SB 79-PAYMENT OF WAGES; PAYROLL CARD ACCOUNT  [Contains discussion of HB 99.] 3:39:13 PM CO-CHAIR HALL announced that the next order of business would be SENATE BILL NO. 79, "An Act relating to wage payments." 3:39:48 PM SENATOR JESSE BJORKMAN, Alaska State Legislature, presented SB 79 on behalf of the bill sponsor, the Senate Labor and Commerce Standing Committee, on which Senator Bjorkman serves as chair. He gave the sponsor statement for SB 79 [included in the committee file], which read as follows [original punctuation provided]: Senate Bill 79 would allow employers to credit wages to an employee on a payroll card account if an employee has voluntarily authorized this, or if an employee has not authorized deposit of their wages to a specified account. This legislation gives employers another option to pay their employees that could be less expensive than other forms of payment and avoids the difficulties of distributing paper checks. SB 79 requires employers to be transparent when giving employees the option to open a payroll card account. The bill requires that employers provide employees with a list of fees they could encounter with the card and a cost-free method to access their wages, as having an ATM card that is not connected to a specific bank can require fees for withdrawal. Employers also cannot offer a payroll card that charges fees for an employee's application, initiation, or participation in the account. The bill gives employees that don't have a bank account another option to accept payment of their wages and a mechanism to avoid check cashing fees. Payroll cards will be used without fees to pay for any store purchases and one cost-free ATM withdrawal in an amount up to the employee's net wages per pay-period. I urge your support of Senate Bill 79 SENATOR BJORKMAN gave a brief history of the bill in the prior legislature, noting that it failed to pass. 3:41:53 PM SAVAYA BIEBER, Staff, Senator Jesse Bjorkman, Alaska State Legislature, on behalf of the bill sponsor, the Senator Labor and Commerce Standing Committee, on which Senator Bjorkman serves as chair, gave the sectional analysis for SB 79 [included in the committee file], which read as follows [original punctuation provided]: Section 1: Amends AS 23.10.040(a) to add AS 23.10.044 allowing an employer to pay via payroll card account. Section 2: AS 23.10 is amended by adding section AS 23.10.044 (a) Allows an employer to pay wages to a payroll card account if an employee has voluntarily authorized or if an employee has not authorized deposit of their wages to a bank account. (b) States an employer paying wages to a payroll card account shall notify the employee of the terms and conditions of payroll cards. (c) A payroll card account must provide an employee with at least one cost-free withdrawal each pay period, up to the amount of the employee's net wages, and a cost-free mechanism to check the account balance through a phone system and an additional unlimited cost-free electric mechanism to check account balances. (d) An employer may not offer a payroll card account that charges fees for employee application or participation in the account, or issuance of an employee's card and one replacement each calendar year, or transfer of employee wages to the account, or point-ofsale purchase transactions. (e) An employer may not offer a payroll card account unless the wages are insured on a passthrough basis by an entity that insures bank deposits. (f) This section protects employees' right to bargain collectively through representatives of their choice to establish mechanisms for payments of wages. (g) Defines "payroll card" and "payroll card account" in statute. 3:43:57 PM AMY MILLER, Senior Director, Government Affairs, Automatic Data Processing, Inc. (ADP), gave invited testimony in support of SB 79. She explained that ADP was the nation's largest provider of human capital management solutions, supporting Human Resources (HR), payroll, and benefits administration. She reported that ADP pays one in six employees in the United States. She stated that SB 79 would eliminate the requirement that Alaska employers offer paper paychecks as a form of wage payment. Under SB 79, employers would have the right to offer wages in the form of direct deposit or payment cards. She clarified that the proposed legislation does not prevent employees from receiving pay via direct deposit, nor does it prohibit employers from distributing paper checks. She further noted that SB 79 would protect the right to collective bargaining arrangements and would not impact payments made to state employees. MS. MILLER asserted that alternatives to paper checks are more timely, consistent, and secure. She noted that some employers, if forced to offer paper checks, may be unable to fulfill the legal requirements of timely pay laws; weather events or slow mail processing can prevent employees from picking up their paper checks. She noted that employees who do not qualify for a bank account could still receive a payroll card from their employer, asserting that payroll cards offer employees consumer protection and convenience. She stated that payroll cards can be used for online bill payments, online shopping, and electronic travel arrangements, such as flights, hotels, or rental cars. She further stated that payroll cards provide protection against unauthorized use and fraud and cannot be overdrawn. MS. MILLER asserted that nearly all government payments are electronic, such as tax refunds, social security payments, et cetera. She cited the National Automated Clearing House Association, reporting that 93 percent of American workers are paid via electronic direct deposit. She additionally reported that electronic pay is the only permitted form of wage payment in many states, and at least 30 states have already implemented payroll cards. She concluded by stating that employees often welcome the change and are adaptable. She urged committee members to pass SB 79 and thanked the committee. 3:48:12 PM REPRESENTATIVE COULOMBE asked whether state employees would be eligible for payroll cards under the proposed legislation. 3:48:27 PM MS. MILLER reiterated that SB 79 would not have an impact on the payment of wages to State of Alaska employees and further stated that it would be up to the state if it wanted to allow payroll cards for its employees. 3:48:39 PM REPRESENTATIVE CARRICK noted that Section 2, [subsection] (a) of SB 79 would allow employers to either pay wages to payroll card account if an employee has voluntarily authorized that action or an employer would deposit wages into a bank account if an employee has not authorized wages to be paid into a payroll card account. She asked which scenario would be more common under the proposed legislation. 