A former McDonald’s employee has brought a class action lawsuit against the franchisees of 16 McDonald’s locations in Pennsylvania (the franchisor is not named in the suit), claiming their practice of paying employees via mandatory payroll debit cards is unfair and illegal.

A payroll debit card is a plastic card that works like a debit card, except that it does not require the employee to have his or her own bank account linked to the card. In practice then, it is essentially an open-loop gift card (such as a Visa or American express gift card), but the employee can also use the card to access cash like he or she could do with a traditional, bank-issued debit card. Payroll debit cards have become a popular paperless payment alternative to direct deposit over the past few years, with numerous companies including Walmart, Home Depot, Lowes, UPS, and FedEx making at least some use of similar programs.

In the lawsuit, the employee alleges that as a practical matter, the payroll debit card program reduces an employee’s pay because there are numerous, often unavoidable fees preventing an employee from obtaining cash off the cards for free. For example, the employee alleges that there was a $1.50 minimum charge for an ATM withdrawal, a $5 fee for an over-the-counter cash withdrawal, $1 fee to check the balance, a 75-cent fee per online bill payment, and $15 fee to replace a lost or stolen card.

The Pennsylvania Department of Labor and Industry is also currently investigating the matter. If the lawsuit gains any traction, franchises that use or are considering moving to a payroll debit card program may need to consider (re)structuring their payroll debit card programs to reduce or eliminate fees to obtain cash from the card.

Read more about the suit online on the following websites: USA Today, Citizens Voice, or New York Daily News.