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HomeMy WebLinkAbout21-502 Confidential PHONE: 717-783-1610 STATE ETHICS COMMISSION FACSIMILE: 717-787-0806 TOLL FREE: 1-800-932-0936 FINANCE BUILDING WEBSITE: www.ethics.pa.gov 613 NORTH STREET, ROOM 309 HARRISBURG, PA 17120-0400 ADVICE OF COUNSEL January 28, 2021 21-502 To the Requester: This responds to your letter dated December 28, 2020, by which you requested a confidential advisory from the Pennsylvania State Ethics Commission seeking guidance as to three (3) specific questions identified below: Issue: 1). Pursuant to the submitted facts, would the issuance of a Severance Payment by an by 65 Pa.C.S. § 1103(e) of the Pennsylvania Public Official and Employee Ethics Act? 2). Would 65 Pa.C.S. § 1103(e) of Ethics Act prohibit or restrict the Employer from making the proposed Severance Payment to Employee? 3). If paid to the Employee, would the Severance Payment constitute reportable income as opposed to a gift, and be reported as such upon Statement of Financial Interests required to be filed for calendar year 2021? Brief Answer: 1). NO. Pursuant to the submitted facts, the issuance of a Severance Payment by the Employer to the Employee would not prohibited under 65 Pa.C.S. § 1103(e) of the Pennsylvania Public Official and Employee Ethics Act. 2). NO. Pursuant to the submitted facts, the Employer would not be restricted from making the proposed Severance Payment to Employee. Confidential Advice, 21-502 January 28, 2021 Page 2 3). YES. The Severance Payment, if paid to the Employee, would constitute reportable income required to be disclosed by the Employee upon Statement of Financial Interests filed for calendar year 2021. Facts: You have been authorized by \[Employer\] \[Employee\] (the to request a confidential advisory from the Commission pursuant the following submitted facts. The Employer is a national professional services firm offering \[various services\], with offices across the United States, including the Commonwealth of Pennsylvania. The Employer provides professional services to various agencies of \[Pennsylvania Government\]. However, the Employer provides no services to the \[Office\] of Pennsylvania state government, including but not limited to, the \[Specific Office\]. Employee is/was a full-time employee based in the \[City\] office of the Employer. The Employee typically has provided advisory services to commercial clients of the firm and has not done work for the Commonwealth or its agencies. The Employee was elected to \[Specific Office\] on \[Date A\], but at the time of the submission of the request for an advisory, had not yet taken the Oath of Office required by \[Law\] permitting the Employee to \[Enter\] public office. (See \[Law\]). At the time of the request for an advisory, the Employee intended to take the Oath of Office on \[Date B\] when the \[Office\] reconvened. On \[Date B\], Employee did in fact take the Oath of Office. The \[Law\] specifically provides that the terms of service of \[Office\], including members of the \[Specific Office\]\[Date C\](See \[Law\]) Thus, since Employee was elected on \[Date A\] to serve as a member of \[Specific Office\] began on \[Date C\], even though Employee had (at the time of the submission of the request for an advisory) not yet taken the Oath of Office. The Employee resigned as an employee of the Employer on \[Date B\]. The Employer the Employer would like to make a payment to Employee which would be Although the circumstances here are unique (i.e. an employee assuming public office), the amount of the Severance Payment is consistent with other severance/career transition payments made by the Employer to other employees in the past. Payment of the Severance Payment by the Employer is not contingent acceptance of public office; however, Employer has yet to issue the Severance Payment pending the issuance of this advisory. If paid, the Employer and the Employee will treat the Severance Payment as income paid by the Employer to the Employee and appropriate amounts will be withheld from the Severance Payment as is required by law with respect to any income paid by the Employer to its employees. The Employee has indicated that he acknowledges that the Severance Payment will be income paid to him and as such the Employee will be required to publicly disclose the payment of the Severance Payment on the Statement of Financial Interests form that the Employee will be required to file for calendar year 2021. Confidential Advice, 21-502 January 28, 2021 Page 3 Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all the material facts. As a \[Specific Office\], Employee is a public official subject to the provisions of the Ethics Act. The Pennsylvania Public Official and Employee Ethics Act (65 Pa.C.S.