[Federal Register Volume 61, Number 147 (Tuesday, July 30, 1996)]
[Rules and Regulations]
[Pages 39756-39767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19173]
[[Page 39755]]
_______________________________________________________________________
Part III
Department of Health and Human Services
_______________________________________________________________________
Office of the Secretary
_______________________________________________________________________
5 CFR Chapter XLV
Supplemental Standards of Ethical Conduct for Employees; Final Rule
Federal Register / Vol. 61, No. 147 / Tuesday, July 30, 1996 / Rules
and Regulations
[[Page 39756]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
5 CFR Chapter XLV
RIN 3209-AA15
Supplemental Standards of Ethical Conduct for Employees of the
Department of Health and Human Services
AGENCY: Department of Health and Human and Services (HHS).
ACTION: Final rule.
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SUMMARY: The Department of Health and Human Services,with the
concurrence of the Office of Government Ethics (OGE), is issuing
regulations for officers and employees of HHS that supplement the OGE
Standards of Ethical Conduct for Employees of the Executive Branch.
This final rule specifies procedural and substantive requirements that
are necessary to address ethical issues unique to the Department. The
rule: Designates separate agency components for purposes of the gift
rules and the teaching, speaking and writing restrictions; excepts from
the gift rules, subject to monetary limits, arts and crafts items
received from Indian tribes or Alaska-Native organizations; prohibits
the holding or acquisition of certain financial interests by employees
of the Food and Drug Administration (FDA); exempts otherwise
disqualifying financial interests derived from Indian or Alaska Native
birthrights; prohibits certain outside employment and other outside
activities; establishes HHS-wide prior approval requirements for
outside employment and other outside activities, with additional rules
applicable to FDA employees; authorizes certain compensated teaching,
speaking and writing activities engaged in by special Government
employees in the Public Health Service (PHS); and delineates
restrictions on concurrent representation of tribal organizations.
EFFECTIVE DATE: July 30, 1996.
FOR FURTHER INFORMATION CONTACT:
Edgar M. Swindell, Assistant Special Counsel for Ethics, or Richard M.
Thomas, Assistant Special Counsel for Ethics (FDA sections), Office of
the General Counsel, Ethics Division, telephone (202) 690-7258, fax
(202) 690-5452.
SUPPLEMENTARY INFORMATION:
I. Background
On August 7, 1992, the Office of Government Ethics published
Standards of Ethical Conduct for Employees of the Executive Branch (OGE
Standards), codified at 5 CFR part 2635. See 57 FR 35006-35067, as
corrected at 57 FR 48557 and 52583 and 60 FR 51667, with additional
grace period extensions at 59 FR 4779-4780, 60 FR 6939-6391 and 66857-
66858. Effective February 3, 1993, the OGE Standards established
uniform rules applicable to all executive branch personnel.
Pursuant to 5 CFR 2635.105, executive branch agencies are
authorized to publish, with the concurrence of OGE, supplemental
regulations deemed necessary to implement their respective ethics
programs. The Department and OGE have determined that the following
supplemental regulations, which are being issued in a new chapter XLV,
consisting of part 5501, of 5 CFR, are necessary to establish certain
prior approval procedures, and to address gifts, financial holdings,
outside employment and other outside activities, and other ethics
issues arising out of the unique programs and operations of the
Department.
In a separate rulemaking (which will have an effective date that is
the same as the date of publication of this supplemental regulation),
the Department, after consultation with OGE, will remove those
provisions in its existing agency standards of conduct regulations at
45 CFR part 73 and 73a that have been superseded by the OGE Standards
of Ethical Conduct, the OGE financial disclosure regulations at 5 CFR
part 2634, and this final rule. The Department will then add a cross-
reference to the OGE rules, as supplemented. Those portions of the HHS
and FDA regulations regarding conduct that remain will preserve
employee obligations unrelated to those subjects assigned to OGE for
rulemaking and implementation, such as the political activity
restrictions for uniformed service officers in the Public Health
Service Commissioned Corps, the rules governing conduct on Federal
property, and the standards for workplace courtesy, cooperation, and
avoidance of sexual harassment.
II. Analysis of the Regulations
Section 5501.101 General
This section states the purpose and scope of the part, incorporates
the general definitions promulgated in the OGE Standards, and defines
specific terms. The section specifies that the supplemental regulations
apply to all officers and employees of HHS, including special
Government employees (SGEs) and uniformed service officers in the
Public Health Service Commissioned Corps on active duty.
