When There’s a Fee to Get Your Pay

Sarah Jaffe June 20, 2013

A former employee has filed a class action suit against a McDonald's franchise in Pennsylvania over payroll options.

In the years since the finan­cial cri­sis struck in 2008, it’s often been point­ed out that gains for bankers have gone hand in hand with loss­es for work­ers. But few cas­es pro­vide a bet­ter exam­ple of just how direct that rela­tion­ship can be than that of Natal­ie Gun­shan­non, who says her employ­er put her in a sit­u­a­tion that forced her to pay fees to one of the big banks just to access her wages.

Gun­shan­non, of Dal­las Town­ship, Penn., filed a class action law­suit this week against a McDonald’s fran­chise where she worked, claim­ing that she and oth­er work­ers were paid not through check or direct deposit, but through a pre-paid JPMor­gan Chase deb­it card. Along with her card, her law­suit alleges, she received a list of fees she’d incur when she used it: $1.50 for ATM with­drawals; $5 for over-the-counter cash with­drawals; $1 per bal­ance inquiry; 75 cents for online bill pay and $15 if she lost the card or had it stolen from her.

I need to receive all the mon­ey I earn,” Gun­shan­non, who was being paid around $7.44 an hour, told a local news­pa­per. I can’t afford to lose even a few dol­lars per pay­check. I just think peo­ple should be paid fair­ly and not have to pay fees to get their wages.”

The law­suit, filed by attor­ney Mike Cefa­lo of Cefa­lo & Asso­ciates and pro­vid­ed to In These Times by the firm, alleges that the cards vio­late the Penn­syl­va­nia Wage Pay­ment and Col­lec­tion Act, which pro­vides that Wages shall be paid in law­ful mon­ey of the Unit­ed States or check.” The suit fur­ther alleges that the fees reduce the actu­al wages work­ers receive — in some cas­es bring­ing them below min­i­mum wage, which in Penn­syl­va­nia remains at the fed­er­al min­i­mum wage rate of $7.25 per hour.

The law­suit also notes that man­age­r­i­al employ­ees were paid by reg­u­lar direct deposit; only hourly work­ers were stuck with the cards and the fees.

In a state­ment, Albert and Car­ol Mueller, the own­ers of the McDonald’s in ques­tion, said that they could not com­ment on the case, and added, We are com­mit­ted to pro­vid­ing them the best pos­si­ble work envi­ron­ment so [employ­ees] can deliv­er the fast, reli­able ser­vice that our cus­tomers expect.” (McDonald’s Cor­po­ra­tion did not return a request for comment.)

These pay­roll cards,” which after being loaded with wages work like a reg­u­lar deb­it card, are grow­ing increas­ing­ly pop­u­lar as com­pa­nies look for alter­na­tives to paper checks and pay­roll ser­vices. Like most deb­it cards, pay­roll cards can be used to pur­chase goods, or they can be used to make with­drawals from banks or ATMs. JPMor­gan Chase is one of sev­er­al bank­ing com­pa­nies, includ­ing Bank of Amer­i­ca and U.S. Bank, that offer them.

JPMor­gan’s web­site touts its Pre­paid Card Solu­tions” as an effi­cient and cost-effec­tive way to pay employ­ees, call­ing them a direct deposit alter­na­tive for unbanked and under­served employ­ees.” Cost-effec­tive, appar­ent­ly, for the employ­er — who trans­fers the cost of the ser­vice to the work­ers them­selves. As the Con­sumer Finan­cial Pro­tec­tion Bureau—the gov­ern­ment office found­ed by Eliz­a­beth War­ren to inform con­sumers of their rights when deal­ing with finan­cial prod­ucts — explains, employ­ers make arrange­ments with the finan­cial insti­tu­tion as to the terms of the cards, includ­ing any fees that may be charged to [the employee].”

Accord­ing to the CFPB, employ­ers typ­i­cal­ly” offer the card as one of sev­er­al pay­ment options and advise employ­ees who opt for the pay­roll card to read the terms and con­di­tions care­ful­ly. But accord­ing to Gunshannon’s law­suit, when she asked if she could be paid anoth­er way, she was told, If you don’t acti­vate the card, there is no way for us to pay you.” She quit, and called a lawyer.

Nick­eled and dimed

Fast food work­ers like Gun­shan­non are some of the low­est-paid work­ers in the coun­try. As many have not­ed, it’s expen­sive to be poor, with low­er-income peo­ple pay­ing more for, among oth­er things, basic finan­cial ser­vices. A recent study released by the Fast Food For­ward cam­paign — the union- and com­mu­ni­ty group-backed cam­paign to orga­nize New York City’s fast food indus­try — and per­formed by research firm Anza­lone Research found that 84 per­cent of fast food work­ers sur­veyed said they had been the vic­tims of wage theft in some form. Jonathan West­in, cam­paign direc­tor of Fast Food For­ward and exec­u­tive direc­tor of New York Com­mu­ni­ties for Change, said at the time, The [wage theft] epi­dem­ic is prey­ing on the city’s most vul­ner­a­ble res­i­dents — the men and women who make $7.25 / hour and are the least able to afford it.”