§ 1103(e)) provides: (e) Contingent and severance payments. (1) No person shall solicit or accept a severance payment or anything of monetary value contingent upon the assumption or acceptance of public office or employment. (2) This subsection shall not prohibit: (i) Payments received pursuant to an employment agreement in existence prior to the time a person becomes a candidate or is notified by a member of a transition team, a search committee or a person with appointive power that he is under consideration for public office or makes application for public employment. (ii) Receipt of a salary, fees, severance payment or proceeds resulting from the sale of a person's interest in a corporation, professional corporation, partnership or other entity resulting from termination or withdrawal therefrom upon the assumption or acceptance of public office or employment. (3) Payments made or received pursuant to paragraph (2)(i) and (ii) shall not be based on the agreement, written or otherwise, that the vote or official action of the prospective public official or employee would be influenced thereby. By operation of \[Law\]\[Specific Office\] of \[Office\] began on \[Date C\]. As such, at the time of the request for an advisory, the Employee was already a Public Official as that term is defined by the Ethics Act. person is prohibited from soliciting or accepting a severance payment or anything of monetary Confidential, Opinion, 17-544. The Commission has found that the operative phrase in this Confidential Advice, 21-502 January 28, 2021 Page 4 (See Confidential, Opinion, 91-005 (citing Confidential, Opinion 90- 014)). Because the Employee is currently a Public Official and has resigned his employment with Employer, the proposed Severance Payment does not appear to be ntingent upon Section 1103(e) requires two conditions for its application. The first condition is the offer or acceptance of a severance payment or anything of monetary value; the second condition is that the acceptance is contingent upon assumption or acceptance of public employment. In this instance, the acceptance of the severance is not conditioned upon assumption or acceptance of public employment; rather, the offer of the Severance Payment is consistent with other severance/career transition payments previously offered by the Employer for employees not assuming public office/public employment. Since the condition is unrelated to the acceptance of public office, it does not appear as though §1103(e) applies to this situation. As the Commission has held in Minor, Opinion 90- condition as to the severance does not relate to the acceptance of the offer but to the condition Minor, Opinion 90-016 at page 3. Here too, the condition as to the Severance Payment does not relate to the acceptance of public office, but rather that the Employee has chosen to engage in a career transition. Other than forbidding payment of a severance payment assumption or § 1103(e)), the Ethics Act does not prohibit the employer of an individual who also is a Public Official, from making a severance payment. Under the facts presented here, there are no submitted facts to suggest that the Severance Payment is intended to be contingent; in fact, the contrary has occurred. The Employee assumed office as of \[Date C\] and continued his employment with Employer until taking the Oath of Office. contingent upon the proposed payment of the Severance. As such, issuance of the Severance Payment would not be prohibited by the Ethics Act. Once paid and received, the Severance Payment would be considered income as that term is defined by the Act. Section 1102 of the Ethics Act defines ncome as: Income. Any money or thing of value received or to be received as a claim on future services or in recognition of services rendered in the past, whether in the form of a payment, fee, salary, expense, allowance, forbearance, forgiveness, interest, dividend, royalty, rent, capital gain, reward, severance payment, proceeds from the sale of a financial interest in a corporation, professional corporation, partnership or other entity resulting from termination or withdrawal therefrom upon assumption of public office or employment or any other form of recompense or any combination thereof. The term refers to gross income and includes prize winnings and tax-exempt income. The term does not include gifts, governmentally mandated payments or benefits, retirement, pension or annuity payments funded totally by contributions of the public official or employee, or miscellaneous, incidental income of minor dependent children. Confidential Advice, 21-502 January 28, 2021 Page 5 65 Pa. C.S.§ 1102 (emphasis added). Therefore, payment by the Employer of the Severance Payment to the Employee would be . The term gift which is As income, the Severance Payment is required to be disclosed by the Employee upon his 2021 calendar year Statement of Financial Interests within Block 1 . Conclusion: In your capacity as a \[Specific Office\]official et seq., and the Regulations of the State Ethics Commission , 51 Pa. Code § 11.1 et seq. Accordingly, based exclusively upon the facts provided within the request for an advisory, the following conclusions are set forth: 1. Payment of the Severance Payment by the Employer to the Employee will not 1103(e) of the Ethics Act (§ 1103(e)). 2. The Ethics Act does not prohibit the Employer from making the proposed Severance Payment to Employee. 3. Payment by the Employer of the Severance Payment to the Employee would be . The receipt of the Severance Payment would be required to be disclosed by the Employee unde The propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United 1 $1,300 threshold, same would be required to be disclosed as a source of income. Confidential Advice, 21-502 January 28, 2021 Page 6 States mail, delivery service, or by FAX transmission (717-787-0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Respectfully, Brian D. Jacisin Chief Counsel