New York State
Ethics Commission


Advisory Opinion No. 91-3: Application of §74 of the Public Officers Law to certain non-policymaking employees of OMRDD who engage in outside employment for not-for-profit providers of services which are licensed by and have their rates set by OMRDD.

Introduction

The following advisory opinion is issued in response to an inquiry from the New York State Office of Mental Retardation and Developmental Disabilities ("OMRDD") on whether the application of the code of ethics Standard of §74(3)(i) of the Public Officers Law precludes certain non-policymaking OMRDD employees from engaging in outside employment for not-for-profit providers of services ("providers") which are licensed by and have their rates set by OMRDD.(1)

Pursuant to the authority vested in the New York State Ethics Commission ("Commission") by §94(15) of the Executive Law, the Commission concludes that employees of OMRDD, who have not been designated as serving in policymaking positions by their State agency ("non-policymaking"), may engage in outside employment for providers which are licensed by and have their rates set by OMRDD without violating the ethical Standard of §74(3)(i) of the Public Officers Law as long as those employees are not engaged in duties directly or indirectly related to licensing or rate setting of not-for-profit providers of services, and as long as they do not negotiate, authorize or approve such licenses or rates in any way. No OMRDD employee may sell goods or services to any person or entity licensed by, or whose rates are fixed by, OMRDD.

OMRDD employees permitted to engage in outside employment may violate other standards of §74 through an employment relationship with a provider. A violation could occur if, in the course of such employment, they disclose confidential information, or their judgment on official actions in their State jobs is impaired by their outside employment or they attempt to use their official position to secure unwarranted privileges or exemptions with or on behalf of such outside employees.

Background

Pursuant to §13.01 of the Mental Hygiene Law, OMRDD shall

[p]lan and work with local governments and voluntary organizations and all providers of services to the mentally retarded and developmentally disabled to develop an effective, integrated comprehensive system for the delivery of all services to the mentally retarded and developmentally disabled and to create financing procedures and mechanisms to support such a system of services to ensure that the mentally retarded and developmentally disabled individuals in need of service receive appropriate care and treatment close to their families and community.

Pursuant to §31.22 of the Mental Hygiene Law and §404(q) of the Not-for-Profit Corporation Law, all not-for-profit providers of services are required to receive an operating certificate from OMRDD before beginning any residential or day program. The Mental Hygiene Law provides for specific procedures to be followed in the certification process. OMRDD, by regulations, also sets the rates which providers may bill for their services.

In Advisory Opinion No. 90-25, the Commission concluded that State officers and employees who have been designated as serving in policymaking positions by their appointing authority, may not serve as directors or members of the governing boards of organizations which are regulated or licensed or whose rates are set by their employing State agency.(2) The basis for the Commission's determination was that policymakers, because of their positions of responsibility within a State agency, may be able to influence agency action on behalf of the regulated organization and that an appearance of a conflict of interest, under §74 of the Public Officers Law, would, therefore, occur.(3)

The instant inquiry is whether certain OMRDD non-policymaking employees serving as clinicians for the Agency, such as teachers, rehabilitation counselors, development specialists, nurses, physical therapists, occupational therapists, recreational therapists, speech pathologists, social workers, physicians, psychiatrists, psychologists, dentists, and dental hygienists, may engage in outside employment for providers without violating the conflict of interest Standard of §74(3)(i).(4)

Discussion

In addressing the circumstances raised herein, the Commission has recognized the inherent difference in the status of "employee" vis-a-vis that of "seller of goods or services."

Section 74(3)(i) of the Public Officers Law.

The ethical Standard contained in §74(3)(i) provides:

No officer or employee of a state agency employed on a full-time basis nor any firm or association of which such an officer or employee is a member nor corporation a substantial portion of the stock of which is owned or controlled directly or indirectly by such officer or employee, should sell goods or services to any person, firm, corporation or association which is licensed or whose rates are fixed by the state agency in which such officer or employee serves or is employed.

This Standard creates a blanket prohibition on the sale of "goods or services" by State officers and employees to providers subject to the agency's licensing or rate setting powers, irrespective of whether an officer or employee is involved in licensing or rate setting activities on behalf of the State agency. The Commission must determine whether the restrictions of §74(3)(i) are intended to bar outside employment by OMRDD officers and employees with providers which are licensed by and have their rates set by OMRDD.

In a related case, the New York State Attorney General determined that the ethical Standard of §74(3)(i) does not prohibit all employees of the Department of State from receiving licenses by their employing State agency.(5) While the Attorney General recognized that an employee of the Department of State who is licensed by that Department to engage in a particular occupation is subject to greater restrictions on the use of that license than a licensee of the Department of State who is an employee of another State agency or not employed by the State, "a conflict of interest does not arise in a per se sense simply because such a licensee is also employed by the licensing source." The Attorney General went on to state, in regard to §74, that: "[w]hether and to what extent a State employee may pursue a particular private activity or occupation depends not only on the nature of that activity or occupation but on the nature of his official duties on behalf of the State." (Emphasis added.)

