There are still employers out there who pay laborers -- migrant farm workers are but one example -- in cash, withdrawing the cash in one bundle and doling it out in the style you may remember seeing in the movies, in which each worker approaches the paymaster table, signs for his pay and walks away with the cash.
As long as the tax withholding is properly done, it's a perfectly legal way to do payroll, albeit a holdover from the 19th century. The workers in these scenarios typically do not have bank accounts and would have difficulty cashing a check at a bank.
The exemption is a way in which a bank can exempt just the payroll withdrawals of such businesses.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8