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['Compensation']
['Payroll', 'Compensation']
10/01/2026
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Direct deposit provisions — State comparison
Some states have laws and regulations that go above and beyond federal laws regarding the use of direct deposit for payroll, and specifically whether employers are permitted to make direct deposit mandatory. Use the table below to determine whether your state has additional requirements.
Federal regulatory citation
- 15 USC 1693 et seq. — Electronic Funds Transfer Act (EFTA)
- 12 CFR Part 1005 — Electronic Fund Transfers (Regulation E)
- 29 CFR 531.35 — “Free and clear” payment; “kickbacks”
- FOH Chapter 30 RECORDS, MINIMUM WAGE, AND PAYMENT OF WAGES (U.S. DOL – page 11, Sec. 30c)
Regulation E and the Department of Labor Field Operations Handbook Section 30C
Regulation E (Electronic Fund Transfer Act, 12 CFR Part 1005) is a federal regulation that applies to financial institutions and to anyone initiating electronic fund transfers involving a consumer account. Employers are indirectly covered because they initiate payroll EFTs to employees’ personal accounts.
Regulation E does not prohibit mandatory direct deposit; it simply bars employers from requiring employees to use a specific financial institution. If an employer mandates direct deposit, employees must be free to choose the receiving bank. If employees are required to use a designated bank, the employer must offer an alternative payment method.
The Department of Labor’s Field Operations Handbook (FOH) Section 30C, on the other hand, is internal guidance for Wage and Hour Division investigators enforcing the Fair Labor Standards Act (FLSA). Although not a regulation, it provides DOL’s enforcement position that direct deposit is acceptable only if employees can opt to receive wages by cash or check directly from the employer. Per the FOH, direct deposit is permissible only if employees have a non-EFT option or equivalent no-cost access to their pay.
However, many states now expressly allow employers to require direct deposit for payroll, provided they comply with Regulation E’s choice-of-bank rule. The FOH guidance does not prohibit this practice; it simply looks to ensure that employees can access their full wages promptly and without cost. An employer can therefore mandate direct deposit in line with state law, Regulation E, and the FOH by allowing employees to select their own banks or by offering payroll cards with fee-free, convenient withdrawals.
In summary, federal laws require employers that mandate direct deposit to:
- Allow employees to choose the financial institution where their wages are deposited.
- Refrain from requiring the use of a specific bank; if a designated bank is used, an alternative payment option must be available.
- Provide all required disclosures under the Electronic Fund Transfer Act (EFTA) and Regulation E.
In the case of payroll cards: All states allow this practice, but no states currently permit employers to make this form of payment mandatory. Wages cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or “free and clear.” Therefore, an employer may not force an employee to accept payment of wages in a form that would require the employee to pay a fee to access those wages (such as a payroll card that charges an ATM withdrawal fee).
Direct deposit provisions — State comparison
State
Covered employers
Mandatory direct deposit allowed?
Employee consent required?
