Filing Number: 08-02
Subject: Waiver of Post Employment Rules
Keywords: consultant, contract, Department of Community Development and Housing, employee, post employment, private consulting, retirement, waiver
Decision By: Commissioners: John McMahon, Thomas Collins, Edward Danberg, Miguel Gonzalez, V. Eugene McCoy, Mark Murowany, Gerald Turkel
Contact Email: admin@nccethics.org
 
Status: Active

Question:

            Waiver Request The Community Services Department has requested a waiver of Section 2.03.103D's two year post-employment restriction to enable it to contract with a retired employee to perform certain of her former County duties for a three to four month period

Conclusion:

            The waiver request is granted. On balance, the undue hardship to the County in enforcing the post-employment provision exceeds the personal benefit to the former employee. The Department took reasonable steps to prepare successors to take over the employee's duties in the face of her unexpected retirement but was unable to complete that training as a result of the abbreviated time frame. Loss of the employee's unique expertise creates a potentially significant impact on the County treasury in the near future and short term reemployment at a reasonable hourly rate eliminates that potential. The Commission waives the post-employment prohibition so that the former employee may return for an up to four month period as a private contractor with the County.

Facts:

            A long term County employee had announced plans to retire in late 2008 or early 2009 but when she suffered health problems in late 2007 she notified the department that she would retire in March 2008. In her almost 30 year employment with the County, she had been responsible for numerous aspects of reporting to the federal government on the expenditure of millions of dollars of federal funding for a variety of department programs. After she told her department she was retiring, its administrators immediately drew up plans for appointing and training her successors and successfully implemented most of the training before the employee left.
 
            However, as a result of the timing of certain fiscal reports, the department was unable to train a successor in one very financially significant area which has a reporting deadline of June 30, in which the retiree has unique expertise. In addition, the Department has been unexpectedly forced to revise some other budget reports which had been completed by the employee prior to retirement and her successors find that they cannot accomplish the revisions without her assistance. The department proposes contracting with the employee for a three to four month period at her former hourly rate. The employee would work approximately full time in the month of June to prepare the necessary report and to train successors how to complete it, and part time in the following two or three months providing training related to budget information.

Code or Prior Opinion:

New Castle County Code Sections
 
            In this case, the contracted retiree would be performing those same duties for which she had been directly and materially responsible during the course of her County employment.
 
            Section 2.03.103 D of the New Castle County Code prohibits a person who has served as a County employee or County official from
 
represent[ing] or otherwise assisting any private enterprise on any matter involving the County for a period of two (2) years after termination of employment or official status with the County, if the person gave an opinion, conducted an investigation or otherwise was directly and materially responsible for such matter in the course of official duties as a County employee or official. Nor shall any former County employee or County official disclose confidential information gained by reason of public position nor shall the person otherwise use such information for personal gain or benefit.
 
            Sections 2.03.105 A and B provide authority to the Commission to grant a waiver from the prohibition:
 
A.     Notwithstanding the provisions of this Division, upon the written request of any County Department or of any individual who is or was a County employee or County official, the Commission may grant a waiver of the specific prohibitions governing post-employment restrictions if the Commission determines that the literal application of such prohibition in a particular case is not necessary to achieve the public purposes of this Division or would result in an undue hardship on any current or former employee, official or County Department. Any such waiver may be granted only by written decision of the Commission. All requests of waivers will be handled in an expeditious manner by the Ethics Commission.(sic) Any person who acts in good faith reliance upon any such waiver decision shall not be subject to discipline or other sanction hereunder with respect to the matters covered by the waiver decision provided there was a full disclosure to the Commission of all material facts necessary for the waiver decision.
 
B.     Any application for a waiver, any proceedings and any decision with respect thereto shall be maintained confidential by the Commission provided that:
1.      Public disclosure shall be made by the Commission upon the written request of the applicant;
2.     The Commission may make such public disclosure as it determines is required in connection with the prosecution of any violation of this Division;
3.     The Commission shall report to appropriate Federal and State authorities substantial evidence of any criminal violation which may come to its attention; and

4. In the event that a waiver is granted, the waiver decision and the record of all proceedings thereto shall be open to public inspection.

 
State Ethics Code Interpretations
 
            County Code Section 2.03.103 D and Section 2.03.105 A and B are substantially identical to the post-employment prohibition and waiver authority granted to the Delaware Public Integrity Commission (hereinafter "PIC") recited in the Delaware Code at Title 29, chapter 58.1 Since the County Ethics Code is required to be at least as strict as the State Code, interpretations by the PIC are informative. See, 29 Del.C. Sec.5802(4).
 
