Opinion  Selected Opinion 00-148

Date:	10/27/2000
Organization:	Division of Banks
Docket Number:	00-148

Employers requiring direct deposit of salary by electronic means

October 27, 2000

Laura Lough, Esq.
Editor
American Payroll Association
30 East 33^rd Street
New York, New York 10016-5386

Dear Ms. Lough,

This letter is in response to your correspondence dated October 6, 2000 to the Division of Banks (the "Division") in which you request an opinion as to whether a company may require its employees to use direct deposit.

Your letter contains an excerpt from the APA's Guide to Successful Direct Deposit containing the appropriate Massachusetts General Laws chapter 167B, section 7 and the supporting Division Opinion Letter 97-013 a copy of which is enclosed for your review. Your letter asks whether Massachusetts' law requires 1) the employee to authorize participation (under state law or Attorney General Opinion); 2) the employee must not incur additional cost as a result of participation; and/or 3) the employee must be able to choose the financial institution.

The position set forth in Opinion Letter 97-013 remains the position of the Division. Specifically, the Division's regulations governing electronic fund transfers, 209 CMR 31.00 et seq provide that compliance with any provision of the Federal Electronic Fund Transfers Act, the Board's Regulation E, official Board interpretations and official staff interpretations, which does not conflict with G.L. c. 167B and 209 CMR 31.00 or an advisory ruling of the Commissioner, shall be deemed to be compliance with G.L. c. 167B. ." As noted in Opinion 97-013, the Division reviewed 12 CFR 205.10(e)(2), a comparable provision of said Regulation E. The Official Staff Commentary for this section of Regulation E states that "A financial institution (as an employer) may not require its employees to receive their salary by direct deposit to that same institution or to any other particular institution. An employer may require direct deposit of salary by electronic means if employees are allowed to choose the institution that will receive the direct deposit.Alternatively, an employer may give employees the choice of having their salary deposited at a particular institution, or receiving their salary by check or cash." (emphasis supplied.) Upon review of the above provisions of Federal Regulation E and Official Staff Commentary thereto, it is the position of the Division that an employer may require direct deposit of salary by electronic means if employees are allowed to choose the institution that will receive the direct deposit. This practice is specifically listed as permissible in the Official Staff Commentary and compliance with this provision will be deemed to be compliance with Massachusetts General Laws chapter 167B.

The conclusions reached in this letter are based solely on the facts presented. Fact patterns which vary from that presented may result in a different position statement by the Division.

Sincerely,

Joseph A. Leonard, Jr.
Deputy Commissioner of Banks and General Counsel