New York State
Ethics Commission


Advisory Opinion No. 97-16: Application of the two year and lifetime bars of Public Officers Law §73(8)(a) to former employees of the Metropolitan Transportation Authority working pursuant to a contract between the New York City Transit Authority and a private company.

INTRODUCTION

The following advisory opinion is issued in response to a request submitted by Michael A. Vaccari ("Vaccari"), Deputy Executive Director/General Counsel of the Metropolitan Transportation Authority ("MTA"), who asks how Public Officers Law §73(8)(a), the revolving door statute, would affect certain MTA employees under a proposed privatization plan. The MTA would like to privatize its Data Center, and proposes to accomplish this objective through a contract between the New York City Transit Authority ("TA"), one of its affiliates, and a private company. The MTA asks whether employees of the Data Center, who would cease to be MTA employees, could work for the private company pursuant to its contract with the TA and perform the same tasks that they now perform.

Pursuant to its authority under Executive Law §94(15), the New York State Ethics Commission ("Commission") hereby renders its opinion that the MTA Data Center employees may work for the contractor as proposed, as they would not be rendering services for compensation in relation to a contract with their former agency and they would be working on transactions different from those on which they worked while employed by the MTA.

BACKGROUND

The MTA's Data Center currently provides technology services for the various MTA affiliates and subsidiaries(1) in the areas of payroll, inventory, general ledger and automated fare collections. In April, 1996, the TA, an MTA affiliate, issued a competitive request for proposals for technology services to include the work currently performed at the MTA Data Center. The request also sought LAN desktop services, desktop inventory management services and obsolete platform migration, all for the TA. The MTA has informed the Commission that the TA was designated to serve as the lead agency on the contract because it has the most at stake, as it is the largest user of computer software and technology of all of the MTA's affiliates and subsidiaries. In fact, three of the four areas to be serviced by the contractor involve exclusive TA functions.

The privatization initiative with respect to the Data Center was undertaken in furtherance of the Governor's privatization policy directive and with the goals of improving the quality of information services and reducing operating expenses. The TA proposes to approve a contract with the private company at its July Board meeting.

If the proposal is approved, MTA Data Center employees will be seeking employment with the private company to perform services under the proposed contract. The duties of these employees include mounting computer tapes, upgrading operating system software and data processing. None of them has been designated by the MTA as serving in a policy making position, and none has been involved in the establishment of policies, or in the planning or negotiations regarding the proposed privatization concept.

The private company has agreed to hire the MTA Data Center employees after their termination from the MTA if they meet performance and other employment criteria. Those employees who are hired by the contractor would continue to perform the same functions they currently perform for the MTA. They would work in the same space in which the Data Center is now operated, which is in office space leased by the MTA. This space will be sub-leased to the contractor. It is contemplated that none of the employees will continue to perform any services for the MTA. The private company, under contract with the TA, will direct and supervise the day-to-day administration and operation of the Data Center.

Vaccari has confirmed that each operating agency will deal directly with the contractor, as no single agency, such as the TA, will act on behalf of the other operating agencies on day-to-day matters. Each operating agency will have a designated contact person who will deal directly with the contractor on work being performed for that agency. That person will be responsible within the agency for project management, coordination and oversight of all aspects of the project. If an agency is dissatisfied with any aspect of the contractor's performance, the contact person for the agency would discuss the problem directly with the contractor.

In particular, each agency will interact directly with the contractor on a daily basis regarding the mainframe/midrange processing requirements, including requests for changes, problem management forecasts, utilization, chargeback, user satisfaction, technology improvement and new processing requirements. In addition, each of the agencies will validate services and charges, monitor service levels, escalate problems relative to the agency, initiate change order requests and support benchmarking/audits. Basically, the agencies will each deal with the contractor in the same manner in which it currently interacts with the MTA Data Center staff.

APPLICABLE STATUTE

Public Officers Law §73(8)(a) provides:

(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.

(ii) No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment, or which was under his or her active consideration.

