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Employment Law/employee set up of direct deposit


Our company has an on-line employee website. They can update their address, look up benefit info, check their payroll advice of deposit, etc.

We also have it set up so employees can change and/or set up their direct deposit via this online employee site.  It is a secure site in which the employee must use their confidential log on and password.

My question - is it legal for us to provide this service to our employee's in all states? Or are their some states that have laws that say we can't let employees set up a direct deposit online, but rather have to submit a hard copy form?  Our employees logon info is unique to them.   

Thank you!!


Hello Della,

Your Question:
"is it legal for us to provide this service to our employee's in all states? Or are their some states that have laws that say we can't let employees set up a direct deposit online, but rather have to submit a hard copy form?"

My Answer:
As far as federal law is concerned according to the FDIC,
"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 (designated by the employer) or receiving their salary by another means, such as by check or cash."

As far as the U.S. states are concerned,

States with No Laws Regarding Direct Deposit...
Alabama, Georgia, Hawaii, Louisiana, Massachusetts, Mississippi, Nebraska and Ohio have no clear laws restricting direct deposit in any way. Small business owners in those states are advised to consult with an attorney if they want to require employees to accept direct deposit, especially if any employees are unwilling to accept it. The same holds true in Kentucky, Maine, South Dakota and Tennessee, where laws are unclear as to whether employers can require all employees to accept direct deposit.

States Allowing Required Direct Deposit...
Indiana, Kansas, Minnesota, Missouri, South Carolina, Texas, Virginia, Washington and West Virginia allow employers to require all employees to accept direct deposit of wages. But even these states make exceptions for employees who do not have bank accounts, who may receive wages in cash, check or payroll card form.

States Requiring Employee Agreement for Direct Deposit...
Alaska, California, Connecticut, Colorado, Delaware, Florida, Idaho, Illinois, Iowa, Maryland, Montana, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, Vermont and Wyoming require employees to consent to receiving wages in direct deposit form. Some of these states require specific written permission, which must be retained by the employer. Business owners are advised to contact their state department of labor, an attorney or an accountant to make sure they are complying with state rules for employees who elect to receive direct deposit wage payments in these states.

States with Specific Direct Deposit Regulations...
In Arizona, an employee must either specify a bank at which he or she wishes to receive direct deposit payments or agree to receive salary payments in electronic paycard form. Arkansas requires employees to specify in writing that they wish to receive checks if their employer has instituted direct deposit. Utah allows employers to require direct deposit only if they are required to pay a minimum of $250,000 in state payroll tax or if two-thirds of the workforce of a firm agree to direct deposit.


I hope that helps.

MY answer disclaimer:
Please understand my response and answer is for educational and informational purposes only. I'm not an attorney. It is not intended nor should it be relied upon as legal advice. Always consult a qualified attorney for legal advice.

Yancey Thomas Jr.

Employment Law

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Yancey Thomas Jr


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