Filing Number: 09-02
Subject: Post Employment Restriction
Keywords: contract, Department of Community Services, employee, federal government, HUD, post employment, waiver
Decision By: Commissioners: Thomas P. Collins, Sr., Gerald Turkel, Edward Danberg, V. Eugene McCoy, John McMahon
Contact Email: admin@nccethics.org
 
Status: Active

Question:

            The Department of Community Services has requested a waiver of the two-year post-employment restriction found in New Castle County Code Section 2.03.103D in order to contract with a retiring administrator to perform certain of his former County duties on a part time basis for a twelve month period.

Conclusion:

             The waiver is granted for a period of twelve months. On balance, the Department's inability to train a successor and the unique administrative skills required to avoid over spending or forfeiting federal monies, the undue hardship to the Department exceeds the financial benefit to the recently retired employee and a waiver would not reduce public confidence in the Department's hiring practices.

Facts:

             The Department of Community Services is responsible for the administration of over 20 million dollars of public housing funds. The Department recently received eight million dollars of those funds for old and new programs pursuant to federal financial stimulus funding which is intended to ameliorate the effect of the current economic crisis on certain County citizens. The projects funded by the stimulus monies must be implemented immediately. If the Department fails to meet federal and state standards for administering these projects, it will be penalized with the loss or forced repayment of some of these funds, resulting to a significant detriment to the citizens of New Castle County.
 
            The Department of Community Services, like other County Departments, has been under a hiring freeze for over a year. A long term manager unexpectedly retired creating a second vacancy in the top positions of the Department's Division of Community Development and Housing, the entity responsible for the administration of most of the federal funding. The Department has been unable to find or train replacements for these positions, in part because of the hiring freeze and in part because the required experience is so complex. The Department proposes to enter into a one year, part time contract with the recently retired administrator in order to maintain basic function in the Division and to ensure the retention of the federal monies which support almost all of its funding.
 
            The retired administrator is the remaining employee in the Department who is totally familiar with the government programs administered by the Division and able to navigate their complex requirements. For example, the Division is required to allocate 98% of the money it receives during a specified period even though the federal authorities may not communicate the total amount it will be receiving until well into that period.1 The administrator has developed unique skill at coping with this type of budgeting process while avoiding over spending and under spending. Additionally, the Division is required to provide multiple, overlapping and complex accountings in a format dictated, and frequently changed, by the federal government. The retired administer has overseen the implementation of new computer software to accomplish some of these reports and has the experience to provide guidance when changes occur.2 The retiree would be required to manage the stimulus programs, ensure that the Division meets the federal and state reporting standards, and train his successors. He would be paid at an hourly rate 10% less than he received prior to retirement.

Code or Prior Opinion:

New Castle County Code Sections
 
            In this case, the contracted official would be performing duties similar to those for which he had been directly and materially responsible during the course of his 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
 
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 58.3 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 entered into shortly after retirement merely because an official acquired special expertise in the course of paid County employment would not qualify for a waiver. Such a contract would create an impression of unjust enrichment to a former official who capitalizes, for private benefit, on knowledge acquired in a public position. However, even if it could be argued that a former official is capitalizing on such knowledge, a waiver request may be granted if the standard of "undue hardship" to the County 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 grounds of cost 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 Ethics 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, 08-02 and 09-01, 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.
 
            The Commission takes notice of the administrative burden the Department has incurred during the past year because of the employment freeze imposed as a result of a very substantial County budget shortfall. More significantly, it is aware that the Division of Community Development and Housing has not had a Manager to oversee it and recently lost its second in command. It recognizes that succession training, while an important responsibility in both government and business, has become impossible in many agencies. Those facts, combined with the influx of new stimulus money and the urgent need to get that money quickly and accurately into programs intended to benefit County residents adversely affected by the national recession, persuade the Commission that undue hardship would exist if the prohibition on hiring were to be enforced. Given the moderate hourly rate proposed for the contract with the retiree, that undue hardship exceeds the perceived personal benefit to the former employee.

Finding:

             The Commission finds that a waiver would ameliorate the undue hardship to the Department and would not reduce public confidence in the fairness of its hiring practices. Therefore, the requested waiver is GRANTED for a twelve month period.
 
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON THIS 13th DAY of MAY, 2009.
 
___________________________________
Thomas P. Collins, Sr., Chairperson
 
Decision: Unanimous

Footnotes:

1 Currently, the Division is 5 months into the fiscal year for Section 8 subsidy payments, at a rate of 1.1 million dollars per month while the total funding for the fiscal year has yet to be determined by the federal government.

2 The federal Department of Housing and Urban Development recently changed it software, causing the County to file an untimely, and rejected, annual report. The retiree's expertise is necessary for the preparation of a resubmitted report.

3 29 Del. C. sec. 5805 (d) Post-employment restrictions.