Filing Number: 17-04
Subject: Appearance of Impropriety
Keywords: appearance of impropriety, compensation, conflict, consultant, contract, County policy, County resources, department manager, Department of Special Services, employee, impropriety, post employment, private advantage or gain, public purpose, retirement, similarly situated, undue hardship, waiver
Decision By: Paula Jenkins-Massie, Sally Jensen, Robert Ralston, Charles Toliver, IV
Contact Email: admin@nccethics.org
 
Status: Active

Question:

Whether the waiver requested by the Special 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 soon-to-be retiree to perform certain of her 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 a post-employment contract with the retiree at an hourly rate which does not exceed her rate of pay at her time of retirement for the purpose of training a new employee on her job duties and responsibilities.  Such a contract will prevent cessation of important services with little impact on the County’s resources, and without unjust enrichment inuring to the benefit of the retiree.

Facts:

A Special Services employee (the “subject employee”) very recently gave her notice that she would be retiring from County employment at the end of November 2017, after approximately 30 years of County service.  The subject employee performs certain essential administrative duties, for which she is solely responsible, for the Environmental Operations Division of the Special Services Department.  This Division includes approximately 180 County employees. Some, but not all, of the duties of the subject employee include recording the daily attendance of the entire Division, processing performance evaluations for the employees in the Division, and processing disciplinary records for every employee in the Division.  While current County employees have “covered” for the subject employee when she was on vacation or otherwise out of the office, those persons who provided cover for the subject employee are not trained on all of the duties of the position, and those employees have duties to perform for their positions. The Department is in the process of interviewing a replacement for the employee, but, regardless of whether the position is filled by a current County employee or someone not employed by the County, training of this new employee will be essential to the Department and no one but the subject employee can properly train the successor employee.   The Department needs to retain the services of the subject employee to train the successor employee.  The transition from employment of the subject employee to the successor employee is critical to the operations of the Division, as the records maintained and processed by the subject employee relate directly to the provision of vital services to County citizens who are served by employees in the Division.   The proposed contract with the subject employee would include a rate of $30.00 an hour (the subject employee’s current hourly rate), for about 12 – 15 hours per week, lasting approximately 4 weeks, for a potential total cost to the County of about $1,800.00.

Code or Prior Opinion:

 
New Castle County Code Sections
           In this case, the subject employee would be performing duties similar to those 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. …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.
            In Ethics Commission matter W11-01, 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 Ethics Commission matter W14-01, the Commission granted a waiver of the 2-year prohibition.  In that matter, a County Row Office requested a waiver of the two-year post-employment restriction in order to contract with a retired employee to perform certain of his former County duties on an on-call basis for a period of one year.  In that case, the Office stated that there were no adequate internal or external resources for the required services other than the retiree. He possessed unique and exclusive knowledge about the system that he created. Other employees used his system, but he had been the sole architect to sustain its existence. Thus, the retiree was the only source for training the new hire to maintain the system. If the post-employment prohibition was enforced, the hardship for the Office and the public which relies on its services would have exceeded the perceived personal benefit to the retired employee, as long as he received only a moderate rate for his services.
Importantly, the Commission went on to state, however:
The Commission is always concerned when a County employee’s retirement triggers a need for additional contract costs benefitting a retiree as a consultant. It believes that responsible management includes cross training for critical positions, especially when a known event is reasonably certain in the relatively near future. Of course, if an agency has a very small staff, cross training may be impossible despite responsible management. That appears to be the case in this situation since the Agency staff consists of only five persons. The Commission notes that the Agency has successfully sought funds to hire an additional person to manage this critical function in order to prevent a reoccurrence of this problem in the future.
In Ethics Commission matter W16-03, this Commission granted a waiver of the 2-year post-employment restriction when the Community Services Department asked whether a waiver could be granted for a contract with a retired employee to perform certain of his former County duties for a very limited duration.  The Commission stated, in granting the waiver, that the Department was attempting to ameliorate the work load of a burdened section which had lost two of its ten employees within a short period.  The section performed vital functions for customers of the Department and handled financial accounting of grant funds.  The hiring of the retiree, who was paid at a reasonable hourly rate not exceeding the rate paid in County employment, for a short contract duration satisfied the conditions in the Ethics Code for the granting of a waiver.

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 W14-01, 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 the waiver request at hand, such undue hardship exists.  The Department is attempting to prevent a break in the provision of services which are both essential to the County workforce at issue, and also to the County citizens who receive services from the Division.  Without the granting of this waiver, essential services for County employees and County citizens may not be provided.  While the Commission firmly believes that the better method would be for County management to anticipate, when possible, the retirement of long-term employees and put into place programs which provide for the training and hiring of replacement employees without the need for a waiver of this kind. The Commission, however, is sensitive to the reality that such a practice is sometimes not possible due to budgetary and other restrictions, as is the case here. The hiring of a retiree, who was paid at the hourly rate of $30.00, for a short contract duration of 12 – 15 hours a week for approximately 4 weeks, 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 4 weeks from its commencement, for 12 – 15 hours per week, at a rate not to exceed $30.00 per hour, as presented by the Department in its request. The Commission commends the persons in the Special Services Department who acted quickly, here, and in addition to filing a waiver request with the Commission as soon as possible, the management also took steps to handle the situation in a manner which may render the waiver unnecessary, when all is said and done.  Nevertheless, the Commission is hereby putting all County officials and employees on notice that it is a responsibility of management to anticipate the retirements of long-term employees, and to put appropriate transitional plans into motion before those retirements take place, so that waiver requests are not required when a long-term employee retires with adequate notice given to the employer. The Commission is aware of, and sensitive to, the reality that the occasional situation will occur where even the most thorough planning would not have prevented the need to file a waiver request.  But, those instances are rare, and the waiver request is appropriate in that context.  The waiver request process should not be used as a substitute for appropriate planning and training for the times when the long-term employee retires with adequate notice to the employer. 
 
             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 14TH DAY OF NOVEMBER 2017.
 
Eric J. Monzo, Esquire, Chairperson
New Castle County Ethics Commission