            The PIC has discussed the post employment provisions several times. In PIC Ethics Bulletin 007, issued May 22, 1998, that Commission described the State law and made reference to similar federal government provisions:
 
[L]ike other conflict of interest statutes, post employment provisions are meant to insure public confidence in the integrity of the government. It is said public confidence in government has been weakened by a widespread conviction that government official use their office for personal gain, particularly after leaving the government. There is a sense that a "revolving door" exists between industry and the government [which] leads to a suspicion that personal profit was the motivation. There also is public concern that former employees may use information, influence, and access acquired during government service for improper and unfair advantage in later dealings with that department or agency. Reflecting that concern, post employment laws set a "cooling off period" in certain areas which the ex-employee dealt with while working at the agency. [Citations omitted]. Similarly, the Delaware legislature sought to insure public confidence in the integrity of government. 29 Del.C. Sec. 5802. It set a two-year "cooling off period" in areas where the former employee was "directly and materially responsible," etc. 29 Del.C. Sec. 5805(d). This limits the actual or perceived unfair advantage in subsequent dealings with a department or agency. Commission Op. No 97-18. Thus, this Commission has held that Delaware's post-employment provision is an attempt to eliminate concerns that when a State employee moves from State employment to private employment that they do not use their former State position to get a "leg-up" on others in the private sector who also seek to deal with the government. Commission Op. No 97-11. Additionally, it is to avoid the risk that after a State employee moves to the private sector that they will not exercise undo influence on their former colleagues. Commission Op. 96-75.
 
Conditions for Waiver under County law
 
            New Castle County Council foresaw the probability that situations would arise which would militate against enforcement of the prohibition on post-employment contracts and provided waiver authority to the Commission in section 2.03.105A. The Commission may grant a waiver on either of two standards: 1) if literal application of the prohibition is not necessary to achieve the public purpose of the ordinance, or 2) if application of the prohibition would result in undue hardship to the Department. [Emphasis added]
 
            In coming to a decision about a waiver, the Commission also must scrutinize the conditions of the post-employment contract to see if the contract comports with the goal of preventing unjust enrichment of the former employee and promoting the public confidence in the integrity of County government. Compensation must be reasonable for obtaining information acquired through former employment and the contract period must be limited to only that period of time necessary to ameliorate the undue hardship to the Department. The remuneration to the employee must reflect arms' length dealing between the Department and the former employee to avoid any appearance of favoritism.

Analysis:

            An employment contract granted shortly after retirement or resignation merely because an employee acquired special expertise in the course of paid County employment and her hiring would be expedient would not qualify for a waiver. Such a contract would create an impression of unjust enrichment to a former employee who capitalizes, for private benefit, on knowledge acquired in a public position. However, even if a former employee capitalizes on such knowledge, a waiver request may be granted if the "undue hardship" to the County standard is satisfied. "Undue hardship" has been defined by the PIC as "excessive hardship". This phrase means more than ordinary hardship for the County or the former employee. Ordinary hardship encompasses any loss of a productive, long-term employee which affects continuity and work flow in a government agency. As noted by the PIC, undue or excessive hardship is not created simply because it would be cheaper or easier to hire a former employee. In a number of opinions, the PIC found that if waivers were granted on grounds of cheaper cost or continuity, a former employee would always have a "leg up" and be at a competitive advantage over other vendors and the post employment bar would be meaningless. See, e.g., PIC Commission Op. 97-41. Additionally, waivers on the basis of cost or continuity raise the specter of favoritism and unfair dealing. Justifying a contract on such grounds would have the net effect of not only defeating the legislative purpose of the two year cooling off period but also weakening public confidence by creating the impression that government encourages its officials and employees to trade upon their offices for future personal gain at the taxpayer's expense.
 
            However, when undue hardship to the County has been shown to exist, the Commission has granted applications for waiver. In New Castle County Commission Waiver 07-01, the County was obligated to meet a longstanding court-imposed deadline and, because of events beyond its control, was without available resources to advance its position. In New Castle County Commission Waivers 06-01, 08-01, there were no other adequate internal or external resources available to a Department to complete an important project without substantial negative impact to the public.
 
            In this case, the Department does not appear to have adequate internal or external resources to accomplish the fiscal goals. It made substantial and largely successful attempts to train replacements for the employee before she unexpectedly retired. It was unable to complete that training because of her abbreviated schedule and the timing vagaries of federal financial reporting.
 
            Because of the sums of money at issue, there is no question of a significant negative financial impact to the public if the June 30 federal report is not timely and accurately filed. It is also clear that under the conditions related by the Department, no one other than the retiree can assist and train her successors to compile that report and perfect the revisions to the budget. A decision to waive the post-employment prohibition so that the County may contract with the former employee significantly ameliorates the obvious and immediate hardship to the County caused by that employee's unanticipated resignation and advances the interests of the public. Therefore, on balance, the undue hardship to the County in enforcement of the prohibition exceeds the perceived personal benefit to the former employee who will earn only her former hourly rate under a County contract.

Finding:

            A waiver of the two-year post-employment prohibition pursuant to the undue hardship standard is GRANTED for a period of four months under the contract terms described by the department.
 
            BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON THIS 14th DAY of MAY, 2008.
 
_________________________
John McMahon, Chairperson
 
Decision: Unanimous

Footnotes:

1 29 Del.C. Sec.5805(d) Post-employment restrictions.