Suits filed to end paycheck cashing fees

Many California employers were surprised to learn recently that they could be open to legal action because of a law that requires them to ensure that their employees can cash their paychecks without being charged a fee. The issue intensifed when two businesses filed lawsuits against two banks that impose the fees.

Karis House, a nonprofit, has sued Bank of America, while Ability Answering-Paging Service has sued Wells Fargo.

They argue that banks are opening employers to liability under section 212 of the California Labor Code (in effect since 1911) by charging $5 fees for nonaccount holders to cash checks, even if those checks come from an account holder. For those working minimum wage jobs, the fee can be equivalent to an hour's work, according to California Sen. Dean Florez, D-Shafter, who introduced two bills to stop the practice. The bills were pending as of press time.

James King, an employee of Karis House, said he discovered the fees while intervening on his employees' behalf with Bank of America. An employee asked King for cash instead of the reimbursement check he was about to issue her because she'd been charged $5 previously to cash a $13 check. King said he didn't know about section 212 or protections for his employees from paying paycheck cashing fees when he contacted his bank to protest the charge.

The lawsuits also ask the banks to notify business clients of the charges and the potential consequences of the charges under section 212, said Nicholas Roxborough, attorney for both plaintiffs. And they want the banks to refund all fees charged.

Many employers were not aware of the implications of the banks' fees, said Andrew McDevitt, manager of government relations for the American Payroll Association.

The banks have described the fees as a necessary part of doing business, saying there are financial imperatives for charging fees to nonaccount holders who use their banks to cash checks.

"We believe that we are permitted to set the pricing for our products and services," said Harvey Radin, spokesperson for Bank of America. "We believe the state cannot threaten a national bank's business clients for civil and criminal penalties for doing business with a bank that charges fees authorized by federal law."

COPYRIGHT 2004 Society for Human Resource Management
COPYRIGHT 2004 Gale Group