New York State
Ethics Commission


Advisory Opinion No. 95-31: Application of the revolving door provisions of Public Officers Law §73(8) to an agency's proposal to outsource certain agency functions.

INTRODUCTION

The following advisory opinion is issued in response to a request submitted by [counsel] to the [state agency]. [The requesting individual] asks whether, under the revolving door provisions of Public Officers Law §73(8), [state agency] employees could perform the same functions they now perform for the [state agency] while working for private contractors retained by the [state agency] pursuant to the agency's plans for outsourcing certain work currently performed in-house.

Pursuant to its authority under Executive Law §94(15), the New York State Ethics Commission ("Commission") renders its opinion that the two year bar of Public Officers Law §73(8)(a)(i) would prohibit these employees from working for private contractors on the agency's outsourcing contracts for two years after leaving the [state agency], as they would be rendering services for compensation on a matter before their former agency.

BACKGROUND

With the significant reductions in operating assistance from the federal, State, and local governments, the [state agency] faces a budget gap of $316 million in 1996, with the gap expected to grow thereafter. One of the [state agency]'s strategies to close the gap is to "outsource" certain non-core services currently performed in-house. The first two outsourcing initiatives expected to be undertaken are for (1) information/communication services, and (2) parts and supplies warehouse/distribution services. The [state agency] anticipates soliciting contractors this fall for the former, with a scheduled award date of May 1996, and soliciting in 1996 for the latter, anticipating an award in 1997.

The [state agency] believes that a key to the success of its proposed outsourcing is its ability to place current [state agency] employees with the private contractors. In the early years of outsourcing, former [state agency] employees would provide valuable experience to the contractors concerning the outsourced services. Further, the [state agency] believes that the inability to offer "excessed" employees employment opportunities with private contractors could provoke internal resistance to its efforts.

The [state agency] would like to require prospective contractors to fully and fairly consider excessed [state agency] employees for employment on the [state agency]'s contract work, or possibly mandate that the contractors hire either a percentage of excessed employees or specified individuals for a specified time. The number of employees affected is projected to be approximately 90 in the information/communication services and 100 in warehouse/distribution services. The [state agency] recognizes that many of these more senior employees have permanent civil service titles and seniority rights under collective bargaining agreements, allowing them to exercise "bumping" rights or to apply for vacancies in other [state agency] departments. Junior employees who might be "bumped" may not have the experience needed by the private contractors, but the [state agency] would, nonetheless, want to assist them in obtaining employment, including, possibly, employment with the contractors.

The [state agency] requests the Commission's opinion as to whether the two year bar of Public Officers Law §73(8)(a)(i) would apply to preclude these employees from working for the private contractors in positions where they will not be responsible for billing or procurement or for disputes involving contract compliance or payment, but in which they will be involved in the substantive work necessary to perform the contracts, even if the work requires them to be on-site at the [state agency]'s offices.

APPLICABLE STATUTE

Public Officers Law §73(8)(a) states, in relevant part, that:

(i) No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm, corporation, or association in relation to any case, proceeding or application or other matter before such agency.

This paragraph, part of what is generally referred to as the "revolving door" provision, sets the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their employment with a State agency. It contains a two year absolute bar on an employee's appearing, practicing or rendering services for compensation on any matter before his or her former agency.(1)

DISCUSSION

The [state agency], in its letter of request, concedes that prior Commission opinions would preclude former [state agency] employees from working as proposed for the contractors. It, in essence, asks the Commission to, once again, review the language of §73(8) and the intent of the Legislature in enacting this statute, and to re-examine these opinions. The [state agency] specifically notes two approaches found in Commission opinions, and it asks that they be analyzed. The first consists of opinions dealing with what the [state agency] calls "indirect appearances," and the second consists of what it calls application of a "per se" rule.

For the "indirect appearance" set of opinions, the [state agency], in its letter of request, examines the language and purpose of the statute. It argues that the critical question in determining whether a violation of the two year bar may exist is whether a former employee has responsibility for seeking a benefit from his or her former agency. It then notes that under the Commission's opinions, the bar may be invoked whenever the former employee's work product would come to the attention of the former agency. The [state agency] includes in this set of opinions Advisory Opinion No. 90-18, where the Commission held that a former Tax Department employee's work product for a private client could not later be submitted by the client to the Tax Department, and Advisory Opinion No. 90-21, where the Commission held that a former employee could not assist in the preparation of a proposal for funding submitted to her former agency, even if the former employee did not personally appear before the agency. The [state agency] also includes in this category Advisory Opinion Nos. 94-18 and 90-7.

For the "per se" set of opinions, the [state agency] notes that the Commission has found that the law is violated when a former employee works on a contract with his or her former agency irrespective of the employee's duties on behalf of the contractor. It cites Advisory Opinion Nos. 93-8, 93-12, 94-4, 94-5 and 94-16. The [state agency] suggests that the law is violated only where the former employee seeks some discretionary action on the part of the former agency.(2)

Of all of the opinions cited by the [state agency], the one most directly on point with respect to its current request is 94-4. There, the Commission held that the two year bar would prohibit former, seasonal employees of the Department of Taxation and Finance ("Department") from accepting employment with a private entity with which the Department wished to contract to perform certain functions that the Department then performed in relation to the processing of the State personal income tax returns. As proposed by the Department, its former employees, hired by the contractor, would not have any contact with Department employees. The Department stated that if any issues needed to be resolved with respect to the work performed by the contractor, the Department would deal directly with the contractor's supervisory/management staff, who were not former Department employees.

