The Third Department of the New York State Appellate Division issued a decision on Department of Health regulations, which imposed limits on executive compensation and administrative costs for health care providers. The compensation limits were introduced in response to Executive Order 38, which was issued by New York Governor Andrew Cuomo in order to "prevent public funds from being diverted to excessive compensation."
In LeadingAge New York v. Shah, the Third Department (i) affirmed the validity of a "hard cap" on executive compensation, but (ii) ruled that the DOH exceeded its authority by instituting a "soft cap." The hard cap places a $199,000 limit on state-funded executive compensation, while the soft cap would limit executive compensation from any funding source.
In a recent memorandum, Cadwalader attorneys Brian McGovern, Pamela Landman, and Jared L. Facher detailed the Court's findings that the DOH (i) acted outside its rulemaking authority by promulgating regulations based on "its own ideas of sound public policy," (ii) exceeded its responsibilities under Executive Order 38 to manage the use of taxpayer money for healthcare services, and (iii) developed and introduced compensation limits despite having "no special expertise in governing the overall executive compensation or competence in regulating corporate governance."
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