Workers Sue Fifth Third Bank for Paying Wages with Prepaid Debit Cards

Payne has indicated that she intends to amend the complaint to include claims under California’s Private Attorneys General Act (PAGA) which could subject Fifth Third and others to stiff penalties. Those penalties, which are calculated on a per employee, per pay period basis, could prove to be a major issue for a class of defendants that also includes National Association, Fifth Third Bancorp, Automatic Data Processing, United Ground Express Inc., United Airlines, Inc. and Does 1-20. The plaintiffs allege that these defendants operate as a joint venture – a single corporate entity. 

Payne v. Fifth Third Bank, although it cites only the provisions of California labor law, is factually similar to other lawsuits brought throughout the country concerning the provisions of the federal Fair Labor Standards Act (FLSA). At first glance, this seems like well-trodden legal ground, but the practice remains stubbornly common.

Cumbersome, expensive and opaque

Payne worked for Fifth Third from May 9, 2024, to Nov. 25, 2024. She alleges that she and other employees were paid by means of a prepaid card that required them “to pay fees or incur costs to collect their wages.” Further, she claims that “the prepaid card could not be readily cashed in full.”

In addition, the complaint points out that, because workers did not receive a wage statement when they were paid via prepaid card, they were unable to check that they were being correctly paid. A pay stub with timely and accurate information about rate, hours and employer deductions is an employee’s first line of defense against wage theft.

Without a pay stub, workers have no easy way to determine whether they are being paid in accordance with California’s minimum wage laws.

California Labor Code

According to Section 212 of the California Labor Code,

“(a) no person, or agent or officer thereof, shall issue in payment of wages due, or to become due, or as an advance on wages to be earned: (1) Any order, check, draft, note, memorandum, or other acknowledgment of indebtedness, unless it is negotiable and payable in cash, on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument, and at the time of its issuance and for a reasonable time thereafter, which must be at least 30 days, the maker or drawer has sufficient funds in, or credit, arrangement, or understanding with the drawee for its payment.”

Keeping it in California

The complaint makes clear that the lawsuit makes claims only under California law – that there is no federal question. This is presumably an effort to block any anticipated motion to remove the case to federal court, or to add federal claims, either of which might favor the defendants.

Common practice

Nonetheless, the sheer number of lawsuits filed in other states or that refer to the FLSA suggest how prevalent the practice of paying workers with prepaid cards is. Even the embattled Consumer Financial Protection Bureau (CFPB) offered this general advice in 2015:

“If my employer offers me a payroll card, do I have to accept it?

No. Your employer can’t require you to receive your wages on a payroll card. Your employer has to offer you at least one alternative and allow you to choose…

Your employer or the card issuer must provide you with the card’s terms and conditions. Before you agree to receive your wages on a payroll card, make sure you understand those terms and fees. For example, some cards charge fees for out-of-network ATM withdrawals, receiving paper statements, or checking your account balance at an ATM. Some cards charge fees every time you make a purchase.”

These appear to be the kinds of additional charges to which Payne refers.

In 2013, a single mother who worked at a northeastern Pennsylvania McDonald’s franchise sued the owners after she said she was given a fee-laden debit card and was told that she had to use it to access her earnings. In 2014, the Tennessee Bar Association highlighted the legal implications inherent in an employer’s decision to pay workers via prepaid debit cards.

The issue of legality and the extent of employee protections are specifically determined by the law, including California Labor law, being applied.

This is not an isolated issue confined to Fifth Third workers, but a developing situation for California workers to watch.