SPECIAL ETHICS LAW MEMO
TO: State
Officials and Employees
SUBJECT: Summary of
Sections 15-502 and 15-503 – Secondary Employment and Financial Interest
Ownership Restrictions
GOALS OF THE ETHICS
LAW
The purposes of the
Ethics Law are to avoid conflict of interest, insure impartiality and
independence of judgment and avoid the appearance of conflict of interest. The State Constitution also expresses a
similar standard stating the need for officials to act diligently, faithfully
and without partiality or prejudice.
SECONDARY
EMPLOYMENT
A State official or employee
may want to have secondary employment, but, depending on the circumstances, the
right to do so may be limited by provisions of the Ethics Law. (This memorandum does not apply to Judges or
Members of the General Assembly as their restrictions are administered by other
ethics agencies).
TYPES
OF EMPLOYMENT
Secondary employment relates
to either compensated employment with an entity or non-compensated service
involving a fiduciary relationship such as service on a board of
directors. For example:
§
Compensated
employment with a for-profit or non-profit entity;
§
Compensated
employment with local government or a federal agency;
§
Compensated
employment with another State agency;
§
Service
as an elected official at the local level;
§
Service
on a State or local government board or commission with or without compensation
§
Service
on a for-profit or non-profit board or commission with or without compensation.
BASIC
EMPLOYMENT PROHIBITIONS
There are three basic employment prohibitions in the Ethics
Law. The first two apply without
exception. The third establishes a
presumption of rebuttable prohibition based on the facts as defined in the
State Ethics Commission regulations (COMAR Title 19A).
- Sections 15-502(b)(1)
and 15-502(c)(1)(i) provide that, except when found not to be a conflict
or appearance of conflict by the State Ethics Commission, an official or
employee may not have secondary employment with an entity that does
business with his or her department or agency or is regulated by, or
subject to the authority of his or her department or agency. The
Commission’s exception regulations are published in COMAR Title 19A and
delineate specific requirements for an exception. The regulations require the employee to
obtain advice from his or her State agency. Many situations will not be appropriate for exception
particularly if the employee has State duties relating to the private
employer, is affiliated with the unit in his or her agency having duties
relating to the private employer, or has duties with the private employer
relating to his or her State agency or to its authority or programs.
- Section 15-502(b)(2) of
the Ethics Law prohibits secondary employment that would impair the
impartiality and independent judgment of the official or employee.
- Section 15-503(b)
provides that an official or employee who has duties relating to a
contract cannot be employed by an entity that is a party to that contract.
As a practical matter, most secondary
employment issues involve the provisions of § 15-502, as § 15-503 tends to
duplicate other restrictions in the Law.
Some of the specific provisions do not apply to dual State employment
situations (employment with two State agencies, or serving on a State board in
addition to one’s State job). Section
15-502(b)(2) primarily governs dual State affiliations with regard to
impairment. Secondary employment
situations related to board memberships may involve a determination of whether
the affiliation is in a private capacity or in an ex-officio capacity. For example in many instances a person may
be properly appointed to serve on a non-profit board as an agency
representative. In these situations,
non-compensated service may involve an official or employee who is following
the instruction of his or her agency or representing its interest, and he or
she may be removed from the board by the employing agency. Generally, this type of agency
representative services is allowed subject to guidelines.
Section 15-703(F)(3) generally bars an official or
employee from being a regulated lobbyist.
The Commission has issued numerous formal advisory opinions providing
detailed discussions of many different situations involving secondary
employment. You may find the formal
advisory opinions COMAR Title 19A or on our web site http://ethics.gov.state.md.us. Specific questions should be addressed to
the Commission prior to starting an activity about which you have a question.
OWNERSHIP
INTEREST PROHIBITIONS
Section 15-502 prohibits State employees and officials from
having ownership financial interests in entities (corporate, non corporate,
other) doing business with or regulated by their Department or agency. Financial interest is defined to include
entitlement of $1,000 upon sale of the interest or ownership of more than 3% of
a business entity by an official, employee or his or her spouse. There are substantial regulatory exceptions
that permit some ownership financial interests if disclosed and if the
Commission determines that there is no conflict or appearance of conflict. Not
all situations would be appropriate for an exception. For example, an energy official could not have ownership
financial interests in oil companies; a health official could not have
ownership financial interest in a hospital; and a utilities commission member
could not have ownership financial interest in utilities. If you need to have
an exception considered, you should contact the State Ethics Commission.
SPECIAL
EXEMPTIONS AND RELATED RESTRICTIONS
The State
Ethics Law contains some special exemption provisions that may allow a conflict
if the standards of the law are met.
Most of the provisions are applicable solely to part-time members of
State Boards and Commissions. Other
situations generally require a request for exemption from the Governor and the
agency involved and are seldom used. It
is important to note that even when the Commission grants an exception, all of
the other provisions of the Ethics Law continue to apply. For example, the employee or an official
could not participate in any matters on behalf of the State relating to his or
her secondary employer or ownership interest entity even if an exemption or
exception were allowed.
(5/27/02)