The Connecticut Department of Labor (DOL) recently issued earned wage access (EWA) guidance for employers that includes information about wage deductions for fees [DOL, Wage and Workplace Standards Division Notice to Employers Utilizing Earned Wage Access (EWA) Products With Their Employees, 5-10-24].
Employee Authorization Required
State law requires that when the employer passes fees along to employees in the form of payroll deductions, the employer must obtain written authorization from the employee on a form approved by the Connecticut DOL. The DOL considers whether the fee charged is nominal and reflects the cost of the EWA service, ensuring the deduction does not reduce the employee’s wages below the minimum wage, the deduction does not impact overtime pay, and that all appropriate financial disclosures are made to the employee.
Wage Scaling Prohibited
Under state law, an employer must not “make a discount or deduction” from employee wages when the wages (or any part of the wages) are paid at an earlier time than the regular payday. It is called “wage scaling” and employers that violate the law are subject to a fine of not more than $100.
The DOL takes the position that an EWA processing fee with employer advance EWA products is not wage scaling because it is a fee for the service of a third-party processing the payment. However, the DOL cautions employers that courts may find that reducing an employee’s rate of pay or making any other wage deduction for advancing pay may be considered wage scaling in violation of state law.
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Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.
