Does anybody have a list of states that require banks to cash payroll checks? We have several customers who have decided that we are required to cash their checks on overdrawn company accounts, and even worse, supervisors who have sided with them. We span several midwestern states, so all I’m looking for is a basic list of states with payroll check requirements but I’m sure there are a million exceptions in every state.

"several midwestern states"

It would help if you narrowed this down. I have never hear of such a State law. If you are a National Bank - then all bets are really off.

Even California puts the burden on the business issuing the payroll check to provide a means for an employee to cash their checks without charge.

And what do you mean "are required to cash their checks on overdrawn company accounts"? You mean the business is overdrawn? If you are advancing funds for payroll purposes, you will find that the bank risks stepping in the shoes of the employer for employment taxation purposes if the employer fails to pay the required taxes. That is a big problem. Get your legal counsel involved.

I have never heard of such a requirement either. If a business didn't have an account with us but their employees needed to cash their checks, then we had an indemnity agreement with that business that they would cover all the checks we cashed for them. Sometimes this required a rather large CD on deposit to guarantee the funds.

Whether we cashed checks for a business customer who was overdrawn really depended on the business, our total relationship with them, their record of covering those checks, etc..

I agree that it’s a concern cashing them if they’re overdrawn. Sometimes we make exceptions for certain businesses we know well or are good loan customers, but this should not extend to everyone. I think (like most bankers probably do) that we at the bank take too much of the blame for not being able to cash checks that are on overdrawn accounts, non customers trying to cash foreign checks, etc, but that’s just part of the business.

why on earth would your bank cash a check for a non-customer drawn on an OD account?

my response would be "sorry, mr. check holder, there are not sufficient funds in this account to honor your check. I suggest you contact the maker of the account to resolve this issue. thank you, have a nice day."

In my experience, people don't make decisions like this because they have facts to back up their decision. They do so because they don't want to be the person who says, "No."

As Randy alluded to, there are a number of states that have requirements that an employer make payroll payments available to employees in a manner that the employees can receive their full paycheck without a fee deduction or discount. These rules APPLY TO EMPLOYERS not to banks. I would be shocked to learn that there is a law in any state that would require a bank to cash a paycheck against an overdrawn account.

and many a union contract calls for the union members to paid by by X time on payday, or they union people can walk off the job. a company failing to send their payroll in time to meet this deadline/contract is not the banks fault either, although many a banker tries to make it their issue.