State Supreme Court Judge Invalidates Executive Compensation Regulations

In a decision issued last week, State Supreme Court Judge Thomas Feinman of Nassau County ruled that the regulatory limits on executive compensation and administrative costs emanating from Governor Cuomo’s Executive Order #38 are invalid. A similar case – LeadingAge New York et al v. Shah – is awaiting action in State Supreme Court, Albany County.

The case was brought by Agencies for Children's Therapy Services, Inc., a group of over 30 children’s health organizations furnishing services under the Early Intervention program.  “The DOH’s rationale that compensation and expense caps will ‘ensure that taxpayers’ dollars are used properly, efficiently, and effectively to improve the lives of New Yorkers’ is unsubstantiated,” Judge Feinman wrote in the decision.  Similar to arguments made in our lawsuit, this decision relied heavily on Boreali v. Axelrod, a 1987 NYS Court of Appeals decision in a case involving anti-smoking regulations promulgated by DOH in the absence of legislative authority.

Although Judge Feinman issued a restraining order on enforcement of the regulations, this order will be automatically stayed when the State appeals this decision. “We believe the decision is wrong and we plan to appeal,” said Melissa Grace, a spokesperson for NYS Attorney General Eric Schneiderman. The legal counsels in the LeadingAge NY litigation have already shared this decision with the judge in our case.

The final regulations limiting spending on executive compensation and administrative costs became effective July 1, 2013 and were implemented Jan. 1, 2014 for most providers. LeadingAge NY and its Legal Services Committee will continue to closely monitor developments on the regulations.

Contact: Dan Heim, dheim@leadingageny.org, 518-867-8866