Regulations Limiting Executive Compensation and Administrative Costs of State-Funded Providers Upheld by Appellate Division, Second Department

On December 30, 2015, the New York State Appellate Division, Second Department issued a decision in Agencies for Children’s Therapy Servs., Inc. v. N.Y. St. Dep’t of Health,1upholding the regulations promulgated by the Department of Health (“DOH”) pursuant to Executive Order 38 limiting executive compensation and administrative costs for certain State-funded providers.2  The Court’s decision resolves a lower court split within the Second Department3 by reversing the Supreme Court, Nassau County’s prior ruling that adoption of the regulations had exceeded DOH’s statutory authority and violated the separation of powers doctrine, and upholding a Supreme Court, Suffolk County decision that found Executive Order 38 and the regulations to be constitutional.  Previously issued Clients & Friends Memoranda discuss the regulations and litigation challenging them in greater detail.4 

Cadwalader, Dec 31, 2015

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