Legislation S.3577/A.7786 Requires the Department of Financial Services to Conduct a Study Regarding Third-Party Payroll Service Providers
Governor Kathy Hochul today signed legislation S.3577/A.7786 to require the Department of Financial Services to conduct a study on the payroll servicing industry, in the wake of the MyPayrollHR scandal which caused major financial disruptions for workers and small businesses. The Department of Financial Services, in consultation with the Department of Taxation, will conduct a study regarding insurance or other risk mitigation tools and third-party payroll servicers providing these services to ensure the health of the industry and the existence of sufficient consumer protections. The Superintendent of Financial Services will then submit a report of findings and recommendations to the Governor, the temporary president of the senate and the speaker of the assembly.
“Workers and small business owners in New York were devastated by the collapse of MyPayrollHR and it's crucial we have all the information to understand what led to this crisis,” Governor Hochul said. “The first step in any process is gathering all the information on what’s occurring, and using that data to create a plan moving forward and that is exactly what this legislation will do.”
In 2019, federal authorities found that the President of upstate New York payroll management company, MyPayrollHR, redirected $26 million in payroll funds to his personal account. This led to MyPayrollHR accounts being frozen, and paychecks being distributed with funds that did not exist. These transactions were then reversed, resulting in heavy overdraft fees for the workers involved. This legislation will require the New York State Department of Financial Services to work with the Department of Taxation and Finance to conduct a study on the industry, a first step in reviewing this incident and seeing what possible prevention techniques may exist.
State Senator Neil D. Breslin said, "In light of the MyPayroll HR scandal that occurred in 2019, which left thousands of employees and small employers without their pay or funds, it became abundantly clear that we needed to examine the payroll service provider industry to determine what additional consumer protections need to be put in place to ensure that a situation like this doesn't occur again. I applaud Governor Hochul for signing this important piece of legislation into law."
Assemblymember Kevin A. Cahill said, “Three years ago, we watched in horror as a payroll company stole tens of millions of dollars from New York businesses and employees. Families could not even figure out how to make rent and pay bills as their salaries were nowhere to be seen and their employers didn’t replace the missing funds. We want to make sure no family has to face that situation. That is why we must take a close look at the third-party payroll service industry to see how this happened and what steps we can take to make sure no one loses their paycheck again. I applaud Governor Hochul for joining us in protecting our residents by signing this bill into law and I look forward to the full study.”