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McDonald's Franchise Sued Over Payroll Debit Cards

By Aditi Mukherji, JD | Last updated on

A McDonald's franchise is being sued over an issue every employer should know about: wages placed on debit cards. Suffice it to say, some workers are not lovin' it.

A former Pennsylvania McDonald's employee is trying to trim the fat from payroll debit card fees. The lawsuit centers on the fees she says she'll be charged to get her McDonald's wages from a debit card.

Single mom Natalie Gunshannon has filed suit over bank fees that allegedly include $1 to check her balance, $1.50 to withdraw cash, and $15 to replace a lost card, reports the Associated Press.

Payroll Debit Card Pros and Cons

Gunshannon worked at a McDonald's for a month, when her work as home health aide dried up. The 27-year-old says the payroll debit card was her only option to get paid.

"The kicker was, if I use it at a gas pump, they can do a hold of $50 for up to five days," Gunshannon told the AP. "I can't even afford to get gas."

Her lawsuit names franchise owners Albert and Carol Mueller, who employ about 800 people at 16 McDonald's restaurants in northeastern Pennsylvania.

The suit is gaining a groundswell of support from low-wage workers across the country, reports the AP.

Gunshannon's lawyer insists it's not fair to force workers to pay bank fees to get their lawfully earned money. But a spokesman for JPMorgan Chase, which issues the payroll debit cards in question, said cash withdrawals are typically free at Chase banks and other outlets.

Gunshannon's situation is not unique. Nearly 4 million U.S. households have someone receiving wages on a payroll card, according to a 2011 survey by the Federal Deposit Insurance Corporation.

Many employers are trying to move away from the cost of issuing paper checks, in favor of direct deposit or payroll debit cards. The latter, depending on the fees, can be of great use to the unbanked or underbanked.

"Payroll debit cards offer real benefits for workers who are accustomed to cashing paychecks at check cashers, including meaningful cost savings, greater security and the convenience of an electronic payment option," Timothy Flacke, executive director of the nonprofit Doorways to Dreams (D2D) Fund, which makes financial products for low- and moderate-income consumers, told ABC News. "Of course, many people do not like to have a product chosen for them, especially when there are fees involved."

What Employers Need to Know

Employers who pay wages through debit cards should make sure to offer wage payment in another form as well. That's because paying employees by payroll card alone violates both state and federal laws, a managing attorney with the National Consumer Law Center told ABC.

"Employees should always have the choice of direct deposit to their own bank account and also the choice of a check or cash," the NCLC attorney advised.

"Depending on the particular card, for unbanked employees, a payroll card can be a safer, faster, more convenient and cheaper way of receiving wages than paying to cash a paper check," she continued. "But payroll cards vary widely and some charge too many fees. Some payroll cards even have expensive overdraft fees, which are completely inappropriate on payroll cards or any other form of prepaid card."

Each state has its own laws about how wages must be paid. In Gunshannon's case, Pennsylvania's Wage, Payment and Collection law states that employers "shall pay in cash or by bank check," according to the state's Department of Labor and Industry. For their part, the Muellers released a statement saying they strive to follow the law, and asking the public not to jump to conclusions about the lawsuit.

To learn more about the payroll laws in your state, and whether payroll debit cards are right for your business, it might be helpful to contact an experienced employment attorney in your area.

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