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McDonald’s Payroll Practices

July 16, 2013

McDGood news for employees of several McDonald’s franchise in Pennsylvania. At least 16 McDonald’s restaurants in Pennsylvania had imposed a policy requiring employees to be paid through a JP Morgan Chase Payroll Card rather than through direct deposit, check, or other more traditional methods. The payroll cards impose hefty fees, including a $1.50 fee for ATM withdrawals, a $10 inactivity fee for cards not used within 90 days, a 75 cent online payment fee for each transaction, and other fees.

Natalie Gunshannon, a single mother employed at one of the franchises using this practice, had created a petition  to permit employees to receive pay in a check or through direct deposit. She complained that the hefty fees reduced her real pay below the minimum wage. Gunshannon was paid $7.44 per hour; the state’s minimum wage is $7.25 per hour. She worked 30 to 37 and was classified as part-time, so the position came with no benefits.

When the restaurant owner balked at her request for payment through direct deposit with her local credit union, she filed a lawsuit. The franchise owner subsequently revised their policy, permitting employees to choose between direct deposit, check, and payroll card. McDonald’s USA issued a statement distancing the corporation from the policy and noting that “McDonald’s franchisees are responsible for, and make their own decisions around, employment and pay related matters. McDonald’s USA is not named in this complaint. As such, we believe it would be inappropriate to further comment or speculate.”

Defenders of the policy note that payroll cards provide important services for the unbanked. Timothy Flacke, executive director of the nonprofit Doorways to Dreams, noted that “Payroll debit cards offer real benefits for workers who are accustomed to cashing paychecks at check cashers, including meaningful cost savings, greater security and the convenience of an electronic payment option.” But Flacke also noted that individual employees should have the option of receiving traditional forms of payment, “especially when there are fees involved.”

And that’s the real catch. With banks looking for ever more ways to increase their profitability, especially following the imposition of new restrictions under Dodd-Frank, the high fees associated with payroll cards, prepaid debit cards, and other instruments are particularly attractive.

So, rather than accepting payroll cards as a vehicle to service the unbanked, shouldn’t we be asking why the poor are “unbanked” in the first place?

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  1. The McDonald’s Monthly Budget | Global Food Politics

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