Section 5501.102 Designation of HHS Components as Separate Agencies
Section 2635.202(a) of the OGE Standards prohibits an employee from
soliciting or accepting a gift offered by a prohibited source or given
because of the employee's official position. A prohibited source is
defined, in part, as a person who is regulated by, or has matters
pending before, an employee's agency, as prescribed in 5 CFR
2635.203(d). For the purpose of identifying an employee's agency,
Sec. 2635.203(a) of the OGE Standards authorizes an executive
department, by supplemental regulation, to designate as a separate
agency any component of the department that exercises a distinct and
separate function.
Designations made pursuant to Sec. 2635.203(a) are used also to
identify an employee's agency for purposes of applying the prohibition
in 5 CFR 2635.807 on the receipt of compensation for teaching, speaking
and writing that relates to an employee's official duties. In addition,
under Sec. 5501.106(d) of this part, invitations to engage in outside
employment or other outside activities tendered by prohibited sources
of an employee's agency, as herein defined, are subject to a prior
approval requirement.
The Department has determined that each of the HHS components
listed in Sec. 5501.102 exercises distinct and separate functions.
Accordingly, Sec. 5501.102 designates the following operating divisions
and components of HHS as separate agencies: (1) Administration on Aging
(AOA); (2) Administration for Children and Families (ACF); (3) Agency
for Health Care Policy and Research (AHCPR); (4) Agency for Toxic
Substances and Disease Registry (ATSDR); (5) Centers for Disease
Control and Prevention (CDC); (6) Food and Drug Administration (FDA);
(7) Health Care Financing Administration (HCFA); (8) Health Resources
and Services Administration (HRSA); (9) Indian Health Service (IHS);
(10) National Institutes of Health (NIH); (11) Office of Consumer
Affairs (OCA); (12) Program Support Center (PSC); and (13) Substance
Abuse and Mental Health Services Administration (SAMHSA).
As a result of these designations, employees of a designated
component have to be concerned only with the prohibited sources of
their respective components when assessing the propriety of a tendered
gift or invitation to teach, speak, write, or engage in outside
employment or other outside
[[Page 39757]]
activities. Employees of a component are defined to include, in
addition to employees actually within a component, employees in a
division or region of the Office of the General Counsel (OGE) that
principally advise or represent that component.
Any HHS employee not in one of the 13 components designated as
separate agencies (including employees of the Office of the General
Counsel with Department-wide responsibility) is deemed an employee of
the remainder of HHS. These employees are treated as if no separate
designations had been made, and, as a result, all prohibited sources of
HHS are attributable to them.
Under Sec. 5501.102, an employee of the Administration for Children
and Families, for example, could receive an unsolicited gift from a
hospital corporation receiving Medicare reimbursement through the
Health Care Financial Administration, provided that the gift was not
given because of the employee's official position. The hospital
corporation would be a prohibited source of gifts as to all employees
of HCFA, but likely would not be a prohibited source as to all
employees of ACF or other designated agency components, unless that
hospital corporation was also seeking official action from, were doing
business with, were regulated by, or otherwise had a matter pending
before that separate designated agency component.
A hospital corporation receiving Federal funds, however, would be a
prohibited source of gifts for all employees in the Office of the
Assistant Secretary for Public Affairs because such employees are
deemed part of the remainder of HHS and, as such, are charged with all
prohibited sources of the Department. Employees of the Business and
Administrative Law Division of the Office of the General Counsel, which
has Department-wide responsibilities, would be treated similarly.
However, employees of the Children, Families, and Aging Division of the
Office of the General Counsel, which serves ACF and AOA, would receive
the benefit of the separate agency designations.
Section 5501.103 Gifts from Federally Recognized Indian Tribes or
Alaska Native Villages or Regional or Village Corporations
Section 2635.204(k) of the OGE Standards permits employees to
accept any gift that is specifically authorized by a supplemental
agency regulation. The Office of Government Ethics is authorized by 5
U.S.C. 7353(b)(1) to permit ``such reasonable exceptions as may be
appropriate'' from the general ban on gifts to Federal employees given
by prohibited sources or because of their official position. Section
5501.103 permits HHS employees to accept unsolicited gifts of native
artwork or crafts from federally recognized Indian tribes or Alaska
Native villages or regional or village corporations valued up to and
including $200 per source per calendar year. Such gifts may include
art, jewelry, pottery, rugs, carvings, beadwork, and native dress.
Indian tribes and Alaska Native villages often offer gifts of
artwork and crafts as a matter of custom and tradition. Many employees
throughout HHS, most notably in the Indian Health Service, the
Administration for Native Americans within the Administration for
Children and Families, the Centers for Disease Control and Prevention,
and the Substance Abuse and Mental Health Services Administration,
interact with Native Americans. Cognizant of the unique status of
tribal organizations, this exception is intended to effectuate
harmonious and respectful relations between HHS and the governing
bodies of Indian tribes and Alaskan Native villages. The Department of
the Interior concurs in this approach and plans to promulgate an
identical provision for its employees.
