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Wednesday, September 10, 2014

Recent Issues Raised Regarding Payment of Seafarers Via Payroll Cards

By Robert M. Kritzman

We understand that some questions regarding the payment of seafarers’ wages through payroll cards were raised during the first meeting of the Special Tripartite Committee established by the Governing Body of the International Labour Organization (ILO) in accordance with Article XIII of the Maritime Labour Convention of 2006 (MLC). In particular, questions were raised about the appropriateness of certain fees and whether there are any requirements to provide seafarers with access to cash while on ship.

Of course, payroll cards are commonly used in the U.S. and throughout the world. In the U.S., Mercator Advisory Group estimates that approximately 5.3 Million workers received their wages via payroll cards in 2013. Traditionally, seafarers have received their wages onboard ships in cash. This archaic system is fraught with challenges including: (i) high costs for seafarer’s transferring money; (ii) high costs for shipowners to make cash available onboard each pay day across the globe; (iii) tremendous inconvenience for seafarers to manage and handle their cash following each pay day; and (iv) security concerns for both seafarers and shipowners.

Fortunately, the traditional cash-based system has been substantially replaced by electronic payment methods, including payroll cards, to pay wages for the more than 1.5 million seafarers working onboard ships throughout the world. This introduction of modern technology has been welcomed by seafarers and shipowners alike. Despite the recent questions, applicable regulations and legislation recognize, permit and even encourage the electronic payment of wages for seafarers. The applicable international and U.S. regulations addressed in this document are the Maritime Labor Convention of 2006 (“MLC”) and the U.S. Seaman’s Wage Act.

Transaction Costs Related to the Use of Payroll Cards

With respect to certain cardholder fees for the use of payroll cards, ATM withdrawals and point of sale transactions transacted in non-U.S. dollar currencies through the use of payroll cards from an account denominated in U.S. dollars carry the same or similar charges as do such transactions made using the typical bank debit card or credit card. In addition, such charges typically are less expensive than alternative methods of converting U.S. dollar cash into a non-U.S. dollar currency.

The MLC and Payroll Cards

Tremendous resources were devoted by shipowners and employers of seafarers to ensure compliance with the MLC when it became effective in August 2013. The MLC does not contain any provision or guidance indicating that seafarers must be paid in cash. The MLC contemplates various means of electronic payment to crew or their designees. Standard A2.2 of the MLC requires that a shipowner provide seafarers with a means to transmit all or part of their earnings to their families and dependents. The MLC Standard A2.2 provides that charges for those remittances to family and other designees be “reasonable in amount”. Guideline B2.2.2 (4) of the MLC provides that wages should be paid in legal tender, where appropriate, and they may be paid by bank transfer, bank cheque, postal cheque or money order. The Guideline also provides that wages should be paid directly to the seafarers’ designated account unless they request otherwise in writing. The shipowner may impose no limit on the seafarers’ freedom to dispose of their wages and no deduction from remuneration is permitted except by express provision of “national law or regulation” or flag state.

The use of payroll cards provides seafarer with complete control over their wages on their pay date when their wages are deposited into their card-accessed account. The costs and convenience of transmitting wages to family members or others is far less than taking cash to a money transmittal agency. This method of payment clearly meets the requirements of the MLC provided no unreasonable or extraordinary charges are imposed on the payment of wages.

Seaman’s Wage Act

The Seaman’s Wage Act was amended in 2010 to address, among other issues, the electronic payment of Seafarers. The relevant language amended provides:

“(f) DEPOSITS IN SEAMAN ACCOUNT. ……By written request signed by the seaman, a seaman employed on a passenger vessel capable of carrying more than 500 passengers may authorize the master, owner, or operator of the vessel, or the employer of the seaman, to make deposits of wages of the seaman into a checking, savings, investment, or retirement account, or other account to secure a payroll or debit card for the seaman if ……

(1) the wages designated by the seaman for such deposit are deposited in a United States or international financial institution designated by the seaman;

(2) such deposits in the financial institution are fully guaranteed under commonly accepted international standards by the government of the country in which the financial institution is licensed;

(3) a written wage statement or pay stub, including an accounting of any direct deposit, is delivered to the seaman no less often than monthly; and

(4) while on board the vessel on which the seaman is employed, the seaman is able to arrange for withdrawal of all funds on deposit in the account in which the wages are deposited.”

The provision permits the employer of a seaman to make payments to a seaman by direct deposit into a checking, savings or other such account of the seaman's choosing and with the seaman's explicit written authorization."

House Report on HR 3619: "This section also authorizes seaman's wages to be paid electronically into a financial institution designated by the seaman, if the deposits in the financial institution are fully guaranteed under commonly accepted international standards by the government of the country in which the financial institution is licensed."

Clearly the intent of the subject amendment was to permit the deployment of modern technology, including, payroll cards, to pay seaman's wages on large passenger cruise ships. The Act specifically mentions the deposit of wages into an account to “secure a payroll or debit card”. The intent is to allow both the seaman and employer to benefit from the convenience and efficiency of modern technology. The Act appears to have been amended simply to permit current technology as a means of paying seaman’s wages which was not contemplated under the original legislation.

Conclusion

The use of payroll cards in the shipping and specifically, the cruise industry, has clearly arrived and been welcomed by seafarers. The total cost, efficiency, convenience and security is clearly superior to the traditional means of payment by cash as well as payment by payroll check. We do recommend that employers of seafarers obtain signed consents from their employees for the specific means of payment to ensure compliance with both the MLC and the US Seaman’s Wage Act. However, both legislative and regulatory regimes recognize and encourage payroll cards and other forms of electronic payment of seafarers’ wages.

Naturally, different employers will choose to provide differing levels of benefits to their seafarer employees. Employee relations and public relations considerations may result in employers absorbing greater post wage payment transaction expenses than dictated by applicable law. Regardless of the policy adopted by a particular employer, the MLC and the Seaman's Wage Act recognize the use of payroll cards for seafarers subject to specific limitations described above.

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