Pa. McDonald's franchises facing possibly more than $1M after paying employees with debit cards

By Carrie Salls | Nov 8, 2016

WILKES-BARRE – A recent Pennsylvania Superior Court ruling related to the practice of paying employees with debit cards by 16 McDonald’s franchisees in the Commonwealth could mean a payday of more than $1 million for thousands of current and former employees at those restaurants. 

A class of more than 2,300 employees allege that the mandatory debit card use violates the provisions of the Pennsylvania Wage Payment and Collection Law (WPCL).

In order to get to their pay through the debit cards, employees must activate the cards. In addition, according to the lawsuit, the employees had to go to specific banks to avoid withdrawal fees.

Jill S. Welch, a partner in Barley Snyder LLP’s Labor and Employment Practice Group, said she was not surprised by the Superior Court’s ruling in favor of the employees.

“When it comes to employees’ wages, Pennsylvania’s laws and regulations are protective of workers, and the ruling is consistent with this,” Welch told the Pennsylvania Record.

Welch said wage garnishments and payroll deductions are more limited in Pennsylvania than in other states, and direct deposit, even without the possibility of fees and charges, requires employee consent and an opt-out process.

Under the WPCL, employers must pay their workers via check or some other form of “lawful money of the United States.” In its ruling, the Superior Court said a payroll debit card does not fall into either category.

The court also took issue with the fact that the use of the debit cards was mandatory, and that employees of the McDonald’s franchises in question were offered no alternate payment methods.

“The use of a voluntary payroll debit card may be an appropriate method of wage payment,” the ruling said. “However, until our General Assembly provides otherwise, the plain language of the WPCL makes clear that the mandatory use of payroll debit cards at issue here, which may subject the user to fees, is not.”

Welch said the court looked at how the Legislature and the Department of Labor and Industry have implemented rules surrounding direct deposit for guidance on whether the use of mandatory payroll cards, including the possibility of fees being incurred if employees don’t use specific bank branches, would violate the WPCL.

The court noted that employers cannot mandate the use of direct deposit without an employee’s consent and without a process under which the employee can opt out of direct deposit and be paid by check, Welch said.

“Without any specific guidance on this new technology, the court left it to the legislature in the first instance to address whether and under what conditions payroll cards can be used as an acceptable method to pay an employee’s wages,” Welch said.

According to Welch, the Superior Court ruling could be appealed to the Pennsylvania Supreme Court, “which is apparently being considered by the McDonald’s franchises.”

“The case has been certified as a class with 2,380 employees, which makes the case ready for trial,” Welch said. 

If the Superior Court’s decision is upheld in connection with the legality of the mandatory use of payroll cards, Welch said the remaining issues for trial would be whether this group of employees was paid by mandatory payroll cards, as well as the amount of damages.

Damages available under the WPCL include lost wages and costs incurred, penalties, liquidated damages “equal to 25 percent of the total amount of wages due, or $500, whichever is greater,” and reasonable attorneys' fees for a three-year period.

Welch said the trial court noted that if the plaintiffs prevail, that each class member would likely receive more than $500 in damages, meaning the total award could be more than $1.2 million.

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