It has been three years since our last column discussing court challenges to regulations promulgated pursuant to Executive Order 38 restricting administrative overhead and executive compensation on certain service providers doing business with New York state. Serbaroli, “Courts Split on Executive Order 38 Limiting Executive Compensation,” N.Y.L.J., Nov. 25, 2015, p.3. A sharply divided Court of Appeals recently issued a decision resolving these challenges.

Background

Following extensive press reports about excessive compensation and benefit packages for executives of a large not-for-profit agency that served the developmentally disabled and that depended heavily upon state Medicaid funding, Gov. Andrew Cuomo appointed a task force in 2011 to investigate executive compensation at not-for-profit organizations that receive support from Medicaid or other taxpayer funding. The task force collected detailed information from thousands of not-for-profit organizations in New York that provide health and social services and receive Medicaid reimbursement or other state funding.