57 Pages Posted: 27 Mar 2020 Last revised: 28 Oct 2020

See all articles by Yonathan A. Arbel

Yonathan A. Arbel

University of Alabama - School of Law

Date Written: March 1, 2020


Legislation lags behind technology all too often. While trillions of dollars are exchanged in online transactions—safely, cheaply, and instantaneously—workers still must wait two weeks to a month to receive payments from their employers. In the modern economy, workers are effectively lending money to their employers, as they wait for earned wages to be paid.

The same worker who taps a credit card to pay for groceries in semi-automated checkout lines depends on dated payroll systems that only transfer payments on a “payday.” Workers, especially those living paycheck-to-paycheck, are hard-pressed to meet their daily needs and turn to expensive, short-term credit products—notably, payday lenders. While the need for credit is a real one, credit providers charge a steep price, often culminating in endless debt spirals. So, why does the payday still exist?

This Article studies various explanations—economic, historical, behavioral, and legal. A primary conclusion is that the payday owes its existence to legacy legal architecture. That is, payday is a software problem, not a hardware problem. The hardware—i.e., money and payroll technology—is here. We can pay workers daily; in fact, gig economy workers in developing countries will often be paid more quickly than an American employee for the same work. What holds us back is our legal software: Dated Eisenhower-era legislation that failed to anticipate technological change. Surprisingly, even pro-worker legislation, such as minimum wage laws, inadvertently encourage the practice.

By revealing the overlooked and dated legal infrastructure that sustains the payday, the Article suggests a path for legal reform. Daily streams of payment to workers are feasible, practical, and far more efficient than most people realize. A focused reform could effectively bring an end to the puzzling and pernicious practice of having workers lend money to their employers while they wait for their payday.

Keywords: Employment Contracts, Contracts, Technology, Employment Law, Pay Frequency, Law and Economics

JEL Classification: j3, j31, j32, j33, k12, m52

Suggested Citation

Arbel, Yonathan A., Payday (March 1, 2020). U of Alabama Legal Studies Research Paper No. 3547007, Washington University Law Review, Vol. 98, 2020, Available at SSRN:

Yonathan A. Arbel (Contact Author)

University of Alabama - School of Law ( email )

P.O. Box 870382
Tuscaloosa, AL 35487
United States

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