The Commission finds the rationale contained in the foregoing opinion of the Attorney General persuasive. The Commission concludes that all non-policymaking employees of OMRDD should not be prohibited by the Ethics Law from having employment relationships with providers. Such a blanket prohibition would be overly broad and serve no purpose in furtherance of the provisions of the Public Officers Law.(6) Rather, in addressing whether there is a prohibited appearance of a conflict of interest under §74, the Commission must consider the nature of the employee's duties on behalf of OMRDD. In the case of clinicians, the services they generally perform in the treatment and rehabilitation of individuals with developmental disabilities would not conflict with their engaging in employment with a voluntary not-for-profit provider of services.

While the Commission does not interpret §74(3)(i) to bar all outside employment by all OMRDD employees with providers of services, the plain language of the ethical Standard does entail a blanket prohibition on all OMRDD employees from selling goods or services to providers which are licensed by or have their rates set by the Agency.(7) The Legislature, in enacting this ethical Standard, determined that the appearance of a conflict of interest was more manifest when State employees sell goods or services, for example, through a consulting contract, to entities licensed or whose rates are set by their employing State agency than when the State employee enters into an employment relationship with the outside entity.(8)

The blanket prohibition against the sale of goods or services of §74(3)(i) extends to all OMRDD employees, whether or not the employees are policymakers, who perform consulting services to providers, as this would constitute the "selling of services" under the statute. The Commission has previously applied a restrictive interpretation to the term "employee." For example, the Commission concluded that the government-to-government exception to the post-employment restrictions of §73(8) applies only to persons who leave State service and become employees of a federal, state or local government or one of its agencies and does not extend to service as a consultant to such governmental entities.(9)

Sections 74(3)(a) - (h) of the Public Officers Law.

Having determined that certain employment relationships between OMRDD clinicians and providers are permissible, the Commission must also consider whether the application of the other standards of §74 would preclude the employment relationship. The Code of Ethics contained in §74 of the Public Officers Law broadly addresses the appearance of conflicts of interest for State officers and employees. The Rule with respect to conflicts of interest, as provided in §74(2) of the Public Officers Law, states:

No officer or employee of a state agency . . . should have any interest, financial or otherwise, direct or indirect, or engage in any business or transaction or professional activity or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties in the public interest.

The above Rule is further explained by various ethical Standards which include:

  1. No officer or employee of a state agency . . . should accept other employment which will impair his independence of judgment in the exercise of his official duties.

  2. No officer or employee of a state agency should accept employment or engage in any business or professional activity which will require him to disclose confidential information which he has gained by reason of his official position or authority.

  3. No officer or employee of a state agency should disclose confidential information acquired by him in the course of his official duties nor use such information to further his personal interests.

  4. No officer or employee of a state agency . . . should use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others.

  5. No officer or employee of a state agency . . . should engage in any transaction as representative or agent of the state with any business entity in which he has a direct or indirect financial interest that might reasonably tend to conflict with the proper discharge of his official duties.

  6. An officer or employee of a state agency . . . should not by his conduct give reasonable basis for the impression that any person can improperly influence him or unduly enjoy his favor in the performance of his official duties, or that he is affected by the kinship, rank, position or influence of any party or person.

    . . . .

  7. An officer or employee of a state agency . . . should endeavor to pursue a course of conduct which will not raise suspicion among the public that he is likely to be engaged in acts in violation of his trust.

A State officer or employee, who has been designated as serving in a policymaking position, would likely violate the foregoing standards if he or she were employed by or had a contractual, vendor or other business relationship with a provider of services.

As the Commission stated in Advisory Opinion No. 90-25, "[A] policymaker, by definition, has influence in the execution of policy or assists one who does." Even if the policymaker is not in the line of authority to regulate or oversee the provider of services by which the policymaker is employed or has a business relationship, the appearance exists that that individual could influence other policymakers to render decisions favorable to the outside organization. There remains the potential appearance that the provider has retained the policymaker in order to gain influence with the State agency, to obtain unwarranted privileges, to obtain insider or other confidential information, or has provided the outside employment or contract as a reward to ensure that the policymaker will influence licensing or rate setting decisions favorable to the provider. If such inferences were correct, the Commission would direct the policymaker to cease the outside employment or sever the contractual relationship and possibly recommend disciplinary action to be taken by the employee's appointing authority.

