Written by attorney William Fulton Broemer

Federal Law on Mandatory Direct Deposit

While state laws may vary, federal law permits employers to make direct deposit of wages mandatory, with some minor prerequisites.

U.S. Code Title 15, § 1693k states that no person may require a consumer to establish an account for receipt of electronic funds transfer with a particular bank as a condition of employment. The FDIC has interpreted the above section to mean that an employer may not require its employees to receive their salary by direct deposit to a particular bank. An employer may require direct deposit if employees are allowed to choose the bank that will receive the direct deposit.

Alternatively, an employer can give the employees the choice of having their salary deposited at a particular bank (chosen by the employer) or receiving their salary by other means, such as by cash or check. The Department of Labor’s (“DOL") position/interpretation is that direct deposit of wages is acceptable as long as the employee has the option of instead receiving payment by cash or check, and so long as applicable bank charges do not effectively reduce the employee’s wage below minimum wage.

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