3:49:35 PM MS. MILLER offered her belief that the most popular of the two scenarios would be the direct deposit and noted that most employees were already on a direct deposit option. She explained that the payroll card would serve as an alternative for those who are "unbanked." Additionally, she explained that unbanked individuals who receive a payroll card could make purchases online. 3:50:12 PM REPRESENTATIVE COULOMBE asked whether an employee would receive a single reloadable payroll card or a new payroll card every payday. MS. MILLER replied that the employee would receive a reloadable payroll card. REPRESENTATIVE COULOMBE noted that the legislation prohibits employers from offering a payroll card account that would charge fees. She asked who would be responsible for the payroll card fees. MS. MILLER responded that the issuer, such as Visa or MasterCard, would be responsible for the payroll card fees. She offered her belief that mobile check cashing and cash reloading are typical kinds of associated fees. She further stated that employees could use the payroll cards anywhere that would accept a check without incurring fees. 3:51:31 PM CO-CHAIR FIELDS requested a list of fees that consumers could pay under SB 79 and queried how payroll cards interact with banks. He asked whether ADP provides banking services. MS. MILLER responded that ADP does not provide banking services but that it does provide payroll cards. MS. MILLER, in response to a follow-up question from Co-Chair Fields clarified that ADP does not provide any other banking services. 3:52:28 PM REPRESENTATIVE COULOMBE asked whether payroll card users would pay a fee for withdrawing cash from an automated teller machine (ATM). MS. MILLER replied that payroll card users are allowed one free ATM withdrawal per pay period. She noted that there are in- network ATMs that offer free, unlimited withdrawals. Additionally, she stated that payroll card users could go to a teller at any brick-and-mortar bank that accepts Visa or MasterCard for unlimited cash withdrawals with no fees. She noted that payroll card users could not use an automated teller machine (ATM) inside of a bank. 3:53:39 PM REPRESENTATIVE SADDLER asked whether the Federal Deposit Insurance Corporation (FDIC) regulates payroll cards. He further asked whether federal banking regulations are applicable to payroll cards. He remarked that the legislation was being presented as a simplified banking service. MS. MILLER responded that there are regulations regarding anti- theft protection [for payroll cards]. Additionally, she stated that she would do more research and follow-up with the committee. 3:54:33 PM REPRESENTATIVE NELSON commented that access to payroll cards was helpful for anyone without a bank account. He noted he was paid through a payroll card at his first job. 3:54:54 PM CO-CHAIR FIELDS offered his understanding that the Consumer Financial Protection Bureau (CFPB) was "essentially shut down." He asked whether CFPB had any role related to payroll cards. MS. MILLER replied that she believed CFPB may have had a broader federal role in providing consumer protection for payroll cards and stated that the states typically provide consumer protection for payroll cards. She added that the typical protections one might expect with credit and debit cards are the same as for payroll cards. Additionally, she stated that any fees associated with payroll cards are no different from fees associated with credit or debit cards, such as merchant- generated fees or transaction fees. 3:56:17 PM MS. BIEBER, in response to Representative Saddlers prior question, referred to page 2, line 24, [subsection] (e) and read "an employer may not offer a payroll card account unless employee wages or other forms of compensation credited to the account are insured on a passed through basis to the employee by the Federal Deposit Insurance Corporation, the National Credit Union Administration, or another entity that insures bank deposits." 3:56:49 PM SENATOR BJORKMAN, in response to Representative Saddler's prior question, noted that state legislation regarding cryptocurrency and money transmission modernization should also consider including gift cards in regulation. He stated that was not the purpose of SB 79. 3:57:33 PM REPRESENTATIVE CARRICK referred to [subsection] (f) of SB 79 and asked if that language was in the previous iteration of the proposed legislation. She noted that the value of SB 79 appeared to be in "employer options" and "employee choice." 3:58:16 PM SENATOR BJORKMAN offered his understanding that SB 79 was identical to the previous iteration of the proposed legislation. He noted that the provision in [subsection] (f) would preserve collective bargaining rights of employees regarding payroll format. He added that it is the employee's right to advocate for and negotiate with employers regarding how they are paid. He stated, "That provision simply protects rights of employees who are organized and bargain collectively with their employer." 3:59:16 PM REPRESENTATIVE CARRICK noted that members of a collective bargaining unit might disagree with the form of pay they might collectively accept. She suggested that the proposed legislation was supposed to be an "employer-offered option." SENATOR BJORKMAN, in response to Representative Carrick's question regarding the consideration of SB 79 as conforming language, responded yes. 4:00:09 PM REPRESENTATIVE SADDLER asked whether HB 99 would need to be modified were SB 79 to pass the legislature. SENATOR BJORKMAN responded that SB 79 would not intersect with HB 99. 4:01:20 PM CO-CHAIR FIELDS queried the "real-world impact" of the proposed legislation. 4:01:57 PM MS. MILLER stated that 20 other states have passed paperless pay legislation. She stated that it is helpful for employers, given that the cost of issuing checks can range from $4 to $20, which could be expensive for a small business owner. She remarked that most employees opt for direct deposit and the payroll cards serve as an alternative. CO-CHAIR FIELDS further inquired whether there had been a positive impact on reducing the rate of unbanked individuals or other consumer gains in states where similar legislation has been enacted. MS. MILLER replied that the payroll cards would not "offer the option to be banked," but the alternative allows unbanked individuals to participate in online shopping. 4:04:00 PM CO-CHAIR HALL announced that SB 79 was held over.