Legislature(2023 - 2024)BELTZ 105 (TSBldg)
05/08/2024 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB88 | |
| HB203 | |
| HB226 | |
| HB189 | |
| HB233 | |
| HB146 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 88 | TELECONFERENCED | |
| += | HB 203 | TELECONFERENCED | |
| += | HB 226 | TELECONFERENCED | |
| *+ | HB 189 | TELECONFERENCED | |
| * | HB 233 | ||
| + | HB 146 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 203-PAYMENT OF WAGES; PAYROLL CARD ACCOUNT
1:55:15 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of HOUSE BILL NO. 203 am "An Act relating to wage
payments."
1:55:38 PM
CLARK BICKFORD, Staff, Representative Jesse Sumner, Alaska State
Legislature, Juneau, Alaska, read the following sponsor
statement.
[Original punctuation included.]
HB203: Payment of Wages; Payroll Card Account
Sponsor Statement
Prior to the modern era, all payroll in private sector
employment was conducted by traditional means, that is
paying employees either in actual currency or with a
paper paycheck delivered or mailed to an individual
employee on payday. With time and modern technology
advancements, many private employers and government
entities have moved to electronic deposit, or
electronic funds transfer, for paying their employees.
In Alaska, current law does not permit an employer to
select an electronic payroll deposit system unless and
until every employee specifically elects to be paid
electronically. In other words, an employer who wishes
to move the company to electronic wage payment may not
be permitted to do so. Any given employer may have
very good business reasons to switch the company's
payroll system, including, business efficiency, cost-
savings, environmental concerns about excess paper
usage, or security of wage payment transactions.
Those employers in the private sector who elect to
move to an electronic payment system should be
entitled to do so. That decision rests with the
employer, as with any of the many work-related
conditions of employment (choice of uniform; work
hours and scheduling; conduct on the job; job duties
and goals; leave time; vacation allowances; etc.
etc.). The choice for an employer to pay employees via
electronic means is no different, and should be
permitted, if the employer so chooses.
Note that nothing in the proposed legislation would
require an employer to switch to electronic payment of
wages. It would simply authorize that decision, if the
employer elects to do so. Any employer who wishes to
continue paying employees with traditional paper
paycheck methods may still do so.
Should an employee either not have a bank account or
prefer an alternative to electronic funds transfer,
that employee could elect to be paid via payroll card
instead. That payroll card would be issued under a
Visa or Mastercard partner, and would operate just
like an ATM card, now accepted in lieu of cash almost
universally. The payroll card is FDIC-insured, and
secure for the employee receiving payments in this
way.
1:58:19 PM
MR. BICKFORD explained the sectional analysis for HB 203:
[Original punctuation provided.]
HB203: Payment of Wages; Payroll Card Account
Sectional Analysis Version A.A
Section 1. This section amends AS 23.10.040(a) to
require employers to pay wages or other compensation
with lawful money of the United States or with
negotiable checks, drafts, or orders payable upon
presentation without discount by a bank or depository
inside the state.
Section 2. This section adds a new section to AS 23.10
to allow employers to pay wages by credit to a payroll
card account if the employee has voluntarily
authorized the credit or has not authorized deposit of
the employee's wages under AS 23.10.043. The section
also requires employers to notify employees of their
wage payment options, the payroll card terms and
conditions, and the fees associated with using a
payroll card account. Additionally, the section
requires payroll card accounts to provide employees
with at least one cost-free withdrawal each week or
pay period, and an unlimited cost-free mechanism to
check the payroll card account balance. Finally, the
section prohibits employers from offering payroll card
accounts that charge fees for certain activities and
requires that wages credited to payroll card accounts
be insured on a pass-through basis to the employee.
1:59:47 PM
MR. BICKFORD gave a brief history of HB 203. He said HB 203 was
referred to the House Labor and Commerce committee, where there
were no amendments. When the bill made it to the House floor, an
amendment was passed. He said the amendment [from the House
floor] compromised the whole intent of HB 203 by allowing
employees to choose instead of allowing the employer to choose
[the method of payment]. He said the sponsor's intent was to
return to the [original] intent of HB 203 in this [Senate Labor
and Commerce Standing] committee.
2:00:24 PM
CHAIR BJORKMAN summarized to clarify his understanding of HB
203. He said the bill would allow for an employer to decide how
they will pay their employees without the employees having a
choice about how they will get paid.
2:00:45 PM
MR. BICKFORD replied that a better definition of HB 203 was that
the employer would give the employee the option to be paid
either by direct deposit or by payroll card. He said, in 2024
there is an effort to get away from paper checks if an employer
would prefer not to issue them anymore, due to environmental
concerns or various other business reasons.
2:01:15 PM
CHAIR BJORKMAN clarified his question and asked whether the
employee would have protection under the law to receive a paper
check as payment moving forward.
