Under Labor Code Section
212, employers must issue paychecks that are negotiable and payable in cash,
without a bank “discount”—the charging of a fee—at an established place of
business in the state, the name and address of which must appear on the check.
Over the last few years, a question arose as to whether paycheck cashing fees
charged to nonaccountholders by some banks violates this provision— or puts
employers in jeopardy of violating the provision—because the fee may be
considered a prohibited discount.
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Several banks that
charged paycheck cashing fees—such as Wells Fargo and Bank of America— voluntarily
changed their practices to avoid controversy. But the Legislature has also been
working on a solution. Here’s a look at what’s on the table in
• S.B. 778. This
bill strengthens Labor Code Section 212 compliance by barring a financial
institution that issues paychecks on behalf of a business client from assessing
any charge or fee on a worker seeking to cash a paycheck issued by the business
client, even if the worker doesn’t hold an account at that bank. Opponents of
the measure argue that federal banking law—which regulates how banks can charge
customer fees—would preempt this legislation.
• S.B. 1188. This
measure would prohibit an employer from issuing a paycheck that’s payable at a bank
or other business that charges a fee to cash the check unless the employer
reimburses the employee for that fee.
• S.B. 1189. This
bill clarifies Section 212 to define the term “without discount” as meaning
without a fee charged by the bank or place of business where the paycheck is
negotiable/payable.
• S.R. 22. This
resolution would bar state agencies from contracting with a financial
institution that charges a paycheck cashing fee for checks drawn on funds held
at that financial institution by a business client.
We’ll follow the
progress of these measures and keep you posted on developments. In the
meantime, you can find the bills online at www.leginfo.ca.gov/.