Earned wage access — letting employees draw compensation they’ve already earned before payday — is among the fastest-growing benefits in the market, and among the most unevenly regulated. Federal guidance has flipped three times in five years and a dozen states have written their own rules. But the harder lesson for compliance teams, as CCI contributing writer Erin Binney digs into, is that bringing in a third-party provider doesn’t move the risk away from the employer.
Regulatory whiplash is the new normal in Washington, and pay-advance programs are the latest popular employee benefit caught in the current.
The Consumer Financial Protection Bureau (CFPB) has changed its position on earned wage access (EWA) three times in five years — a 2020 advisory opinion, a 2023 reversal and another reversal last December. Six states passed EWA-specific laws in 2025 alone, doubling the number regulating the benefit. And a majority of senior organizational leaders have cited regulatory concerns as their top barrier to adopting EWA, according to a report.
Organizations waiting for the landscape to settle before rolling out a program of their own will be waiting a long time. The more useful question at this stage is probably how to build one that can survive the next reversal — because there will be one.
“These are very simple products in terms of how they are offered but very complicated products with respect to the regulatory landscape,” said Joseph Schuster, a partner in Ballard Spahr’s Denver office.
Fuzzy regulatory picture
EWA — which allows employees to receive a portion of their pay as it’s earned, rather than having to wait until the next regularly scheduled payday — has grown in popularity over the past 10 years, with the industry expected to grow from $8.8 billion in 2026 to $52 billion in 2034, according to Fortune Business Insights. At the same time, clear regulatory guidance at the federal level has been hard to come by.
In December, the CFPB issued an advisory opinion stating that certain employer-supported EWA programs do not constitute “credit” under the Truth in Lending Act and Regulation Z. This essentially reversed the position it had taken in 2023, which itself had reversed guidance the bureau provided in a 2020 advisory opinion letter.
Regulatory reversals have become common at the federal level in recent years as administrations have changed. The Corporate Transparency Act, for example, was upended in August when a final rule rolling back beneficial ownership reporting requirements for US companies and individuals went into effect. In addition, the Department of Labor earlier this year issued a proposed rule that would largely restore the independent contractor test to the one put in place in 2021, which had been replaced by a different test under a 2024 final rule.
And while the Treasury Department has previously called on Congress to amend the Internal Revenue Code so that EWA arrangements would be treated as a weekly payroll period, the legislative branch has yet to act. The House Financial Services Committee did vote on June 30 to advance the Earned Wage Access Consumer Protection Act, but the bill lacks a Senate companion and its prospects are unclear.
In the absence of any meaningful or lasting federal activity, states have stepped in with legislation of their own, much as they have with pay transparency and paid leave laws. To date, about a dozen states have EWA-specific laws on the books.
The patchwork of state laws is adding another layer of confusion to the regulatory environment.
“In some senses, it provides more clarity on the requirements with respect to EWA products,” Schuster said. “In other respects, it creates more compliance challenges with respect to these products.”
That’s because each state approaches things like licensing requirements, credit classification, fee disclosure and repayment restrictions differently. While these state laws are primarily directed at EWA providers, employers are still considered the employer of record in EWA arrangements, so it behooves them to understand what regulations, if any, are in place in the states where they operate.
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The number of states that have EWA-specific laws will only grow, Eric Magnus, a principal and office litigation manager of Jackson Lewis’ Atlanta office, told CCI. So far, he said, it’s a collection of “mostly red states” that have acted, but “it’s only a matter of time before the bluer states get involved in this.”
To his point, among the dozen states with EWA laws, four of them (California, Connecticut, Maryland and Wisconsin) have Democratic governors.
It’s also worth noting that employers may find themselves in hot water if they enter into EWA agreements with providers that, unwittingly or otherwise, allow them to violate other employment laws, such as those relating to wage payment and deduction, overtime and minimum wage.
“Employers are not going to be relieved of any obligations for wage and hour just because they are now engaging a third party,” said Stephen Kenney, an attorney with Ogletree Deakins in Dallas. “So, if [an EWA program] causes any issues with overtime, if it causes any issues with minimum wage, those are going to be employer liabilities.”
Magnus cautioned that providers will let you make mistakes.
