BILL NUMBER: S6728

SPONSOR: BRESLIN
 
TITLE OF BILL:  An act in relation to requiring the department of
financial services, in consultation with the department of taxation and
finance, to conduct a study regarding insurance or other risk mitigation
tools and third-party payroll service providers

 
PURPOSE:

To  require  the  department  of  financial  services to conduct a study
regarding third-party payroll service providers

 
SUMMARY OF PROVISIONS:

This bill requires the Superintendent of  the  Department  of  Financial
Services,  in  consultation  with  the Commissioner of the Department of
Taxation and Finance, to conduct a study  in  which  the  Superintendent
will  review  the  adequacy  of  employee protections and small business
employer protections in the payroll services industry,  The  Superinten-
dent  shall  make recommendations regarding the same.  The bill requires
              

the review to include an assessment of:

(a) the present state of employee protections in  the  payroll  services
industry;

(b)  the  present.  state  of small business employer protections in the
payroll services industry;

(c) the incidence of fraud or misappropriation of payroll funds  in  the
payroll services industry;

(d)  the number of small businesses in New York that use payroll service
providers;

(e) the number and size of payroll service providers in New York;

(f) specific causal or facilitative facts regarding instances  of  fraud
or misappropriation by payroll services providers,

(g)  the  feasibility  and  advisability  of  requiring  payroll service
providers to obtain insurance, post bonds, or utilize other risk manage-
ment tools to address potential situations in which payroll monies  owed
to  employees  on  behalf  of businesses are stolen, misappropriated, or
otherwise rendered unavailable after being transmitted from an  employer
to a payroll service provider or an affiliated.  entity, and

(h)  the  feasibility  and  advisability  of the department of financial
services having regulatory oversight over  third-party  payroll  service
providers.

Within  one hundred twenty days of the effective date, the bill requires
the superintendent of the department of financial services to  submit  a
report to the governor, temporary president of the senate and speaker of
the  assembly of the department's findings, conclusions, and recommenda-
tions.

 
JUSTIFICATION:

In September 2019, MyPayrollHR, a payroll service  provider  in  upstate
New York with clients across the state and nation, abruptly ceased oper-
ations and left thousands of employees and small employers without their
pay  or  funds.  Employees  were left unable to pay bill s and rent, and
employers  struggled  to obtain sufficient funds for outstanding payroll
expenses. 'Employees and employers alike  were  negatively  impacted  in
escalating  ways,  with  employers  losing  employees  and business, and
employees losing jobs, assets, and security.

This situation suggests that it is appropriate to look more  closely  at
the  payroll services industry in New York state, to assess whether more
risk mitigation practices and employee/employer payroll protections  are
needed. This legislation would serve the interests of consumers, employ-
ees, and small businesses in New York.

 
LEGISLATIVE HISTORY:

New Legislation,

 
FISCAL IMPLICATIONS:

None to the state.

 
EFFECTIVE DATE:
This  act shall take effect on the one hundred eightieth day after 14 it
shall have become a law.