The Commission examined whether the proposed employment of the seasonal, temporary employees of the Department would violate the two year bar. It stated:

. . . the contract between the Department and the contractor, awarded pursuant to competitive bid, would be a matter before the Department. The former State employees would perform certain functions in the processing of the State personal income tax to enable the contractor to fulfill its contract terms [footnote omitted]. Moreover, the actual work to be performed by the former State employees will involve the processing of State personal income tax returns, which would constitute a matter before the Department. The former State employees therefore "receive compensation for . . . services rendered by [them] on behalf of . . . [a] corporation . . . in relation to any . . . matter before [their former] agency" in violation of the two year bar.

It should be noted that the Commission's holding was not based on the ban on appearing or practicing. Rather, the proposed employment would have violated the prohibition against rendering services for compensation on a matter before the employees' former agency. Since the employees would be compensated for working pursuant to a contract with the Department, which would be a matter before the Department, the statute would be violated. In this situation, the nature of the work to be performed by the former employees was irrelevant, as was the fact that they would have no contact with employees of the Department.

In its letter, the [state agency] generally ignores the clause in §73(8) that precludes rendering services for compensation. Its analysis focuses almost entirely on the "appearance" bar, and it seems to view the Commission's opinions with this bar in mind. The [state agency]'s outsourcing proposal would cause its former employees, in performing duties pursuant to a contract, to be "rendering services for compensation" on a matter before the [state agency]. Therefore, based upon the language of the statute, the Commission cannot accept the [state agency]'s arguments.

The [state agency] asks that, whatever the wording of the statute, the Commission should consider its legislative purpose. Again, Advisory Opinion No. 94-4 and its aftermath are instructive.

In that opinion, the Commission recognized the hardship created and said:

The Commission is sympathetic to the Department's position but is constrained by the language of Public Officers Law §73(8). Many have argued that the opportunity for a former employee who served in the lower salary ranks of State service to reap private gain from relationships with State employees or knowledge of the State system, in contravention of the post-employment restrictions, does not exist. Others argue that by imposing the revolving door on such former employees works an unreasonable hardship on them. For former employees below SG-18, the effect of the revolving door restrictions can be particularly harsh and limit their options.

The response to this opinion was a legislative effort to amend the statute. The Commission supported that effort and urged easing the restrictions of Public Officers Law §73(8) for all employees in the lower salary ranks. However, the Legislature, which was well aware of Advisory Opinion No. 94-4, eased the bar only for employees who were employed "on a temporary basis to perform routine clerical services, mail, data entry services or other ministerial tasks."(3) By not enacting a bill more widely applicable, as the Commission had suggested, the Legislature demonstrated that it had considered the Commission's opinion and was not prepared to ease the revolving door restrictions except in a very narrow set of circumstances. Thus, the legislative intent is consistent with the Commission's interpretation of the statute.(4)

Finally, the Commission is aware of many discussions which have taken place within the last year concerning the application of the revolving door statute in situations where government is looking to privatize functions. In fact, the Commission's counsel chaired a panel in September at a convention in Washington, D.C. that specifically addressed this topic. It is likely that this will be an important item before the Legislature at its 1996 session. The Commission anticipates that it will be part of what should be lively discussions dealing with an important and complex subject.

CONCLUSION

The Commission concludes that where the [state agency] establishes an outsourcing program, the two year bar of Public Officers Law §73(8)(a)(i) prohibits [state agency] employees, on leaving the [state agency], from working for a private contractor on an outsourcing contract for two years, as they would be rendering services for compensation in a matter before their former agency.

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 or related supporting documentation.

All concur:

Joseph M. Bress, Chair

Robert E. Eggenschiller,
Donald A. Odell, Members

Dated: October 2, 1995


Endnotes

1. The TA does not request an opinion on how the lifetime bar of Public Officers Law §73(8)(a)(ii) might affect the proposed outsourcing, and, therefore, the Commission will not address it here. The lifetime bar would have to be considered if the obstacles presented by the two year bar were to be overcome.

2. To resolve this issue, the Commission need not address the TA's view of each of the prior Commission opinions. These opinions stand on their own and are based on the Commission's application of the Ethics Law to the circumstances in each instance.

3. Chapter 170, Laws of 1994, found in §73(8)(f).

4. This year the Legislature passed another limited exception to the revolving door restrictions in the case of employees terminated because of fiscal exigency during 1995. That exception was approved by the Governor after he vetoed a more broad exception which contained no criteria for the Commission to apply to applications by policymakers to waive the two year bar. (See Veto Message #7 of 1995) It should be noted that this limited exception does not extend to the lifetime bar. (See Chapter 299, Laws of 1995)



URL: http://www.nysl.nysed.gov/edocs/ethics/95-31.htm