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Capital & Main: Andrew Puzder’s House of Debit Cards

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By Dean Kuipers

Torrance Chambers has been calling Andy Puzder for weeks to talk to him about a problem with his paycheck from the Hardee’s restaurant where he works in Birmingham, Alabama. Ordinarily, Chambers wouldn’t bother the CEO of the fast-food chain’s parent company, CKE, Inc., but he claims his shift leader, store manager and several higher-ups told him no one else could help him. Chambers said his store issues paychecks only in the form of a prepaid Visa debit card, and it comes with fees. He’d prefer to get a paper check or a direct deposit, the way he has had at other jobs.

“In order to get the money out the card, you have to go to the ATM, and the one I have to go to, they charge $3.95 for every transaction I have,” said Chambers. He said he’s also charged different fees for using the card in stores and for paying his bills, and there’s no option to get his full paycheck at any particular bank or store without being charged.

“Including food and gas and everything, in a week, total, I’m outta $80 [just on transaction fees]. And I’m only gettin’ paid roughly $250 a week,” he said. These fees mean that Chambers’ real wages are significantly less than the national minimum wage required by law, $7.25 an hour.

Having received no return call from Puzder, Chambers filed a complaint with the U.S. Department of Labor on January 25, 2017, alleging minimum-wage violations related to the cards, as well as other problems at the store. (CKE did not respond to queries related to this article.)

It’s not the first such complaint against the company, as a 2014 Department of Labor investigation found that the company’s use of debit cards violated minimum wage laws. The agency ordered CKE to pay $2,071.98 to an undisclosed number of employees, again at a Hardee’s in Alabama, for similarly issuing cards that incurred fees. Investigation documents state outright that the company refused to pay the money, stating it would mean “changing the payroll practices of the company,” but it is unclear how the case was resolved or if any changes to the payroll cards were ever made.

CKE is one of many employers now paying with plastic. Prepaid debit cards are a common way to pay employees at American mega-employers like Walmart and Home Depot, as well as many other burger chains such as McDonald’s, Burger King, and Sonic Drive-In. Almost half of U.S. states also pay their government employees with cards. The cards are usually offered as an option for those employees who don’t have bank accounts and want to avoid high fees at check-cashing locations.

According to a 2016 report by Restaurant Opportunities Centers (ROC) United, an advocacy group for restaurant employees, 7.4 million American workers received their payroll via debit card in 2015, and that number is expected to rise to 12.2 million by 2019. The cards are popular with some employees and very popular with payroll companies, who see huge savings by going paperless. The ROC United report found, for instance, that Darden Restaurants, the parent chain of Olive Garden, Yard House and LongHorn Steak House restaurants, saved $2.75 per check per pay period by going to plastic, saving the company $5 million a year.

In New York City, Deyanira Del Río, co-director of the New Economy Project, which helped implement new state rules regarding payroll card use, said that in surveying New York state workers, NEP, Retail Action Project and NYPIRG found two egregious problems that she compared directly to what Chambers said he experienced with Hardee’s in Alabama: Some workers could not access their full pay without paying some kind of fee; workers also said they were coerced or pressured by management into taking the card even if there were other options like direct deposit or a paper check. Similarly, Chambers said he was unaware if any other option existed, because multiple managers informed him he could not have a paper check or direct deposit.

“On the part of employers, the motivation is to offset the costs of their payroll processing,” said NEP Campaigns Coordinator Andy Morrison. NEP led a labor-civil rights working group that pressed for the New York rules, which go into effect next month  and are touted as the toughest in the nation. Plastic payroll is cheaper and also harder to track, since there’s no paystub or statement. The payroll card companies, which are often the same or affiliated companies as the rest of the prepaid debit card industry that is dominated by such giants as Visa and Mastercard, can offer cheaper services to employers because they make huge profits on all those card fees.

This schedule of fees, as provided by the 2016 ROC United study and other reports, shows just how many times the card company is touching a worker’s money:

  • ATM fee, typically anywhere from $1 to $3.95
  • Point of Sale (swipe) fee (the merchant also pays an interchange fee on this)
  • ATM balance inquiry fee
  • Optional paper statement fee
  • Point of Sale decline fee
  • Overdraft fee
  • Card-to-card transfer fee
  • Fee to talk to customer service if there is a problem (such as the payroll not loading on payday, which is a common occurrence)
  • Monthly maintenance fee
  • Card replacement fee
  • Inactivity fee if the card isn’t used often enough

Del Rio pointed out that the cards are marketed as a vehicle to help the low-wage worker manage his or her money by limiting the amount they can spend – since the cards are not linked to other accounts or to a card that would cover over-limit spending – but most don’t realize they’ll still get dinged for hitting the limit. “These payroll cards are supposed to help you manage your spending and not go over, but you can actually trigger overdraft fees with a lot of these cards. And those can be quite high, like $30 to $40,” she said.