2:01:25 PM
MR. BICKFORD affirmed that [a paper check would not be an
option] unless the employer offered that option. He described a
scenario in which one employee out of one hundred requested a
paper check, [under HB 203] the employer could limit the choice
to direct deposit or payroll card.
2:01:52 PM
SENATOR DUNBAR asked how many other states have adopted this
sort of system which shifts the rights from employee to
employer.
2:02:04 PM
MR. BICKFORD answered that it was an overwhelming number and
deferred to MR. Lewis for a more accurate answer.
2:02:29 PM
SENATOR DUNBAR reflected on the current status of HB 203. He
noted that under HB 203 the employer would be able to pay the
employee by direct deposit without the employee's consent. He
said [currently] the employee must give affirmative consent, but
if there was an amendment that said an employee had the right to
receive a paper check, HB 203 would still provide a different
position for employers. He explained that by keeping the other
language of the bill, it would follow libertarian paternalism
principles and shift the default. He said it would take more
effort [by the employee] to "opt out" but it would preserve the
number of options for the employee. He asked whether that was
the intent of the amendment from the House floor and if so,
where the amendment was inserted in HB 203.
2:03:26 PM
MR. BICKFORD said the amendment ended up in AS 23.10 and said it
would allow employers to pay wages by credit to a payroll card
account if the employee has voluntarily authorized the credit.
He said originally, HB 203 gave the employer the right to choose
whether to give [employees] the choice between direct deposit
and payroll card and with the amendment [from the house floor],
employees also have the choice of a paper check. He restated
that was what [the bill sponsors] were hoping to get away from.
MR. BICKFORD deferred to Mr. Lewis for a more eloquent
explanation.
2:04:10 PM
CHAIR BJORKMAN announced invited testifier Mr. Lewis.
2:04:23 PM
DAN LEWIS, Vice President of Government Affairs, Automatic Data
Processing (ADP), Roseland, New Jersey, said ADP was the
nation's largest provider of human capital management solutions,
and that they pay one in every six US employees. As such, he
opined, ADP is uniquely positioned to understand the importance
of supporting electronic pay and transitioning away from paper
pay. HB 203, as originally drafted and approved by the House
labor and Commerce Committee, would eliminate the requirement
that Alaska employers offer paper paychecks as a form of wage
payment. Under the HB 203, employers would offer employees
payment by direct deposit or by payroll card. He said it was
ADP's position that paying employees by direct deposit or
payroll card will benefit employers from a payroll management
and expense perspective, while also providing significant
benefits to employees. He said nothing in HB 203 would prevent
employees from continuing to receive pay by direct deposit. He
also said employers could offer paper paychecks if they so
choose. He said HB 203 would protect rights to collective
bargaining arrangements and does not impact regulations for
payment of wages to state employees.
2:05:44 PM
MR. LEWIS said there were much better alternatives to paper
paychecks. Advances in technology have improved the timeliness,
consistency and security of electronic pay. He said electronic
pay protects employers. He explained that under certain
circumstances, it can be effectively impossible for employers to
comply laws requiring the timely payment of wages if they must
offer paper paychecks. He noted employees who receive paper
checks can't get paid on payday if there are events preventing
the timely issuance of paper, such as the all-too-common weather
events in Alaska and he said electronic payments would eliminate
this concern. In addition, he said HB 203, would make payments
of wages better for employees. He explained that paper checks
can interfere with employees' financial security decisions
because they do not allow for easy and timely access to wages.
He noted that employees often take extra steps to travel to the
workplace to receive paper checks, travel to a bank to deposit
the checks and wait for the check to clear. He pointed out that
mail is slow, and employees may not receive their pay on
schedule. He noted that some employees use costly check cashing
stores and then carry their entire paycheck to cash, which is
subject to loss or theft. Further, even employees who don't
qualify for a bank account can get a payroll card from their
employer, therefore protecting underbanked or unbanked
employees.
2:07:01 PM
MR. LEWIS said that payroll cards offer employees better
consumer protection convenience because they can use the payroll
cards anywhere they would use a check, including free online
bill payment, internet shopping, and the cards can be used for
travel arrangements that require electronic payments, such as
flights, hotels and rental cars. Unlike paper checks, payroll
cards provide protections from fraud or unauthorized use. In
addition, he said the cards provide pre-associated savings
features as well as financial wellness tools. Finally, workers
cannot overdraw their payroll card accounts, so there are no
overdraft fees associated with usage. He said passing HB 203 in
its original version would enable Alaska to align with the fact
that most payments are already electronic. Virtually all
government payments are electronic, including tax refunds and
social security payments and according to the National Automated
Clearing House Association, 93 percent of American workers are
already paid by a direct deposit.
