My Payroll is Late?

RE: Now, here is the problem:
I get the warning "Your Payroll is Late. Do you want to pay all by check?" when I click "Continue".
Then I get a second warning when I try to send the direct deposits (my workers have a mix, some with DD, some paid by check), again telling me that my payroll is late.

Yes, this is because you need to complete your payroll and send the DD orders two banking days before the payroll date. Otherwise the employees will not get their money by the payroll date, because it takes two days to deliver the money. Creating DD orders that won't arrive in employee accounts by the payroll date that is non-compliant, a form of "holding" payroll - something you don't want to do.

A better practice is to pay about week in arrears, a week after the pay period end date. For example, if your pay period ends on Friday, Saturday, or Sunday, make your payroll date the following Friday. Then complete the payroll and send the DD orders by Wednesday  5pm PT - the cutoff point for a Friday payroll.

But that doesn't make sense. You're saying I'm 'holding' payroll, but the way to fix it is to pay them a full week later. That would be 'holding' their pay for even longer.
It sounds like I'm paying them a full 3 days faster than someone who pays "about week in arrears".

It does make sense. Most big companies pay a week in arrears, so they have time to prepare the payroll and send the DD orders. They did this even before DD was popular so they'd have time to get the payroll right. In the bad old days they had to calculate each paycheck manually and post it to ledgers manually. Even for a larger small company, this could take days.

As an employer, you must communicate the pay period and payroll schedule to your employees. Usually this is part of the employee handbook. For your case, it'd be something like "The work week and the weekly pay period is from Monday - Sunday. Payroll is paid on the following Friday."  You could actually make it Wednesday, if you can reliably get the payroll done and sent on Monday before 5pm. But you have to get it done. Depending on how complicated your payroll is, that may be rather aggressive.

Once the pay period and related pay dates are communicated then you're expected to make payroll, at all cost, on each payroll date. The rule is the employees have to have their money on the payroll date, whether that be a paper check or a direct deposit arriving in their bank account.

There's nothing wrong with paying in arrears, at least up to a full week. Every employer I've worked for since college paid me on the Friday after the pay period ended.

What isn't compliant with the DOL is paying the employees late ("holding payroll") for any reason, compared to the payroll date communicated ahead of time. Allowances are made for unexpected issues, such as computer or power failures or bank screw-ups, but your internal processes should be set up so that you can regularly make payroll.  "I was sick or tired or too busy" aren't reasons to miss payroll.  "I don't have the money for a couple of days" is possibly the worst reason you could ever give your employees to be late.

Interestingly, you also aren't compliant if you give your employees their live paper paycheck early, before the payroll date, a check that is dated in the future, and you ask them to sit on it until payday.  I'm not sure what employer abuse that's designed to solve for, but it is a rule.

If you're open 7 days a week, you can technically set your payroll date on any day of the week you want. As long as its regular so the employees understand when they'll be paid and you're there to hand out paychecks. However, when DD is involved, then the payroll date has to be a banking day, so then weekends are out.

We founded the company in 1978, and have been running payroll this way since the beginning. It does say in our company manual that direct deposit will be funded on Wednesday, and that workers paid by check will receive it on Monday. We had to make that change when we started offering direct deposit in 2018. Of course, that's when Quickbooks started sending me all those errors.
Are we compliant with those rules in our manual?

RE: It does say in our company manual that direct deposit will be funded on Wednesday, and that workers paid by check will receive it on Monday. We had to make that change when we started offering direct deposit in 2018. ...Are we compliant with those rules in our manual?

I don't think so. You're penalizing your employees for choosing DD and making them wait two days past the payroll date to be paid.

For example, in California,

https://www.plbsh.com/california-employment-laws-can-my-boss-pay-me-late/

"However, for all other California employees, if the state determines that there is no valid reason for a delayed payment, then it will be assessed a penalty of $100 for the first violation [per employee who is paid late.] Each additional violation will result in a $200 penalty. In some cases, the state may require your employer to pay additional fees on top of penalties. Importantly, even if your employer disputes the total amount owed to you, it still has to pay you the full amount of wages owed on time to avoid the penalties. If it fails to do so, an experienced California employment lawyer can help you examine your options.

And also, from

https://nakaselawfirm.com/employers-attorneys/is-it-illegal-to-pay-my-employees-late/

"The Fair Labor Standards Act was created to protect laborers. All employers must meet the minimum requirements of the FLSA and any state employment laws which supersede it. Employers must pay their employees promptly, meaning on the next payday after the pay period in which the hours were worked. The employee must be paid for all hours worked during that pay period, including overtime."

RE: Of course, that's when Quickbooks started sending me all those errors.

Yes, when QB can tell the DD orders aren't going to make it on time, it warns you because it's trying to help you be complaint. 

Thanks for your help. I've sent an email out to our labor board (Oregon) explaining the issue. I'll let you know what they say. It still seems bizarre that I could be 'holding' their money too long, and that to comply with the rules I will then have to hold it longer.

Again, "holding" payroll is keeping the money after payday.  That's what you're doing now.  If you change your payday so that you can get the money to employees on payday, then that's not holding.

I got a reply from the Oregon BOLI. They said what I'm doing is perfectly legal and meets their requirements.

Thanks again for your reply.