The Department of Human Resources has requested a waiver of the two-year post-employment restriction found in New Castle County Code Section 2.03.103D in order to contract with a retired employee to perform certain of her former County duties for a period of nine months.
The waiver is granted for a period of three months and hourly payment shall not exceed 80% the retiree's former salary. The Commission finds that the hardship to the Department and potential harm to the pensioners exceeds the financial benefit to the recently retired employee. The Commission finds that a waiver would not reduce public confidence in the fairness of the Department's hiring practices.
Upon reconsideration, the waiver is amended to extend the period to five months.
The Department of Human Resources is responsible for implementing all of the medical and voluntary benefits, including pension benefits, for approximately 1450 employees and 1200 retirees. The long term manager of the compensation and pension systems recently announced her retirement from County service effective June 30, 2011.
This employee has been responsible for the Department budget closeout occurring at this 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. She is also managing the transition to a new benefits consultant and is responsible for compliance with the new federal health care act.
The Department does not believe it can 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 is requesting 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 notes, however, that it will be better able to evaluate its needs in three months. The Department expects to require services from the retiree on a part time basis and proposes an hourly rate pegged at 80 to 85% of her former hourly salary.
Code or Prior Opinion:
New Castle County Code Sections
In this case, the contracted official 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. All requests of waivers will be handled in an expeditious manner by the Ethics Commission.(sic) 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 58.1 Since 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. Sec.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. Sec.5802. It set a two-year "cooling off period" in areas where the former employee was "directly and materially responsible," etc. 29 Del.C. Sec.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 undo influence on their former colleagues. Commission Op. 96-75.
Conditions for Waiver under County law
New Castle County Council foresaw the probability that situations would arise which would militate against enforcement of the prohibition on post-employment contracts and provided waiver authority to the Commission in Section 2.03.105A. The Commission may grant a waiver on either of two standards: 1) if literal application of the prohibition is not necessary to achieve the public purpose of the ordinance; or 2) if application of the prohibition would result in undue hardship to the Department. [Emphasis added]
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.
An employment contract entered into shortly after retirement merely because an official acquired special expertise in the course of paid County employment would not qualify for a waiver. Such a contract would create an impression of unjust enrichment to a former official who capitalizes, for private benefit, on knowledge acquired in a public position. However, even if it could be argued that a former official is capitalizing on such knowledge, a waiver request may be granted if the standard of "undue hardship" to the County is satisfied.
"Undue hardship" has been defined by the PIC as "excessive hardship". This phrase means more than ordinary hardship for the County or the former employee. 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 grounds of cost 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.
However, when undue hardship to the County has been shown to exist, the Commission has granted applications for waiver. In New Castle County Ethics Commission Waiver 07-01, the County was obligated to meet a longstanding court-imposed deadline and, because of events beyond its control, was without available resources to advance its position. In New Castle County Commission Waivers 06-01, 08-01, 08-02, 09-01, 09-02 and 10-02 there were no other adequate internal or external resources available to a Department to complete an important project without substantial negative impact to the public.
The Commission takes notice of the administrative burden the Department has carried during the past two years because of the employment freeze imposed as a result of the substantial County budget shortfall. Its ability to keep up with the flow of work under such circumstances is admirable and the Commission understands that the unexpected loss of even one key employee can jeopardize the entire Department's function. In this case, County pensioners would clearly bear the burden of malfunction. The Commission also notes that the administration of the Department is very new and that the employee in question has been helpful in acclimating that administration to its duties. In sum, if the post employment prohibition is enforced, the hardship for the Department and pensioners would likely exceed the perceived personal benefit to the retired employee.
However, the proposal to structure a contract with payment at 80-85% of the retiree's former hourly wage gives the Commission pause, mainly because there is no proffered justification for that amount, such as an analysis of the pay grade range for the position. However, since the Commission is aware of the high level of skill needed for this particular position, it will accept the proposal tendered by the Department.
The waiver is granted for a period of three months and payment shall not exceed 80% the retiree's former salary. The Commission finds that the hardship to the Department and potential harm to the pensioners exceeds the financial benefit to the recently retired employee. The Commission finds that a waiver would not reduce public confidence in the fairness of the Department's hiring practices.
The requested waiver is GRANTED.
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON THIS 10th DAY of JUNE, 2011.
On June 28, 2011, Gregg Wilson, acting County Administrative Officer requested reconsideration of the terms of the waiver. The Commission entertained argument by Mr. Wilson on July 13, 2011, to extend the waiver period to 6 months and to increase the allowable compensation to 100% of the prior salary.
The waiver is AMENDED to a period of five months.
BY AND FOR THE NEW CASTLE COUNTY ETHICS COMMISSION ON THIS 13th DAY of JULY, 2011.
Thomas P. Collins, Sr., Chairperson
The Commission voted to reject the amendment proposed by Mr. Wilson.
The Commission voted 4 to 2 to amend the waiver period by extending it to 5 months.
Miguel Gonzalez, James Keeley, Gerald Turkel, and Vincent White for the motion; Johanna Bishop and Thomas Collins, Sr. against the motion.
1 29 Del. C. Sec.5805 (d) Post-employment restrictions.