Iowa Direct Deposit
Law Changes Again
In 2005,
the Iowa Legislature made some important changes to state
law regarding direct deposit of paychecks and what
information employers must furnish employees on their payday
statements. Then in 2006, the Legislature revisited these
changes and made some revisions to the new law which
employers need to be aware of:
Direct Deposit Fine-tuned
The 2005
changes permitted Iowa employers for the first time to
require new hires to sign up for direct deposit of their
paychecks as a condition of their hire. However, the new
law stated that “current employees” could not be required to
participate in direct deposit which created the anomaly that
once a new hire becomes a current employee, they could opt
out of the direct deposit mandate.
So during
the 2006 session chapter 91A of the Iowa Code was amended to
make it clearer who is covered by the direct deposit
requirement. Chapter 91A.3 (3) now states, “An employee
hired on or after July 1, 2005, may be required, as a
condition of employment, to participate in direct deposit of
the employee’s wages…”
The key
points are that the requirement retroactively applies to
anyone hired on or after July 1, 2005, and that the direct
deposit mandate is now a condition of employment, not hire,
so it is a continuing, not a one time, requirement.
It should
be noted that the exceptions to the direct deposit
requirement remained the same. That is, direct deposit
cannot be required if any of these conditions exist: (a)
the costs to the new employee of setting up and maintaining
an account would reduce the employee’s wages below minimum
wage; (b) the employee would incur a fee charged to the
employee’s account as a result of the direct deposit; and/or
(c) a labor union contract between the employer and a labor
union representing the employees prohibits the employer from
requiring employees to sign up for direct deposit of wages.
Another
change in the direct deposit law that employers should be
cognizant of is that a provision was added which makes the
employer liable for any overdraft charges on the employee’s
account if the overdraft was caused by the failure of the
employer to timely send the wages on or by the regular
payday.
Pay
Stub Modification
The 2005
changes also enacted a new requirement that every payday
employers provide to employees a statement showing the hours
worked, wages earned and deductions made from the paycheck.
The 2006 revisions established a limited exception to this
requirement. An employer need not provide information on
hours worked for employees who are exempt from overtime
under the provisions of the Fair Labor Standards Act (FLSA)
unless the employer has established a policy or practice of
paying exempt employees overtime or bonus pay based on hours
worked. This change relieves an employer from keeping track
of hours worked by exempt employees unless some type of
extra pay is based on their hours.
Any
questions regarding the changes to the Direct Deposit law,
or any other human resources topic, you can contact David L.
Hansen, SPHR, CCP at (515) 221-1718 or
hansend@hr-onesource.com.
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