This provision, 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. Subdivision (i), known as the two year bar, contains a two year absolute bar on a former employee's appearing, practicing or rendering services for compensation in relation to any matter before his or her former agency. Subdivision (ii), known as the lifetime bar, prohibits a former State employee from rendering services in relation to any case, proceeding, application or transaction in which he or she was directly concerned and personally participated or which was under his or her active consideration while in State service.

DISCUSSION

I. Two Year Bar

In Advisory Opinion No. 94-4, the Commission considered whether employees of the Department of Taxation and Finance could work for a contractor pursuant to a privatization plan whereby the contractor would assume some of the Department's mail, clerical and data entry functions. The Commission analyzed the situation as follows:

[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. Moreover, the actual work to be performed by the former State employees will involve the processing of State personal income tax returns, which would also constitute a matter before the Department. The former State employees would therefore "receive compensation for . . . services rendered by [them] on behalf of . . . matter before [their former] agency" in violation of the two year bar (footnotes omitted).

In reaching this result, the Commission noted that it was compelled by the language of the statute, but it urged the amendment of §73(8) to relieve some of the restrictions imposed on former employees who were employed in the lower salary ranks of government.

Advisory Opinion No. 94-4 would preclude the MTA employees who are the subject of this opinion from working for the contractor if the contract were with the MTA. Under the holding in that opinion, they would be rendering services in relation to a matter before their former agency during the two year post-employment period.

However, under the MTA's privatization proposal, the contractor would contract with the TA, not the MTA. The MTA argues that the employees should, therefore, be permitted to work on the contract because the TA is a different State agency from the MTA, and the Data Center employees would be rendering services in relation to a matter before an agency other than their former agency.

In support of its position, the MTA cites an informal opinion of the Commission, dated May 27, 1993, where the Commission held that, with the exception of certain senior employees,(2) the former agency of an employee of the MTA is only the MTA, and the former agency of an employee of an affiliate is only the affiliate for which the employee worked. That informal opinion was confirmed in formal Advisory Opinion No. 95-33. Since the Data Center employees do not occupy senior positions and they work for the MTA, the MTA argues that the employees can work for the contractor, which would not have a contract with their former agency.

The Commission agrees with the MTA's position. The assumption underlying both the informal and formal opinions was that the MTA and each of its affiliates and subsidiaries, although having the same corporate directors, performed separate functions. For example, the TA runs the New York City bus and subway system, while Metro North and the Long Island Railroad each run separate railroad operations. The MTA's role is to oversee and coordinate regional transportation operations. Under this structure, each affiliate is truly a separate entity, and there is no reason to consider the employees of one as employees of another.

Under the privatization scenario proposed, these distinctions are maintained. Today, each of the agencies deals with the Data Center, which is operated by the MTA, with respect to its needs. After the privatization proposal is implemented, each of the operating agencies will deal directly with the contractor. While the contract will be with the TA, each agency will maintain its distinction from the others. Thus, the structure of the MTA system, on which the Commission based its informal opinion of May 27, 1993 and its Advisory Opinion No. 95-33, is maintained.

Following these opinions, the Commission concludes that the Data Center employees, who do not occupy senior positions, are employees of only the MTA. Since they will be working under a contract with the TA, and, in practice, directly for each of the MTA affiliates, they will not be rendering services in relation to a contract with their former agency. Consequently, the Data Center employees may accept employment with the contractor without violating the two year bar.

While they may work for the contractor, these employees may not appear before MTA. Thus, to the extent that the contractor performs services for the MTA, employees other than current Data Center employees will have to handle all contact with that agency.

II. Lifetime Bar

In analyzing the issues presented by the lifetime bar, the Commission looks to Advisory Opinion No. 95-4. There, the employees of an MTA affiliate were divided into three categories for purposes of the lifetime bar. That opinion, like this one, concerned employees who would work for a private venture which would take over a public function. The three categories of employees were: (1) those who perform ongoing functions, such as clerical services and customer services; (2) those who supervise the first category of employees; and (3) senior staff who were involved in the planning and formation of the privatization program.

The Commission concluded that the last category of employees would be lifetime barred from carrying out the same functions they performed after having left the public payroll, but, with narrow exceptions, the first two categories of employees would not be so barred. For those other than in the third category, each operation was considered a separate transaction.

