Regulations for Executive Compensation/Administrative Expenses
The Cuomo Administration continues to move ahead with its Limits on Executive Compensation and Administrative Expenses in Agency Procurements regulations (the “Regulations”). The Department of the Budget and its “state agency partners” released the second revised proposed Regulations on March 13, 2013. Comments to the draft are due by Friday, April 13, 2013. This version of the Regulations incorporates many changes, while staying with the underlying concept and proposed operation. The effective date has been moved back from April 1, 2013 to July 1, 2013. However, that date seems more like a moving target based on the Department’s acknowledgment that it and its state agency partners are still developing clear guidance regarding application of the rules, definitions and calculations.
A common theme among the various agencies’ responses to public comments was that the draft Regulations are fluid and remain a work in progress. Some of the vagaries will be “addressed in the implementation work undertaken by the Department and its agency partners.” Considering that this implementation work will impact important areas of the Regulations including: i) the methodology for calculating administrative expenses; ii) the use and approval of compensation surveys (“safe harbor surveys”); iii) the reporting procedures; and iv) the waiver application process, the agencies may need to release a further round of revisions before finalizing the Regulations.
A significant change in this iteration of the Regulations is that it spares agents, subcontractors, and “related organizations” of covered providers from complying with the Regulations unless the agent, subcontractor, or “related organization” is also a covered provider.
The “related organization” elements of the Regulations lacked clarity and this change may reflect a tacit acknowledgment by the agencies that the Regulations could face legal challenges from related organizations that are for-profit companies. The revisions make clear that only certain organizations that directly receive state money need to abide by the Regulations.
Another change extends the grandfather clause of the Regulations. Covered Providers will be excused from compliance when relying on a compensation agreement with an executive that is entered into before July 1, 2012 (when the agreement does not extend beyond April 1, 2015).
More information is required about the waiver process set forth in the Regulations. The agencies acknowledged that the waiver process may impact the recruitment of certain executives since providers may need to apply for and receive a waiver in advance of a hiring. Despite the importance of the waiver application process, the Department has yet to address the details. The Department should provide more clarity in this regard before finalizing the Regulations.
Hiscock & Barclay will continue to monitor developments with these Regulations, including providing notice through a Legal Alert as they continue to develop. For more information, contact David P. Glasel at firstname.lastname@example.org or Charles Z. Feldman at email@example.com.
- Provider Due Process Under Fire Amid Flurry of Network Terminations
- A Second New York State Appellate Court Rejects the Department of Labor’s “13-Hour Rule” and Finds That Home Care Attendants Working 24-Hour Shifts Must Be Compensated for All 24-Hours
- Health Care Compliance and Responsibilities of Boards of Directors