In 2025, we would like to pay all our employees by direct deposit. We have a couple of employees who do not have direct deposit, and it can be challenging to get their paychecks to them on time. Can we require every employee to enroll in direct deposit?
The short answer is no. Although the vast majority of employees use direct deposit, there are some employees who prefer to receive wages by means of a traditional paycheck.
Employers in California may find themselves running afoul of the law if they attempt to make direct deposit mandatory for all employees.
In our increasingly digital working world, many businesses have gone paperless. Direct deposit of wages into employee bank accounts has many advantages; it eliminates the time and expense of producing and distributing paychecks each pay period. In addition, direct deposit eliminates the possibility of physical checks being lost or stolen.
Employer May Offer Direct Deposit
California Labor Code Section 212 requires that checks or other types of payment be negotiable and payable in cash at a place of business or bank in the state. Mandating that all employees receive payment of wages by direct deposit would require that an employee have a checking or savings account, and that is not required by the law.
Employers may offer employees the option of enrolling in direct deposit but cannot require it. California Labor Code Section 213(d) expressly authorizes employers to pay employees via direct deposit into an account of the employees’ choosing (bank, savings and loan, or credit union with place of business in California) provided the employee has voluntarily authorized direct deposit.
Employers can utilize the forms available to CalChamber members on HR California (Direct Deposit Authorization, English and Spanish versions).
A Division of Labor Standards Enforcement (DLSE) opinion letter states: “Employee choice is thus a fundamental condition for payment methods utilizing direct deposits under California wage payment law.” (DLSE Opinion Letter 2008.07.07.)
The bottom line in this case is that the employer cannot mandate that all employees enroll in direct deposit.
If an employer requires that an employee use direct deposit, without the employee’s voluntary consent, the employer may be subject to civil penalties.
Timely Payment of Wages Required
California Labor Code Section 204 requires that all wages earned in the current pay period be paid to an employee no later than the employer’s designated payday.
It can be more difficult to ensure that employees receive their pay on time without direct deposit. The employer must print and issue a traditional paper paycheck and either hand it out to employees or mail it to the employee’s home address. There is the risk that first class mail delays may result in an employee receiving their paycheck late.
Employers who are having difficulty mailing paychecks to employees on time may wish to consider using some form of overnight mail service. Whatever payment method they use, employers must ensure that employees have timely access to their wages on the designated payday to avoid stiff penalties.
Employers should always consult with legal counsel about their pay methods to ensure they are complying with all the California wage payment laws.
Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred members and above. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.