The same ethical concerns are not present in the case of non-policymaking employees, who engage in outside employment or conduct business relationships with providers, because the non-policymaking employee does not have the same opportunities to influence the policies or licensing or rate setting decisions of his or her employing State agency.(10) Therefore, the Commission concludes that the ethical Standards of Public Officer Law §§74(3)(d), (f) and (h) do not preclude a non-policymaking State officer or employee, who is completely removed from the licensing or rate setting functions of his or her State agency, from having an employment relationship with a provider of services.(11) The issue of the propriety of an individual serving in a policy-making position engaging in outside employment with a provider is subject to the Commission's Outside Activities regulations. The appointing authority and the Commission, where appropriate, would have to decide on a case-by-case basis whether such employment can be approved under the Ethics in Government Act.(12)

Conclusion

The Commission concludes that the code of ethics Standard of §74(3)(i) of the Public Officers Law does not prohibit non-policymaking employees of OMRDD, who are neither directly nor indirectly involved with the licensing and rate setting functions of their State agency, from engaging in outside employment with not-for-profit providers of services which are licensed by and have their rates set by OMRDD.

This Opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion.

All concur: Joseph M. Bress, Chair

Norman Lamm
Angelo A. Costanza
Donald A. Odell, Members

Dated: March 14, 1991


Endnotes

1. Pursuant to §73-a of the Public Officers Law, which requires certain State employees to file annual statements of financial disclosure, the Commission has promulgated guidelines to assist appointing authorities at State agencies to designate policymakers (who must file). One guideline refers to a "policymaker," designated by an agency appointing authority, as an individual who exercises responsibilities of a broad scope in the formulation of plans for the implementation of goals or policy for a State agency or acts as an advisor to an individual in such a position. A non-policymaker would be any person who is not designated as a policymaker. The procedure for designating policymakers was upheld as constitutional and as having a rational basis in Grygas v. NYS Ethics Commission, 554 N.Y.S.2d 779, ___ Misc. ___ (1990).

2. The Commission also concluded that those employees, who are under the direct control and supervision of an individual serving in a policymaking position, may not serve as a director or member of the board of an organization regulated or licensed by their employing State agency.

3. The Commission has yet to determine whether employees serving in policymaking positions may engage in outside compensated employment for a regulated entity. The conclusions reached in this Opinion apply only to employees who serve in non-policymaking positions.

4. "Clinician" is a blanket title at OMRDD, which refers to a wide variety of job responsibilities and encompasses approximately seventy-seven specific job titles. OMRDD contends that the clinicians' outside employment is advantageous both to OMRDD and mentally retarded and developmentally disabled persons because such services ensure a certain quality that might not otherwise be available because of a scarcity of trained personnel. In addition, it is argued that any adverse decision by the Commission will have an enormous impact upon OMRDD licensed providers of services because OMRDD employees have engaged in this type of outside employment since the inception of the State agency in 1978. According to OMRDD, there are approximately 3,595 OMRDD employees serving in clinician titles. OMRDD has no figures on how many of these clinicians work for voluntary providers of services, although the agency believes that in certain geographical areas of the State, the number of clinicians who are engaged in outside employment with voluntary providers is substantial.

5. 1962 Op. Atty. Gen. [Inf] 41.

6. This is not to say that OMRDD, under its own employee guidelines and policies and pursuant to law, might find it useful to prohibit some or all OMRDD employees from engaging in outside employment with not-for-profit providers of services or to limit the number of hours of such outside employment in accordance with appropriate laws.

7. Section 74(3)(i) only bars the sale of goods and services to regulated entities which is different from engaging in outside employment.

8. This line of reasoning is consistent with the Legislative intention of §73(4) of the Public Officers Law which prohibits State officers and employees or firms in which they are members or control a substantial interest, from selling goods or services over twenty-five dollars to any State agency unless such goods or services are provided pursuant to an award or contract let after public notice and competitive bidding. For purposes of §73(4), the term "services" does not include employment as an employee.

9. See Advisory Opinion No. 89-5.

10. As discussed previously, an exception would be for non-policymaking clinicians employed by OMRDD, who are directly or indirectly involved in licensing or rate setting functions or who, as part of their duties on behalf of the Agency, evaluate or inspect providers of services to ensure their compliance with OMRDD regulations or who ensure that licensure or rate setting standards are being maintained.

11. An exception to this statement would be if an OMRDD clinician diverted patients to a provider of services who engages the clinician in outside employment.

12. Pursuant to the authority of the Commission under §94(16) of the Executive Law, the Commission has promulgated regulations on the outside activities of State officers and employees who have been designated by their appointing authorities as serving in policymaking positions within their State agency. Under the Commission's regulations on outside activities, those employees who have been designated by OMRDD as serving in policymaking positions and who engage in outside employment in which they earn over $1000 in annual compensation must seek the approval of their appointing authority to conduct the outside activity and the additional approval of the Commission if the outside employment grosses over $4000 in annual compensation, irrespective of whether they are involved in licensing or rate setting activities on behalf of OMRDD.



URL: http://www.nysl.nysed.gov/edocs/ethics/91-03.htm