MR LEWIS concluded saying that most states already allow for
electronic pay as the only option for employees to receive
[their pay] This has been an effective means of pay in more than
30 states that permit electronic wage payments. From our
experience, employees quickly adapt to and are thankful for the
change.
2:08:24 PM
SENATOR DUNBAR asked whether employees living in the 30 states
that permit electronic wage payment are denied the option to
receive a paper check.
2:08:49 PM
MR. LEWIS affirmed that electronic means of payment only include
direct deposit or payroll card for employees in those
jurisdictions.
2:08:59 PM
SENATOR DUNBAR asked how quickly and where employees could
convert payroll cards to cash.
2:09:12 PM
MR. LEWIS said the funds are immediately available to employees
and in general are available more quickly than checks. He said
the cards may be funded one to two days earlier than a [paper]
check would be received.
2:09:48 PM
SENATOR DUNBAR requested an explanation of ADP's interest in
[methods of payment for employees in Alaska]. He noted ADP is
not Mastercard or VISA, who are the ones who issue the payroll
cards. He asked whether ADP operated in Alaska currently and how
ADP fit in the Alaska economy.
2:10:13 PM
MR. LEWIS explained that ADP, although headquartered in New
Jersey, is a global company with global operations, paying
employees in all 50 states including Alaska. He said ADP was
very well situated to understand the expenses to employers in
handling paper paychecks. He referred to estimates through Bank
of America from several years back that the cost to employers
for paper paychecks ranged from four to $20 for each paycheck
and said paper paychecks were expensive for employers to offer.
In addition, ADP was significantly concerned with the potential
risks related to paper paychecks. He said ADP was interested in
reducing the number of paper paychecks and moving to the digital
economy which he opined would be safer for both employees and
employers. He noted that ADP took environmental concerns
seriously, and that any reduction in the use of paper was
beneficial to the environment, the economy, and the US.
2:11:38 PM
SENATOR GRAY-JACKSON expressed concern about the impact of lost
paychecks and asked whether ADP could provide statistics for the
number of checks lost and the costs related to the losses.
2:11:58 PM
MR. LEWIS said that he could not provide statistics for lost
paychecks but that was one of ADP's concerns. He noted that
paper checks delivered by FedEx or UPS and left on a porch or
patio could be stolen or lost. He said ADP took those risks
seriously and that was a big part of the reason they were
supporting the effort to move to digital electronic pay.
2:12:39 PM
SENATOR DUNBAR noted that 30 states represented a good natural
experiment and asked whether there was evidence that wage theft
by employers was either higher or lower after laws like HB 203
had been adopted.
2:13:01 PM
MR. LEWIS said he did not have statistics on wage theft but
suggested [digital methods of pay] were much safer ways of
paying and of managing funds for employees. He explained that
the funds get deposited directly into the payroll card which
would be accessible only by that employee and can't be accessed
by anybody else. He said there was not any sort of forgery that
would allow access to those funds. He suggested [digital pay]
was a much safer means of protecting the individual employees
than any paper medium available.
2:13:42 PM
SENATOR DUNBAR requested [wage theft] statistics for the next
hearing. He defined wage theft as employers illegally
underpaying employees for the hours they work. He implied that,
if wage theft is less prevalent in states [with laws like HB
203], this could be powerful evidence for the bill, though
perhaps circumstantial. He said that if there is any compelling
argument that HB 203 would make it easier to commit the crime of
wage theft, he would be disinclined to support HB 203.
2:14:28 PM
MR. BICKFORD said he would provide those statistics to the
committee.
2:14:38 PM
CHAIR BJORKMAN noted that HB 203, page 2, line 7 mentioned fees
assessed by the card issuer and that there may be additional
fees. He requested more information about those fees.
2:15:09 PM
MR. BICKFORD said fees that may apply would be Automatic Teller
Machine (ATM) fees for cash withdrawal, reload with cash [fees]
and mobile check cashing [fees]. He said it appeared the fees
would be anywhere between a dollar and seventy-five cents to
upward of five dollars and ninety-five cents. He deferred the
question to Mr. Lewis for further explanation.
2:15:37 PM
MR. LEWIS said the premise [for HB 203] was that any employee
would have free access to all the funds on their payroll card.
He said it would be like receiving a paper paycheck. The
employee would be able to go to the bank, cash the check and get
all those funds. He said it would be the same through the
payroll card. He said there would be no fees associated with
that on the payroll card issuer side. He said, in terms of
transactions, there may be other fees for using a payroll card
that are no different than any other card that an employee may
be using. He said those fees may be generated on the merchant
side. He noted service fees for using a card, as opposed to cash
and said that was not anything unique to the payroll card
itself. He described the fees as "an attendant feature" that
we're all familiar with and [a common occurrence] when we're
using debit cards and credit cards in transactions.
2:16:47 PM
CHAIR BJORKMAN held HB 203 in committee.