Regulators in New York will be placing the payroll services industry under a microscope as part of a new law to study the sector following a corporate scandal. 

The law signed last week by Gov. Kathy Hochul will have state banking regulators and tax officials to review the third party payroll services industry in the wake of the MyPayrollHR snarling financial and payroll functions for businesses and their workers. 

The measure will require the Department of Financial Services as well as the Department of Taxation and Finance to study insuance and other risk mitigation mechanism for third-party payroll services in ensure the health of the industry and if there are enough consumer protections in place. 

A report of the findings from the superintendent of financial services in New York will be submitted to the governor and top lawmakers in the Legislature. 

"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," Governor Hochul said. "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 measure, backed by Sen. Neil Breslin and Assemblyman Kevin Cahill, was approved following the 2019 implosion of MyParollHR, a Capital Region-based company. Federal authorities found the president of the company had redirected millions of dollars from the company to his personal account. 

Accounts and paychecks were frozen and workers faced heavy overdraft fees. 

"Three years ago, we watched in horror as a payroll company stole tens of millions of dollars from New York businesses and employees," Cahill said. "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. That is why we must take a close look at the third-party payroll service industry to see how this happened and what steps we can take to make sure no one loses their paycheck again."