In the­o­ry, for low-wage work­ers who don’t have bank accounts, pay­roll deb­it cards could be an alter­na­tive to expen­sive options like check-cash­ing ser­vices and pay­day lenders. But the fees make that argu­ment tough to swal­low. Cer­tain states, how­ev­er, pro­tect users against fees asso­ci­at­ed with pay­roll cards. In some states,” the CFPB notes, you can’t be charged a fee to get your pay, which means that you won’t be charged a month­ly fee to have a pay­roll card or for the first with­draw­al per pay peri­od, which can include all of your pay.”

Right now, New York State is con­sid­er­ing leg­is­la­tion that would rec­og­nize pay­roll deb­it cards as a law­ful form of pay­ment. A bill has been intro­duced in its State Sen­ate and Assem­bly, endorsed by the state’s Busi­ness Coun­cil, that would allow work­ers to be paid on pay­roll cards, pro­vid­ed that they con­sent in writ­ing pri­or to the pay­ment and that at least one with­draw­al per pay peri­od is allowed with­out the work­er incur­ring fees. The Busi­ness Coun­cil calls it a less expen­sive, envi­ron­men­tal­ly friend­ly way” to pay work­ers and touts the ben­e­fits of the cards to unbanked” work­ers who lack check­ing accounts.

Sup­port­ers say that as long as work­ers can make one with­draw­al with­out a fee per pay peri­od, they’re not being ripped off. But what, then, about the work­er who doesn’t want to car­ry her entire pay­check in cash for the rest of the peri­od? The pay­day lend­ing indus­try, it’s true, makes an easy vil­lain, run­ning work­ers up to $15 or $20 to cash a decent-sized pay­check. But the kinder, gen­tler ver­sion offered by deb­it cards is a dif­fer­ence of degree, not of kind, and for fast food work­ers, whose week­ly check may only add up to $180, every dol­lar counts. In many cas­es, it’s pover­ty that keeps these work­ers from open­ing tra­di­tion­al bank accounts in the first place, and the added costs they face to get paid cre­ate a cycle that’s near­ly impos­si­ble to break.

Labor steps in

While low-wage work­ers with­out reg­u­lar bank accounts are most like­ly to have these cards offered as an option, work­ers in many fields, from restau­rants to acad­e­mia, find their wages pre­sent­ed to them on a piece of plas­tic with fees attached.

The pub­lic sec­tor is one of the biggest users of pay­roll cards: Some 41 states use deb­it cards to dis­trib­ute unem­ploy­ment ben­e­fits to recip­i­ents, many of whom have report­ed com­plaints sim­i­lar to Gunshannon’s. Fed­er­al law requires that unem­ploy­ment recip­i­ents be offered direct deposit as an option, but a 2013 report found some states still didn’t offer that choice. As I report­ed for Alter­Net last year, Bank of Amer­i­ca dis­trib­uted South Car­oli­na’s unem­ploy­ment ben­e­fits via pre­paid cards — and users report­ed get­ting charged fees for call­ing to check a hold on their account, or hav­ing to dri­ve 50 miles to get to a bank where they could use the card.

Rec­og­niz­ing the finan­cial bur­den these cards put on recip­i­ents, some unions and work­ers’ groups have begun to fight back. In 2011, Oregon’s SEIU Local 503 led a cam­paign to push back against U.S. Bank, the issuer of that state’s Reli­aC­ard, which was used to dis­trib­ute unem­ploy­ment and child-sup­port ben­e­fits and which had been crit­i­cized by the Nation­al Con­sumer Law Cen­ter. The state paid noth­ing to the bank, which recouped its mon­ey entire­ly through the fees paid by card users — includ­ing an unusu­al­ly oner­ous over­draft fee of $17, as well as ATM and bank teller fees and an inac­tiv­i­ty” fee.

Heather Con­roy, exec­u­tive direc­tor of Local 503, explained that the issue became a part of the union’s bar­gain­ing cam­paign that year, with statewide actions by home care work­ers and state employ­ees. Their cam­paign against the fees laid the ground­work for their inno­v­a­tive plan this year to bring bank issues to the bar­gain­ing table as they nego­ti­ate new con­tracts (a sto­ry I wrote about in The Amer­i­can Prospect).

As Gunshannon’s law­suit pro­ceeds, it’s worth tak­ing a les­son from the win Ore­gon work­ers scored: unlim­it­ed with­drawals at any bank, get­ting rid of the over­draft fee, cut­ting down oth­er fees, and push­ing back on the idea that low­er-income peo­ple should pay more just to get at their mon­ey than those who have lots of it to begin with. 

As the use of these cards spreads in the pri­vate sec­tor and states like New York con­sid­er leg­is­la­tion allow­ing them, advo­cates can play a nec­es­sary role in mak­ing sure that the cards don’t turn into just anoth­er prof­it cen­ter for big banks at the expense of work­ing peo­ple. Stephen Lern­er, a long­time labor orga­niz­er and advis­er to sev­er­al cam­paigns tar­get­ing Wall Street, warns that the banks are hap­py to make $1.50 a pop off low-wage work­ers’ pay­checks, just the same as they would be to make mon­ey off mort­gages. Or, as he puts it, No scam is too small or too big for the wiz­ards of finance.”

Sarah Jaffe is a for­mer staff writer at In These Times and author of Nec­es­sary Trou­ble: Amer­i­cans in Revolt , which Robin D.G. Kel­ley called The most com­pelling social and polit­i­cal por­trait of our age.” You can fol­low her on Twit­ter @sarahljaffe.
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