[USA - New York] Over 40 Subpoenas Issued In Wake Of MyPayrollHR Scandal

The state of New York is scrutinising the payroll technology industry after the collapse of MyPayrollHR, PYMNTS reports (via original reporting from The Wall Street Journal)

In an effort to more closely examine industry practices, it is reported that the New York State Department of Financial Services has subpoenaed more than 40 members of the payroll processing industry operating within the state. This in the wake of the sudden collapse of MyPayrollHR, a New York-based payroll company that closed without warning, leaving a number of its 1K corporate customers and their employees without their pay.

Additionally, the company has been accused of stealing approximately $70million from its clients and their employees. The accusation prompting both an FBI probe and the arrest of Michael Mann - MyPayrollHR’s founder and chief executive officer - last month.

In September Andrew Cuomo - the New York Governor - directed the DFS to launch its own investigation into the matter. The department reportedly widened the scope of its examination to look at other players in the industry so they can understand how payroll processors move and manage client funds. 

The option of requiring payroll processors to obtain a license to operate as a money transmitter is something else the state is said to be considering.

It has been noted that payroll companies currently have comparatively light regulations. The law only requires licenses for companies who “engage in the business of selling or issuing checks or engage in the business of receiving money for transmission” at present.

This makes things somewhat ambiguous for payroll firms. ADP Payroll Services - one of the largest payroll companies - is licensed in New York with DFS right now. Paychex - another key company - is not. 

Stephanie Schaeffer - Chief Legal Officer for Paychex - told The Wall Street Journal, “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.” (comment via PYMNTS)

Ms Schaeffer added that Paychex has not received a subpoena from New York officials.