Regulatory citation
All employers
Yes (private sector); No (public sector)
No
Follows federal law for private; for public employers, Alabama Code §11-47-26
All employers
No (private sector); Yes (public sector, state employees)
Yes (private sector); No (public sector, state employees
All employers
No (private sector, allowed but employees can opt out); Yes (public sector for employees hired after August 2005)
Yes (private sector); No (public sector)
AR Code 11-4-402
AR Code 21-5-109
All employers
No
Yes
All employers
No (for state employees, direct deposit is the default, but employees may opt out)
Yes
All employers
No (private sector); Yes (default for state employees, exceptions may be made)
Yes (private sector); No (state employees)
All employers
Yes (private sector); Yes (public sector, employees may opt out)
No
All employers
No (private employers); Yes (public employers)
Yes (private sector); No (public employers)
All employers
No (private sector); Yes (public sector, most state employees unless exempted)
Yes (private sector); No (public/state sector)
O.C.G.A. Section 34-7-2
O.C.G.A. Section 50-5B-3(3)
State Accounting Office Business Process Policies – Direct Deposit
All employers
No (private sector); Yes (mandatory for most state employees)
Yes (private sector); No (public sector)
All employers
Yes (all employers; mandatory for many state employees)
No (state employees may request it, but administrative policy will require it for new employees)
All employers
Yes (private and public sector, for employees hired after July 2005)
No
All employers
Yes
No; but employers must offer one alternative payment method if an employee fails to designate a financial institution
All employers
Yes (allowed for private; mandatory for most state employees)
No
All employers
Yes (allowed for private; mandatory for most state employees)
No
Private sector: Follows federal law
Public sector: L.A.C. Title 4, Part III, Ch. 3
All employers
Yes (allowed for private; mandatory for most state employees)
No
All employers
No (private sector); Yes (public sector; default for most state and many county/local government employees, with exemptions allowed)
Yes (private sector); No (public sector)
Md. Code, Labor & Employment Sec. 3-502 to 3-504
Md. Code, Personnel and Pensions, Sec. 2-405
Md. Local Govt. Code Sec. 1-205
All employers
Yes (private and public sectors; generally mandatory for state employees hired after July 1, 2005)
No
All employers
No (private sector; employees have the right to opt out); Yes (public sector, mandatory for most state employees and some municipal employees)
No
All employers
Yes (allowed for private; mandatory for most state employees)
No
Private - Follows federal law
Public - 1 CSR 10-8.010
All employers
Yes (private and public sector; mandatory for most state employees)
No
All employers
No (private sector); Yes (public sector, mandatory for most state employees; waivers may be granted)
Yes
All employers
No (private sector); Yes (most state employees after 2014; some exemptions permitted. Also applies to school board and county college employees.)
Yes (private sector); No (public sector)
All employers
No (private sector); Yes (most state employees; employees may opt out)
Yes (private and public sector)
All employers
No (most employers; high-earning employees and unionized workplaces may be mandated); Yes (state employees hired after January 1, 2023)
Yes
All employers
Yes (private and public sectors; mandatory for state employers; other public employers such as local governments or special districts may have their own policies)
No
All employers
Yes (private and public sectors; mandatory for most state employees
No
Follows federal regulations (private sector)
Ohio Rev. Code Sec. 4113.14 (public sector)
Ohio Rev. Code Sec. 124.151 (public sector)
All employers
Yes (private and public sectors; mandatory for most state employees)
No
All employers
Yes (private sector; employees may opt out); Yes (public sector; mandatory for most state employees)
No
All employers
No (private sector); Yes (public sector; mandatory for most state employees)
Yes (private sector); No (state employees)
All employers
No (private sector); Yes (public sector; mandatory for state employees hired after September 2014)
Yes (private sector); No (state employees)
All employers
Yes (private and public sector; mandatory for many state employees)
No
All employers
Yes (private and public sector; mandatory for some state employees)
No
All employers
Yes (private and public sector; mandatory for many state employees)
No
Tenn. Code Ann. Sec. 50-2-103(e)
Tenn. Code Ann. Sec. 8-23-202
Dept. of Finance and Admin. Policy 1 – Automatic Deposit of Paychecks for Employees (2018)
All employers
Yes (private sector, with 60 days written notice from employer); No (public sector; highly encouraged for state employees, but exemptions are allowed)
No
All employers
Yes (private sector; employees can refuse except in certain circumstances); Yes (public sector; primary method of payment for most state employees, some opt outs are available)
No
All employers
Yes (all employers; state agencies can set payroll policy, but mandatory direct deposit is encouraged)
No
All employers
Yes (private and sectors)
No
All employers
Yes (private and public sectors)
No
All employers
Yes (private and public sectors)
No
Follows federal law
['Compensation']
['Payroll', 'Compensation']
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Copyright 2026 J. J. Keller & Associate, Inc. For re-use options please contact copyright@jjkeller.com or call 800-558-5011.