New York State
ETHICS COMMISSION


Advisory Opinion No. 92-13: Application of Public Officers Law §§73(7)(a) and 74 and the Commission's regulations on outside activities.




INTRODUCTION

The following advisory opinion is issued in response to certain Outside Activity Requests submitted by policy-making employees of [a specific State agency] and addresses the issue of whether it would be a Public Officers Law violation for [those State agency] employees serving in policy-making positions ("policymakers") to engage in compensated outside employment or consulting for entities regulated and licensed by [the State agency].(1)

Pursuant to the authority vested in it by Executive Law §94(15), the New York State Ethics Commission ("Commission") hereby renders its opinion that it would not be a violation of the Public Officers Law §§73(7)(a) or 74 for [a State agency] employee designated as a policymaker to engage in compensated outside employment for an entity subject to [the State agency's] regulatory jurisdiction provided that the policymaker is engaged only in clinical activities (i.e., treating patients) for the outside entity. Public Officers Law §74(3)(i) prohibits [State agency] policymakers from providing consulting services of any kind to regulated and licensed entities.


BACKGROUND

[The duties of these policymakers](2) are clinical in nature and entail the treatment of patients or involve the supervision of other clinicians. Policymakers serving in the above titles are not involved in the licensing or regulation of outside entities.

[These] policymakers seek approval to engage in compensated outside employment or outside consulting with entities that are regulated or licensed by [their employing State agency]. Pursuant to [the law], the agency has broad regulatory and licensing authority over virtually all [specific service] providers in the State. [These] providers, including local governmental units which operate mental health programs, must be licensed by [the employing State agency], with the limited exception of persons engaged in private practice. Given [the State agency's] broad licensing and regulatory authority, outside professional employment of [State agency] policymakers usually involves [an agency] regulated or licensed entity.

[The State agency's] long-standing official agency policy authorizes certain types of outside employment.
[ ] the agency's policy manual states in relevant part:

A.   Policy Statement
The engagement in outside employment by any employee of [the State agency] must not adversely affect her/his availability or capability to perform the duties and functions for which s/he is employed.

. . . .

Employees receiving prior approval of the Commissioner of [the State agency] or designee or facility director . . . may be employed by local governmental units or the agencies with which local governmental units contract.

Employees will not be allowed, however, to engage in outside employment in any agency funded through direct contract with [the State agency] . . . or to operate, manage, or have any interest whatsoever in licensed or unlicensed [ ] facilities funded in whole or in part by the [State agency] except for [specific facilities].

[The State agency] contends that any additional limitations on [State agency] policymakers' outside employment or consulting activities will make it extremely difficult for the agency to recruit and retain qualified professionals. [The State agency] has also requested that any restrictions on outside employment or consulting be waived when [State agency] policymakers are performing outside activities for other governmental entities.


APPLICABLE REGULATION AND STATUTES

1. The Commission's outside activity regulations.

Pursuant to Executive Law §94(16)(a), in April of 1990, the Commission adopted regulations on outside activities, 19 NYCRR Part 932. The regulations contain, in relevant part, the following:

932.3 Restriction on holding other Public Office or Private Employment or engaging in Other Outside Activities

. . . .

(c) No individual who serves in a policy-making position . . . shall expend time or otherwise engage in private employment, profession or business, or other outside activity from which more than nominal compensation, in whatever form, is received or anticipated to be received without, in each case, obtaining prior approval from the State Ethics Commission.

(d) No individual who serves in a policy-making position. . . shall expend time or otherwise engage in any private employment, profession or business, or other outside activity from which more than $1,000 but less than nominal compensation is received or anticipated to be received without, in each case, obtaining prior approval from his or her approving authority.

Part 932 defines "nominal compensation" as no more than $4,000 in annual compensation for services rendered. Therefore, policymakers who earn in excess of $4,000 in annual compensation must receive the approval of both their appointing authority and the Commission to undertake the outside employment.

The Commission determines whether to approve a described outside activity based on whether the activity would interfere with or conflict with the proper and effective discharge of the individual's duties on behalf of the State consistent with the provisions of Public Officers Law §§73 and 74.

2. Public Officers Law §73(7)(a).

Relevant to this discussion is Public Officers Law §73(7)(a) which states:

No . . . state officer or employee, other than in the proper discharge of official duties, shall receive, directly or indirectly, or enter into any agreement express or implied for, any compensation, in whatever form, for the appearance or rendition of services by himself or another in relation to any case, proceeding, application or other matter before a state agency where such appearance or rendition of services is in connection with:
(i) the purchase, sale, rental or lease of real property, goods or services, or a contract therefor, from, to or with any such agency;

(ii) any proceeding relating to ratemaking;

(iii) the adoption or repeal of any rule or regulation having the force and effect of law;

(iv) the obtaining of grants of money or loans; and

(v) licensing.

3. Public Officers Law §74.

Public Officers Law §74 sets forth a code of ethics for State employees, prohibiting conflicts of interest and their appearance. The rule with respect to conflicts of interest, as contained in §74(2), provides:

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.
Standards set forth in §74(3) which further explain and define the above-mentioned rule and which pertain to the present circumstances, include:
f. 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.

h. 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 that are in violation of his trust.

i. No officer or employee of a state agency employed on a full-time basis nor any firm or association of which such 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.


