Payroll service study to come

New state law a response to Capital Region scandal

Gov. Kathy Hochul, citing the local payroll scandal that rocked area and national businesses, signed legislation Friday that will study the industry’s health and its impact on consumers.

The new law requires the state Department of Financial Services to study the payroll servicing industry, in the wake of the MyPayrollHR scandal that caused major financial disruptions for workers and small businesses, Hochul’s office said.

The agency, working with the Department of Taxation, will review insurance or other risk mitigation tools and thirdparty payroll firms providing such services “to ensure the health of the industry and the existence of sufficient consumer protections.” The Financial Services superintendent will submit a report of findings and recommendations to the governor, the temporary president of the Senate and the speaker of the Assembly, according to Hochul.

Michael Mann, who headed the Clifton Park-based MyPayrollHR processing company, was convicted in 2020 for swindling Pioneer Bank and others out of more than $100 million in a fraud scheme that started to unravel around Labor Day 2019. It led to the collapse of MyPayrollHR and left thousands of workers across the country without paychecks. He was accused of diverting payroll deductions from his clients for his own use at various times.

After pleading guilty to the scheme, the former Edinburg man was sentenced last year to a 12-year federal prison term. The case has also triggered a number of lawsuits.

“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,” Hochul said in a statement. “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.”

The hopes are that the study will be a “first step in reviewing this incident and seeing what possible prevention tech

niques may exist.”

In light of the scandal, sponsor of the state Senate bill, Neil D. Breslin, said it became clear that the state 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.

“Three years ago, we watched in horror as a payroll company stole tens of millions of dollars from New York businesses and employees,” said Assemblyman Kevin A. Cahill, who sponsored the bill in his chamber. “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.”