Filing Number: 16-03
Subject: Post Employment Restriction
Keywords: post employment, retirement
Decision By: Commissioners: Johanna Bishop, Beatrice Patton Dixon, Paula Jenkins-Massie, Sally Jensen, Robert Ralston
Contact Email: admin@nccethics.org
 
Status: Active

Question:

          Whether the waiver requested by the Community Services Department of the two-year post-employment restriction, found in Section 2.03.103.D of the New Castle County Code, should be waived in order that it may contract with a retired employee to perform certain of his former County duties for a very limited duration?

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 retiree. The Department needs to overcome a gap in service while the County searches for a permanent replacement of the retiree at issue.  The Department anticipates a very short term duration of 10 hours of post-employment of the retiree at a cost of $250.00.  Such a contract will prevent cessation of important services with little impact on the County’s resources.

Facts:

          A Community Services employee retired in December 2015.  This retiree performed certain financial duties for the Department.  Before this employee retired, he trained a relatively new employee to take over his duties, for which he was solely responsible.  Soon after the retiree at issue left County service, another employee in the finance section resigned which required the members of the section to take on additional duties. The Department now finds that the retired employee's successor requires assistance in the performance of some of the retiree's former duties which were not performed by any current County employee.  The Department states that the successor needs to consult with the retiree in order to complete certain financial processes unique to the section of Community Services which deals with grant funds.  The proposed contract with the retiree includes a rate of $25.00 an hour, $12.17 less per hour than his pre-retirement hourly rate, for about 10 hours of consultation.

Code or Prior Opinion:

New Castle County Code Sections

           In this case, the retiree would be performing duties similar to those for which he 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. …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. Because 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. §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. §5802. It set a two–year “cooling off period” in areas where the former employee was “directly and materially responsible,” etc. 29 Del.C. §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 undue influence on their former colleagues. Commission Op. 96-75.

            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 on the basis of expediency, merely because an employee acquired special expertise in the course of paid County employment, would not qualify for a waiver since the reasoning underlying the prohibition would be contravened. 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 to the disadvantage of competitors for the position.

             Even if a former employee capitalizes on such knowledge, however, 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.  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.

            When, however, undue hardship to the County has been shown to exist, the Commission has granted applications for waiver. In New Castle County Commission Waiver 14-01, the department stated that the retiree possessed unique and exclusive knowledge about the system he created. Thus, the retiree was the only source consultation for the successor as to how to process certain financial aspect of grant funds.  If the post-employment prohibition had been enforced, the hardship for the department and the public which relies on its services would have exceeded the perceived personal benefit to the retired employee, especially if he received only a moderate rate for his services.  

            In New Castle County Commission Waiver 11-01, the Commission granted a waiver where the department wanted to hire by contract a manager who had recently retired.  The retiree had been responsible for implementing all of the medical and voluntary benefits, including pension benefits, for approximately 1450 employees and 1200 retirees. This employee had also been responsible for the Department budget closeout occurring at the time, the fiscal year start up, and financial reporting processes as well as heading up modifications to the County's pension plans pursuant to recently enacted ordinances. The department did not believe it could timely recruit and train a new employee to execute the retiring employee's duties without severe disruption to the pension program and its beneficiaries. It requested a 9-month window in which to contract with the retiring employee for her services in performing many of the tasks for which she was previously responsible. The department expected to require services from the retiree on a part time basis and proposed an hourly rate pegged at 80 to 85% of her former hourly salary, which gave the Commission pause.  Due to the nature of the hardship facing the County at the time, however, the Commission granted the waiver.

            In the waiver at hand, the Department is attempting to ameliorate the work load of a burdened section who lost two of its ten employees within a short period.  The section performs vital functions for customers of the Community Services Department and handles financial accounting of grant funds.  The hiring of retiree, who was paid at the hourly rate of $37.17, for a short contract duration of 10 hours at $25.00 per hour, in this instance, satisfies the conditions in the Ethics Code for the granting of a waiver.

Finding:

          A waiver of the two-year post-employment prohibition pursuant to the undue hardship standard is GRANTED for a period not to exceed 10 hours at the rate of $25.00 per hour, as presented by the Department in its request.             
 
          In rendering this opinion, this Commission has applied the New Castle County Ethics Code, which establishes the minimum level of ethical conduct required of County officials and employees.
 

BY AND FOR THE NEW CASTE COUNTY

ETHICS COMMISSION

ON THIS 13TH DAY OF APRIL, 2016.

 

                                          ________________________

                                                         Johanna Bishop, Chairperson

                                                         New Castle County Ethics Commission

Decision:  Unanimous