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A Better Partnership

Publications

Jan 2004
14
January 14, 2004

Mandatory Direct Deposit Clarification

Apparently, what is good for the goose is not good for the gander. Governor Granholm recently signed a bill permitting the state, in its capacity as an employer, to direct deposit the pay of so-called "nonclassified" employees without the employees' signed permission. (In general, nonclassified employees are nonunion employees.) You might hear reports or read articles suggesting that private employers also have this same right. Unfortunately, that's not the case. The new law does not change the requirement that private employers must obtain the permission of an employee before directly depositing his/her paycheck.

The new law also allows employers to pay with a no-fee payroll "debit" card. However, unless the employer was doing so prior to January 1, 2005, it must also get the employee's consent before paying in this fashion. Employers who were paying by debit card on or before January 1, 2005, are grandfathered and do not need employee consent.

This issue was being pushed by the House and Senate, apparently as an effort to save employers money and to reflect the realities of common payroll practices. The Governor would not go along (except to the extent that she will permit the state to save payroll processing costs by using direct deposit).

Many other states allow employers to mandate direct deposit of paychecks for their employees. Thus, if you do business in states other than Michigan, you might be able to require direct deposit of paychecks. Because each state has its own unique laws regarding the payment of wages and benefits, you may want to double-check to ensure that whatever you are doing is permitted.

For more information, please contact Rob Dubault at rdubault@wnj.com or by phone at 231.727.2638.
 

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