“Let’s say you’re a restaurant and you contract with an EWA provider so your employees can get their tips ahead of the normal payroll cycle,” he said. “If you as the employer tell the EWA provider, ‘We want part of your fee,’ the EWA provider will do it. That’s unlawful.”
From a tax perspective, Kenney noted that under basic tax law, employees who have the ability to receive wages outside of the regular pay period are considered to be in constructive receipt of those wages. That means employers that aren’t executing withholding requirements on a daily basis are technically late with payroll taxes.
“So, you’re opening yourself up to potential liabilities in terms of failure-to-deposit penalties and interest risks,” he said.
Employers can also invite risk as a result of the way they communicate an EWA benefit to employees, Schuster said.
“If it is represented improperly by the employer, it’s possible that the employer could have liability under the contract,” he explained. An example would be if the employer says the EWA offering allows employees to “borrow” wages they’ve already earned.
Minimizing adoption risks
With federal entities paying closer attention to EWA and states adding laws on a regular basis, employers should make sure the programs they put in place today can withstand any potential regulatory changes going forward.
Here are a few ways employers can minimize risk:
Negotiate vendor contracts
The top thing to look for, Magnus said, is an indemnification provision that releases the employer from liability if the provider is found to be operating unlawfully.
“I would never let a client of mine willingly contract with an EWA provider that isn’t willing to indemnify,” he said. “If the landscape changes, if you get the right contractual provision, you’re not going to be on the hook if it happens.”
He also encouraged employers to scrutinize privacy and security provisions in EWA contracts. If you don’t want the vendor to market the product to your entire workforce, he said, don’t sign something that requires you to hand over all of your employee data. Similarly, employers should make sure they’re comfortable with how the provider plans to secure employees’ personally identifiable information.
Contracts can also be written to stipulate that the EWA provider must keep the employer apprised of changes in EWA laws, any new licenses they’ve obtained and any issues they’ve run into with states, Schuster added.
“Spend the appropriate amount of time with respect to the contract with the EWA provider,” he said. “That is going to be important as laws continue to change.”
Run daily payroll
Though he acknowledged that running daily payroll would be administratively burdensome, Kenney noted that this is the only way to guarantee tax compliance with the Internal Revenue Code as it is currently written.
“It’s something to talk to your payroll vendor about to see if that could be facilitated,” he said.
Limit employee eligibility
One way to limit employee eligibility is to make EWA an opt-in program, Kenney suggested.
“If you make it broadly available, then you’ve just created constructive receipt for your whole organization,” he said. Making it an opt-in program won’t absolve all your risk, he added, but it will limit your risk to the subset of your employees who sign up.
Some employers also may want to limit where they offer EWA programs. Magnus said some of his multistate clients, for example, choose not to offer EWA products to their employees in California, because of the state’s reputation for having aggressive consumer protection laws and being employee-friendly.
“In California, there are statutory remedies for pay-stub violation,” he said. “So do you have to give a pay stub every time an employee chooses to take an advance from an EWA provider? There’s no law on that. So it is riskier in a place like that.”
Communicate carefully with employees
Schuster suggested adding provisions to contracts that require EWA providers to evaluate any employee communications being disseminated by the employer to avoid misrepresentation of the product.
“These are nuances that employers may not be attuned to, but the EWA providers very much are,” Schuster said.
Magnus advises employers to stay out of the business of trying to sell EWA products to their workers.
“I tell my clients, ‘You don’t need to do the EWA provider’s marketing for them.’ Just tell employees it’s available, but don’t try to market it,” he said.
What’s next?
Employers that wait for the regulatory environment to be settled before rolling out EWA offerings are likely to be waiting a long time, observers say, as the landscape is expected to continue to change.
Sitting on the sidelines, however, comes with its own risk, Magnus noted, in that employers that fail to offer EWA could find themselves at a competitive disadvantage from a recruiting and retention standpoint.
“People who are in their mid to late 30s in the workforce have had this benefit for 10 years,” he said, so they’re going to expect it from their next employer. “It’s going to become more and more entrenched.”
Erin Binney is a freelance writer and editor who has been covering workplace-related topics for over 20 years. 