DISCUSSION

In Advisory Opinion No. 90-25, the Commission concluded it would be a violation of Public Officers Law §74 for policy-making employees to serve on the boards of directors of not-for-profit organizations that are licensed, regulated or whose rates are set by the policymaker's State agency. The Commission determination was a blanket prohibition on all policymakers within the agency irrespective of their specific job responsibilities. As the Commission stated in Advisory Opinion No. 90-25:

This question goes beyond simply the appearance of a conflict of interest faced by this policy-maker, because of the relationship of his agency with the private entity with which he is affiliated. It strikes at all similar situations, where a policy-making employee desires to serve or is serving on the board of an organization which is regulated or licensed by the State agency with which that individual is employed. We conclude that a question of an appearance of a conflict of interest will always be raised in such circumstances. A policy-maker, by definition, has influence in the execution of policy or assists one who does. Even if that policy-maker is not in the line of authority to regulate or oversee the private organization on whose board he or she serves, the appearance that he or she can influence other policy-makers, with whom he or she works or who have appointed him or her, clearly exists whenever favorable action is taken by the agency towards such organization.
The instant matter is distinguishable because the [State agency] policymakers are not requesting to serve on the boards of directors of regulated entities, but rather to engage in compensated outside employment for these outside entities. Nonetheless, the Commission notes that those concerns raised in Advisory Opinion No. 90-25 may be present depending on the nature of the work the [State agency] policymakers seek to perform for the regulated and licensed entities.

The potential for a conflict of interest or the appearance of a conflict of interest is greater when a policymaker serves on the governing board of a regulated and licensed entity, as in the circumstances of Advisory Opinion No. 90-25, or serves as a corporate officer of the entity, or engages in activities for the regulated entity that are directly related to his or her [State agency] duties. Therefore, the Commission has denied [State agency] policymakers approval to serve as board members or corporate officers of regulated and licensed entities or to perform services for outside entities that are directly related to their [State agency] positions.(3)

In Advisory Opinion No. 91-3, the Commission found that non-policy-making clinicians(4) employed by [another State agency] may engage in compensated outside employment for not-for-profit providers of services which are licensed and have their rates set by [their employing State agency] "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."(5)

Taking into consideration the policy-making status of the [State agency] employees, that their duties as clinicians for [the State agency] do not require that they "negotiate, authorize or approve such licenses or rates in any way" and the Commission's prior formal opinions, the Commission concludes that the Public Officers Law does not prohibit [these specific State agency] policymakers serving in clinical titles from engaging in compensated outside employment, provided they do not engage in any work in such outside employment that relates in any way to the licensing or ratesetting or any other regulation of the licensed entity. Engaging in clinical work only will meet this requirement.(6)

Notwithstanding the above, Public Officers Law §74(3)(i) prohibits any full-time State employee from selling goods or services of any kind to any entity which is regulated by the employee's State agency. This issue was previously discussed in Advisory Opinion No. 91-3 in which the Commission concluded that engagement in an outside activity as consultant is the equivalent of the "sale of services".(7) Consistent with that precedent, the Commission concludes that [State agency] policymakers may not engage in compensated outside consulting or serve as consultants to regulated and licensed entities.

Finally, [the State agency] has inquired whether the Commission would consider exempting policymakers who serve as consultants to local governmental agencies regulated by [the State agency], from the provisions of §74(3)(i). While Public Officers Law §73(8), the State's revolving door provision, exempts from its coverage former State employees who become employees of federal, state or local governments, there is no similar "government-to-government" exception to §74(3)(i). Prior opinions of the Commission have limited the "government-to-government" exception of Public Officers Law §73(8) to individuals who, after leaving State service, become employees of the governmental entities.(8)


CONCLUSION

The Commission concludes that it would not be a Public Officers Law violation for [State agency] policymakers to engage in compensated outside employment for regulated entities provided that they provide only clinical services to the outside entity. Public Officers Law §74(3)(i) prohibits [State agency] policymakers from providing consulting services of any kind to entities which are licensed or regulated by [their employing State agency]. The Commission will respond to the outstanding outside activity requests consistent with this opinion.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the requesting individual 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

Angelo A. Costanza
Donald A. Odell
Barbara A. Black, Members

Dated: July 2, 1992


Endnotes

1. The issue has been previously mentioned by the Commission but not decided; see Advisory Opinion No. 91-3, footnote 3.

2. [Footnote deleted].

3. See Advisory Opinion Nos. 90-25 and 92-4.

4. The [State agency] clinicians discussed in Advisory Opinion No. 91-3 perform many, if not the same, duties as the [ ] policymakers in the instant matter. The decision whether to designate individuals and titles as policy-making rests with the appointing authority.

5. See Advisory Opinion No. 91-3, page 2.

6. Public Officers Law §73(7)(a) prohibits any State employee from engaging in compensated outside employment for a regulated and licensed entity if the employee would be required to submit or assist others to submit documents to any State agency as part of the entity's licensing application. Limiting the range of allowable outside work to clinical activities is intended to help the clinicians avoid any §73(7)(a) problems.

7. See Advisory Opinion No. 91-3, pages 7 and 8.

8. See Advisory Opinion No. 91-2, later codified in Public Officers Law §73(8).


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