Can You Require Your Employees to Use Direct Deposit?

Can You Require Your Employees to Use Direct Deposit?

Direct DepositMany businesses today provide their employees with the option of direct deposit of paychecks.

While most employees might love this option, can an employer require it of those employees who don’t want direct deposit or who don’t have a bank account set up?

What does the federal government say about mandatory direct deposit?

The federal guidelines, as stated in the Fair Labor Standards Act, aren’t specific on this issue.

The Department of Labor, who administers the FLSA, states that the payment must be in cash or negotiable instrument.  More specifically, in its Field Operations Handbook, it states that employees must also have the option of receiving payment by cash or check if direct deposit is mandated.

Washington State’s stance on mandatory direct deposit:

What about Washington state law? While many states have rules limiting or regulating direct deposit of wages, Washington is not one of them.

Washington law simply states that if payments are made via direct deposit, the payment must be made available on payday, and that there cannot be any charge to the employee to set up the direct deposit process.

There are no Washington laws restricting an employer from mandating direct deposit.

The wrap-up:

If you do mandate all employees participate in direct deposit, just keep in mind that you probably should be flexible in accommodating employees that have an issue with using it.