BILL NUMBER: S3577

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.
management 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, MyPayrol1HR, 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,
employees, and small businesses in New York.

 
LEGISLATIVE HISTORY:

S6728 of 19/20

 
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.