from employers and/or employees. Some banks waive these fees, depending on "the extent of (an) employer's relationship with the bank."
  • Other fees, such as overdrafts, replacing a lost card, "excessive" ATM transactions or balance inquiries.
These fees vary widely, the report says, depending on the bank and its relationship with the employer.

'The most vulnerable'

Gunshannon's attorney, Michael J. Cefalo, told The (Wilkes-Barre) Times Leader that this form of payroll hurts "the most vulnerable of our society," i.e., those with service-sector salaries: "Why should they have to pay fees to collect their rightful wages?"

Gunshannon, a 27-year-old single mother of one, didn't want plastic pay because the fees would eat up too much of her $7.44-an-hour salary. Depending on how many fees she incurred, she says, her pay might have dropped below the minimum wage of $7.25. So she refused to sign off on electronic pay and quit the job.

At issue is whether Gunshannon and others are/were required to accept electronic wages. Her attorney claims that Pennsylvania law requires wages be paid by check or with "lawful money."

What that means isn't clear. The Citizens' Voice, another Wilkes-Barre newspaper, reports that the state Department of Labor and Industry and state banking regulators have endorsed payroll cards as a legal form of wage payment. However, agency officials advised employers to have workers authorize either direct deposit or payroll cards.

In this case, employees were not given the option of a traditional paycheck or even direct deposit. However, Pennsylvania state courts have previously determined that "employers (can) make electronic wage payment a condition of employment."

The country's largest private employer, Wal-Mart, pays its 1.4 million workers electronically; half get debit cards and half get direct deposit. Other large U.S. employers such as United Parcel Service, Home Depot, Lowe's and FedEx also use payroll cards.

Proponents of the payment system cite several advantages to consumers as well:
  • Earlier payout. Cards generally load at the beginning of the payday, not at the end.
  • Safety. Payroll cards are insured by the FDIC.
  • Ease of replacement. If a card is lost or stolen the funds are still secure.
  • Flexibility. Cards can be used to pay by phone, online or by mail.
  • Fewer fees. That may sound odd, given the lawsuit, but not every payroll card charges extra. In this case, "fees" refers to money the unbanked pay at check-cashing places and the cost of getting money orders.
'A few dollars per paycheck'
The Shavertown franchise owners, Albert and Carol Mueller, operate 16 McDonald’s restaurants in northeastern Pennsylvania. They declined to respond to the Times Leader's request for an interview, saying they had not yet seen the lawsuit.

However, they did issue a statement through a public relations coordinator: "We value our employees and everything they do for our organization. We are committed to providing them the best possible work environment so they can deliver the fast, reliable service that our customers expect."

It's up to the court now. Certainly this is a case to be watched, given how many people get paid with debit cards -- and given how close to the bone so many service-sector employees are living.

"I can't afford to lose even a few dollars per paycheck," Gunshannon told the Times-Leader.

"I just think people should be paid fairly and not have to pay fees to get their wages."

More on MSN Money:

Jun 18, 2013 7:04PM

Simple. Quit financing the "too big too fail" rip off artists (banks) and go back to paying your workers every payday in CASH!!!!!

That wont cost the employer anything since there's no checks to print up nor transaction fees between financial institutions.

Jun 18, 2013 9:17PM
The employee should be given the option of direct deposit or payroll card. Better yet, the options should include paper checks. It's a rip-off if an employer gets a kick-back on the payroll cards from the bank or the card is subject to trans-action fees. That is or should be illegal, because it's the same thing as refusing to pay part of an employee's wages. If you are stuck with a payroll card, transfer the money into your own bank account or cash. I get my check through direct deposit. It's my choice and doesn't cost me anything.
Jun 19, 2013 8:38AM
The employee should be given the option of direct deposit or payroll card. Paper checks are too costly for companies. If the employee can't manage a saving or checking account, that's not the employers problem. This is another example why poor people stay poor, pay high fees, and payroll cards thrive.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.