Workers’ Union Turns To Payroll Cards Amid Fee Regulation Pressure

The U.S. Supreme Court ruled earlier this year to prohibit unions from collecting fees from non-member public workers, but the government’s pressure on organized labor may not end there. Only weeks later, President Donald Trump’s administration issued a proposal that would restrict the ability for states to move money from Medicaid to “third parties.”

“One such potential impact of the proposed rule-making would be that states stop reassigning home care workers’ dues to unions,” the proposal stated. “We estimate that unions may currently collect as much as $71 million from such assignments.”

Now, a major workers’ union in the at-home healthcare industry has a unique strategy to ensure dues are collected even if the proposal becomes regulation: develop its own payroll card allowing employees to automatically send in their union fees.

Reports in Bloomberg on Tuesday (Oct. 9) said the Service Employees International Union (SEIU) Local 2015 — the largest U.S. home healthcare union, representing an estimated 385,000 in-home healthcare employees in California — is launching a pre-paid debit card, co-branded with ADP.

At-home healthcare providers are employed by the states, which automatically deduct union fees from those employees’ paychecks. According to Bloomberg, Tim Hill, the acting head of Medicaid, said the proposal “is intended to ensure that providers receive their complete payment” from Medicaid.

But critics of the proposal say the initiative is an attack on organized labor an unions’ ability to fund themselves, and imposes a hassle for existing union members that would have to manually send in their fee payments every month.

According to reports, states like California are expected to introduce a legal challenge to the White House’s proposal. Until that happens, though, the union is exploring ways to ensure its existing members are able to easily pay dues each month without having to physically write a check.

The launch of a debit card means workers can authorize ADP to load their state paychecks onto their cards, then route dues to the SEIU, allowing for automatic fee payments without having to manually pay their dues each month. Those cards can also be used to pay bills, cash checks and store government benefits, reports said. According to the union, the cards may be particularly beneficial for workers without a bank account.

ADP did not elaborate to Bloomberg on what any card-linked fees might be, though payroll card fees have been the topic of debate with some issuers charging fees for employees to access wages, make payments with their cards, or use their cards to withdraw cash at an ATM. According to the publication, ADP told Bloomberg that the fees are minimal and avoidable.

The company released a statement to PYMNTS via email that stated: “We ensure we are compliant with all applicable laws and regulations. Additionally, all voluntary deductions from pay must be authorized by the employee.”

Payroll cards have also shown signs of growth beyond servicing un- and under-banked, low-wage workers: recent research from the Center for Financial Services Innovation found most payroll card products are not linked to excessive fees, and are actually quite popular among higher-earning professionals. Their research found 16 percent of payroll card users earn more than $100,000 every year, and work in a range of industries including IT and sales.

Further, the vast majority of payroll card users are banked, the report added, noting that adoption of payroll cards has moved beyond its old reputation as it provides enhanced financial services for its users.

But the ongoing debate over automatically-deducted union fees suggests there are new applications for payroll cards and a potentially broader market opportunity for them too, even if it’s not ideal.

“We shouldn’t have to do it,” said SEIU Local 2015 member Alaina Brooks in an interview with Bloomberg about the creation of the payroll card. “We have to do this because it’s a solution to the attack we are under.”

The strategy comes as the SEIU Local 2015 prepares to launch its “recommitment” campaign in an effort to retain or gain up to 100,000 workers, reports said, with the union turning to signing members up to use the card as part of that campaign. But the payroll cards, the union acknowledged, may only be a temporary fix.

“I’m sure people will get back to the drawing board when this doesn’t work,” Local 2015 Executive Vice President Kim Evon told Bloomberg.