Many of our employees
have opted to have their paychecks directly deposited. It would be so much
easier for our company—and we’d save money—if we could require everyone to use
direct deposit. Can we do this?
– Eileen in
400+ pages of state-specific, easy-read reference materials at your fingertips—fully updated! Check out the Guide to Employment Law for California Employers and get up to speed on everything you need to know.
The short answer is no,
cannot require employees to opt for direct deposit of paychecks. Under Labor Code
Section 213, employers can use direct deposit only when an employee voluntarily
authorizes it. Thus, you must allow an employee who wants to receive paper
checks to do so.
Also, there are other
rules with respect to direct payroll deposit. When an employee who has authorized
direct deposit is discharged or quits, you can pay the final wages by direct
deposit. (Note that this is a recent change in the law. Before 2006, a direct
deposit authorization terminated on discharge or resignation.) Keep in mind,
however, that you still have to follow all other final paycheck rules, which
could make direct deposit problematic in this situation. For example, final
wages are due immediately when an employee is discharged, and within 72 hours
when an employee quits unless notice of the resignation was provided more than 72
hours before the resignation date. Given these tight timeframes, it may not be
possible to pay the final wages by direct deposit.