LEANDER, Texas -- A Central Texas Subway franchise owner faces a class action lawsuit filed by one of his employees. The suit claims Destiny Foods illegally forces its employees to accept pay on payroll debit cards that carry expensive fees.
Jake Branson’s attorney filed the suit last week. As of Wednesday afternoon, Branson still worked at his Subway restaurant in Leander.
"There’s usually good people there. It’s a good work environment," said Branson.
Last month, the franchise sent Branson and about 300 other employees a memo explaining it “will no longer issue paper paychecks.” Instead, employees will get paid on payroll debit cards “effective immediately.”
"I was told by my manager that my payroll would be processed on cash cards, and that was the end of the story," said Branson.
Here’s how it works: Every pay period, the employer puts money on the card. Employees can then use it as a bank debit card to make purchases or pay bills. Employees can also transfer the money directly into their checking account.
After receiving the card, Branson quickly realized the card started charging him fees.
According his account activity he provided KVUE, the card vender, Global Cash Card, charged him a 50 cent fee to use it as a debit card at a motor parts store. It also charged him $1 to check his balance.
Global Cash Card’s terms and conditions show more fees, like $1.75 ATM charges and $3 inactivity fees if Branson doesn’t use his card after 90 days.
"I’m required to put my money into an account where if I don’t use my own money fast enough, they can take some of it," said Branson.
Jim Terry is Branson’s attorney. Last week, he filed class action lawsuit against Destiny Foods on Branson’s behalf.
The suit claims forcing employees to use the card violates Texas and federal laws. So far, Destiny foods has not responded to the suit.
"It limits people’s choices. I mean, we’re not cattle, we’re not indentured servants to our employers," said Terry.
Last September, the Consumer Financial Protection Bureau, a federal agency, issued a bulletin to remind employers “they cannot require their employees to receive wages on a payroll card.”
Destiny Foods declined an on-camera interview.
Over the phone, owner David John said, “If you use it as a payroll device, the card is easier to get your money and there’s no fee. Using it as a debit card is going above and beyond.”
While John says employees can request alternative payments, here’s how he answered whether that employee would still have a job: “Texas is a right to work state. As with all employees, their continued employment is based on whether they bring value to our customers and the company. It would be looked at on a case by case basis," he said.
Consumer watchdog groups like Consumer’s Union say they're seeing an increase in retailers and fast food companies using these cards.
"I think that in many cases, employees are either compelled or they’re effectively steered into using the cards," said Suzanne Martindale, an attorney with Consumers Union.
Martindale says the incentive for employers is to save money.
"For the employer, if they can outsource everything to a third party servicer that provides the cards, it cuts down certainly on their paper check costs, but also streamlines the entire payroll process for them," she said.
Destiny Foods emphasizes its employees can transfer money into their checking accounts without a fee. The franchise owner says about half of his employees don’t have checking accounts.
Last year, an employee filed a class action lawsuit against a McDonald’s franchise owner in Pennsylvania over similar payroll cards. That case is still pending.