NY AG Subpoenas 40+ Cos About MyPayrollHR Scandal

The state of New York is taking a closer look at the payroll technology industry amid the fallout from the collapse and scandal of MyPayrollHR, The Wall Street Journal reported Thursday (Oct. 3).

The New York State Department of Financial Services has reportedly issued subpoenas to more than 40 members of the payroll processing industry operating in the state in an effort to more closely examine industry practices. The move is a response to the sudden collapse of MyPayrollHR, a New York company that suddenly closed and left some of its 1,000 corporate customers and their employees without pay.

The company is also accused of stealing about $70 million from its clients and their employees, prompting a FBI probe and the arrest of MyPayrollHR founder and chief executive officer Michael Mann last month.

New York Gov. Andrew Cuomo directed the DFS earlier last month to launch its own investigation into the matter, leading the department to broaden the scope of its examination to include other players in the industry in an effort to understand how payroll processors move and manage the funds of their clients. The state is also reportedly considering whether payroll processors should be required to obtain a license to operate as a money transmitter.

Reports noted that today, payroll companies manage a relatively light regulatory burden, with current law only requiring licenses for companies if they “engage in the business of selling or issuing checks, or engage in the business of receiving money for transmission.”

This leaves ambiguity for payroll firms. One of the largest payroll companies, ADP Payroll Services, is currently licensed in New York with DFS. Another player, Paychex, is not, with Paychex Chief Legal Officer Stephanie Schaeffer telling the publication, “Most payroll providers are not registered unless they have aspects of their business model that require it, such as stored value cards — which we do not.”

She added that Paychex has not received a subpoena by New York officials.