COMP NEWS – An existing Connecticut law could clash with employer attempts to provide “on-demand” pay – a service where workers receive early compensation in exchange for a payroll deduction.

EWA, also known as on-demand pay or daily pay, is a way to allow workers to receive their pay before payday, according to the Connecticut guidance. That money in some cases comes as an advance from a third-party vendor that requires fees via a payroll deduction.

 

Many workers say they want such an offering from their employers, and data shows they use the option when it’s offered. In the employer-sponsored market, workers accessed $9.5 billion through EWA in 2020, triple the amount from just two years earlier, according to data cited in CNBC reporting. The number of transactions also tripled during that time.

Connecticut state law specifically prohibits employers from reducing pay in exchange for receiving paid wages early.

• Employers must be aware that courts may find that earned wage access fees violate Connecticut law, the state’s department of labor cautioned Friday.
• Connecticut state law prohibits employers from engaging in “wage scaling,” or reducing pay when any wages are paid early.
• The agency itself doesn’t believe an EWA fee would amount to wage scaling “as it is a fee for the service of a third-party processing the payment,” it said, but “employers must be aware that courts may find that reducing the rate of pay or any other wage deduction for advancing pay may be considered wage scaling in violation of [state law].”

To read more about the ongoing fight over return-to-office mandates, click here.

For more Comp News, see our recent posts.