In recent years employees have requested earlier access for earned wages than the normal payroll period.  With employees at times financially struggling, access to their earned wages outside of the normal payroll allows them flexibility to pay bills, rent, and other expenses in a timely manner. A recent study shows that 60% of Americans live paycheck to paycheck, making Earned Wage Access (EWA) a valuable financial benefit for employees. This is different than a payday loan which is a loan, not early access, and interest could reach usurious rates.

Although Michigan does not have an Earned Wage Act law, approximately 20 states do. Some state specifically that these EWA services are loans (e.g. Maryland) and some say they are not (Indiana). However, many of these laws have similar provisions regardless of whether considered loans or not.  Typical provisions identified by Troutman Pepper Locke (a major law firm) include:

• Disclosures: Providers must fully and clearly disclose all fees associated with EWA services and inform consumers of their rights before entering into an agreement with a consumer.
• No-Cost Option: Providers must offer at least one option to obtain EWA proceeds at no cost to the consumer and clearly explain how to elect this option.
• Voluntary Tips: Providers may solicit, charge, or receive tips, but in doing so they are required to: (i) clearly disclose that tips are voluntary and that EWA services are not in any way contingent on the consumer paying a tip; (ii) set any default tip at $0; (iii) not increase fees because the consumer did not provide a tip; and (iv) abstain from representing that tips provide a benefit to any specific individual.
• Expedite Fees: Providers may charge a fee for expedited delivery of EWA proceeds but must cap fees at specified amounts. For example, Indiana caps fees at the greater of $5 or 5% of the amount of the proceeds, while Maryland caps fees at $5 for proceeds up to $75 and $7.50 for proceeds greater than $75.
• Privacy and Security Compliance: Providers must comply with all applicable local, state, and federal privacy and information security laws.
• Fee Reimbursement: Providers must reimburse consumers for any overdraft or nonsufficient funds fees caused by the provider in certain instances.
• Fee and Tip Sharing: Providers cannot share with an employer any portion of the fees or tips received from consumers.
• Credit Reporting: Providers cannot obtain a consumer’s credit report for purposes of determining eligibility for or the terms of EWA services. In addition, providers cannot report a consumer’s failure to repay EWA proceeds to credit reporting agencies.
• Debt Collection: Providers cannot engage in third-party debt collection, litigation, or debt sales to collect EWA proceeds, fees, or tips that a consumer has not repaid.
• Charging Penalties and Interest: Providers cannot charge late fees, interest, or any other penalties for failure to pay outstanding proceeds, fees, or tips.
• Exemptions: Some states also explain that EWA services that are provided in compliance with each respective law do not constitute money transmission and are not subject to certain other laws, such as those governing payroll deductions.

If an EWA provider comes to the employer wanting to partner, HR should thoroughly research the organization. The employer should consider the following areas for review:

• Transparent Pricing – Avoid hidden fees that could be detrimental to employees.
• Seamless Payroll Integration – The provider should integrate easily with existing HR and payroll software.
• Compliance with Regulations – Ensure the provider follows federal and state laws.
• Flexible Payout Options – Employees should have multiple withdrawal options, such as direct deposit or pay cards.
• Strong Customer Support – A reliable support team ensures smooth implementation and troubleshooting.

If the EWA does partner with the employer, they may recover EWA proceeds through payroll deductions. For a payroll deduction to occur in Michigan; however, the employee must sign off on it.  A form from the EWA stating such may not be sufficient.  If HR is considering EWA, make sure legal counsel is involved in the review, negotiations, and liability identifiers in the contract.

Source:  Troutman Pepper Locke 6/13/25, Paypro 3/17/25, NSCL.org 2/28/25