The ROC United study detailed other hidden problems that put workers into the red. For instance, Darden employees interviewed for their study found that some gas stations put a hold on a prepaid debit card for $75 to $150 and left it on there for several days. Employees unaware of the hold often went over their card’s limit or got POS declines, incurring more fees, causing them to call in to make a balance inquiry, which also incurred more fees, and reported not having the money they needed on time to pay their rent and other expenses.

The study surmised: “Payroll cards should be offered as one of several free and safe ways for workers to receive their wages rather than be used as a vehicle for steering employees towards costly and unwieldy accounts.”

To date, Alabama has no state regulations governing the issuance of payroll debit cards. Federal regulations don’t directly address them, either, other than requiring that payroll cards be insured with deposit insurance (unlike other prepaid debit cards).

But in 2013, the Consumer Financial Protection Bureau – the agency created by the Dodd-Frank Wall Street Reform and Consumer Protect Act passed in the wake of the Great Recession – issued a stern warning that federal law prohibits employers from mandating that workers take their pay on plastic. They must also be offered a choice of a paper check or a direct deposit. Acknowledging that the bureau had received reports that employers in the retail and food service industries were forcing their workers to take the cards, CFPB director Richard Cordray said at the time, “Today’s release warns employers that they cannot mandate that their employees receive wages on a payroll card. And for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections.”

Hardee’s employees in Birmingham had filed complaints in the past claiming the company forced them to take the cards. The 2014 Department of Labor investigation into Hardee’s in Birmingham addressed these claims and interviewed a company district manager who said that employees were required to take the plastic card for their first check and they could then receive their pay via direct deposit. Two years later, Torrance Chambers and at least one other employee in his store – which may not be the same store investigated in 2014 – insist that they were told it’s the card or nothing.

One of the significant findings of the 2015-16 workgroup led by the New Economy Project was that workers were coerced into accepting the cards, regardless if other options were available. They even found one company that was taking a tiny kickback from the card company for every new account they enrolled in the card. Subsequently, New York’s new labor rules expressly prohibit coercing workers to use the cards.

Morrison noted, “[New York’s new rules have] been trumpeted as the strongest in the nation, so in theory other states could follow suit.”

The 2014 Department of Labor investigation into Hardee’s in Birmingham documents company pushback similar to that seen in New York. That investigation found that fees incurred while using payroll debit cards at “ATMs, gas stations and grocery stores” reduced the received wages to below $7.25 per hour, resulting in multiple Section 206 (Minimum Wage) violations of the Fair Labor Standards Act.

A Hardee’s Vice President of Payroll, interviewed for the investigation but whose name was redacted from released documents, stated that the “’the card is designed to incur no fee’s [sic] and the employee’s [sic] should receive 100% of their money.’” The vice president pointed out that, at the time of his interview in 2014, the card should work without ATM fees at PLUS and INTERLINK ATMs and at Kangaroo gas stations, as well as some other places, but that “it is up to the employees to use the cards wisely” and that “all employees are told this when they start working here.”

Chambers, who said he has been active in the movement to raise the minimum wage, ended up trying to call Puzder’s office to get help with his payroll card problems. Chambers, however, does not work for CKE itself, but rather for HNI LLC, a franchisee of the Hardee’s chain. As detailed in Capital & Main’s companion piece about the relationship between CKE and its franchisees, the company demands that its franchisees adhere closely to what is referred to in its 45-page franchise agreement as the “System,” a zealously enforced operations guide regulating everything from burger look and taste to dining room design, to which products are used to clean the bathrooms — but which leaves employee hiring and firing, payroll and pricing to the franchisee.

Which means that Puzder is under no obligation to call Chambers back. But all Chambers wants is for the big boss to show him some love.

“Well, first off, if he’d show a little bit more concern with the employees, and come talk personally, then there wouldn’t be no complaint,” said Chambers. “[I want him to] just try to make it better for the employees and try to make ‘em happy, and he’s the only one that can do it. Without his say-so, it’s not going to be any progress with these issues.”

Chambers thought that disqualified Puzder from being a good candidate for labor secretary. “It’s a terrible idea,” he said. “One, he’s not a people person. Two, he’s very inconsiderate. And furthermore, he’s just concerned about himself and no one else, so I really don’t think that he should be in that position.”