The Data Center employees who are the subject of this opinion are more like the first two categories of employees. None are in the third category. Many are operational, as they mount computer tapes and are concerned with operating systems and software. Like the first category of employees in Advisory Opinion No. 95-4, they will perform "the same kind of generic task" as they carry out their functions for the contractor. However, as in Advisory Opinion No. 95-4, the Commission views each task as "different for purposes of the lifetime bar." For those who are supervisors, the Commission here, as in its previous opinion, treats them in the same manner as the operational employees. Thus, although the Data Center's employees' tasks for the contractor will be similar in nature to those they now perform, they will not be barred from working for the contractor and performing these functions.

CONCLUSION

The Commission concludes that the MTA Data Center employees may work for the contractor on the proposed contract to privatize the services of the Center, as they would not be rendering services for compensation in relation to a contract with their former agency and they would be working on transactions different from those on which they worked while employed by the MTA.

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:

Evans V. Brewster,
Donald A. Odell,
Paul L. Shechtman, Members

Shechtman, P., concurring. I concur in the Commission's opinion, but write separately to express my concern that we are struggling to resolve an ethical issue where none exists.

Public Officers Law §73(8)(a) imposes a two year ban on a former employee "appear[ing] or practic[ing]" or "receiv[ing] compensation for . . . services rendered . . ." in relation to any matter before his or her former agency. This "revolving door" provision was designed to prevent former government employees from enriching themselves and benefiting their new clients by trading on their contacts in their former agency.

In Advisory Opinion No. 94-4, the Commission concluded that §73(8)(a) barred a former employee of the Department of Taxation and Finance from working for a private contractor as part of a privatization initiative pursuant to which the contractor would assume some of the Department's clerical and data entry functions. The Commission believed that the language of the statute compelled that unsatisfying result, and it recommended that the Legislature relax the two year prohibition in such instances. It emphasized that the concerns that animated §73(8)(a) were not implicated if former employees were allowed to sort an agency's mail for a private contractor as part of a privatization plan.

Because the Legislature did not accept the Commission's recommendation, we are today faced with an ingenious proposal by the MTA to privatize its Data Center by way of a contract between a private firm and the TA, an MTA affiliate. The logic of the proposal is impeccable: the TA is not the MTA, and, therefore, the former employees are not appearing before their former agency. Put simply, the MTA has skirted Advisory Opinion No. 94-4 and thereby won the Commission's approval.

I join in the belief that the MTA's proposal raises no serious ethical issue. The plan, like any privatization initiative, may be wise or foolish, but it should be judged on its merits. It should not founder on §73(8)(a). To suggest that there is some ethical impropriety if former MTA workers continue to mount computer tapes and upgrade software for the MTA pursuant to a private contract is to conjure up imaginary demons.

The Commission's opinion has the untoward effect of encouraging other agencies that are contemplating privatization to engage in contortions similar to that of the MTA. I would proceed differently. I would overrule Advisory Opinion No. 94-4 and hold that a former employee does not violate §73(8)(a) when performing tasks for his or her former agency that are related to the individual's former governmental duties pursuant to a contract between the agency and a private entity. Because that is what occurred here, I find no ethical objection to the MTA's proposal.

Dated: July 28, 1997


Endnotes

1. These include the MTA New York City Transit, MTA Long Island Rail Road, MTA Long Island Bus, MTA Metro-North Railroad, MTA Bridges and Tunnels and MTA Card Company.

2. Those senior employees affected are (1) the chair and first vice-chair of the board of the MTA and the executive director of the MTA, who are considered to be officers of the MTA and all MTA system affiliates and subsidiaries; and (2) the heads of MTA's 11 departments and the directors who are their immediate subordinates, whose responsibilities include actively and routinely managing significant projects or matters involving one or more MTA affiliates or subsidiaries, who may, on a case by case basis, be considered to be an employee of the MTA and the other MTA entity.



URL: http://www.nysl.nysed.gov/edocs/ethics/97-16.htm