The $200 per source per year threshold is appropriate in light of
the recognized value of handcrafted artwork. The figure reflects that
tribal art on occasion may be expected to exceed the current $20
maximum permitted by the gift rules, but is set low enough to exclude
antiquities, collectibles, or similar items having a significant
commercial value. Moreover, the $200 figure is consistent with the
monetary threshold contained in Sec. 2635.204(d) of the OGE Standards
relating to receipt of gifts for meritorious public service or
achievement.
This section does not authorize employees to accept such gifts from
individual tribe or organization members. In addition, the limitations
on the use of exceptions to the gift rules, contained in 5 CFR 2635.201
through 2635.205, apply to this section. If the donor is a tribe or
village that has interests that may be substantially affected by the
performance or nonperformance of the recipient's official duties, the
employee may accept the gifts authorized by this section only where
there is a written finding by the agency designee that acceptance of
the gift is in the agency's interest and will not violate any of the
limitations on the use of exceptions contained in 5 CFR 2635.202(c).
Gifts valued over $200 may be accepted on behalf of HHS, where
appropriate, if authorized by applicable statutory gift acceptance
authority, e.g., 42 U.S.C. 238.
Section 5501.104 Prohibited Financial Interests Applicable to
Employees of the Food and Drug Administration and the Office of the
Chief Counsel
In 1972, the Department of Health, Education and Welfare, the
predecessor of the Department of Health and Human Services, determined
that, because the Food and Drug Administration ``is a unique consumer
protection and regulatory agency within the Department,'' the
Department's standards of conduct needed ``further supplementation to
reflect this role.'' 37 FR 24347, 24348 (November 16, 1972). Therefore,
the Department adopted additional activities and financial interests,
applicable only to employees of FDA (and later to employees of the then
Food and Drug Division of the Office of the General Counsel), codified
at 45 CFR part 73a. The Department amended the FDA supplemental
regulations in 1978, again ``to re-enforce public confidence in the
integrity of decisions rendered by FDA employees.'' 43 FR 7618, 7619
(February 24, 1978).
Over two decades since the FDA supplemental regulations were first
promulgated, the work of FDA still poses unique challenges for an
agency ethics program. FDA employees participate in regulatory and
product approval matters that substantially affect significant sectors
of the United States economy, including the food, pharmaceutical,
medical device, veterinary medicine, biotechnology, and cosmetics
industries. Many FDA employees have access to confidential commercial
information and trade secrets, the misuse of which can have serious
financial consequences. Moreover, many FDA employees participate in, or
have access to information about, pending enforcement matters, such as
seizures, injunctive actions, and criminal investigations and
prosecutions. Unethical conduct in this context, including misuse of
information, could have serious public health consequences. In sum, FDA
has a compelling need to monitor, and impose reasonable restrictions
on, the financial and employment ties between FDA employees and the
vast number of entities regulated by FDA. Such restrictions not only
serve the interests identified above, but also relieve FDA of the
significant administrative burden of resolving many conflict of
interest problems on a case by case basis.
Therefore, Sec. 5501.104 will preserve the substance of FDA's
historic restrictions on the acquisition and holding of financial
interests in
[[Page 39758]]
regulated organizations. (See the explanation of Sec. 5501.106(c)(3)
and Sec. 5501.106(d)(2) for a discussion of the provisions governing
outside employment of FDA employees.) Like FDA's prior financial
interest restrictions, Sec. 5501.104 is narrowly tailored in two
important respects:
First, Sec. 5501.104, like the prior FDA rule, distinguishes
between interests in organizations that are significantly regulated by
FDA, and interests in organizations that are only incidentally
regulated by FDA. Only interests in ``significantly regulated
organizations'' are restricted. ``Significantly regulated
organization'' is defined, at Sec. 5501.101(c)(2), to include any
organization that derives ten percent or more of its annual gross sales
from the sale of FDA-regulated products. The new rule adds a necessary
modification to FDA's prior definition: companies that have no record
of sales, but which are operating solely within a field regulated by
FDA, also will be deemed to be ``significantly regulated.'' This
modification is necessary to cover companies that are subject to
significant regulation by FDA but which do not yet have any products on
the market. The rule would cover, for example, start-up biotechnology
companies that may exist for several years before obtaining FDA
approval to market any product.
Second, Sec. 5501.104, like the prior FDA rule, places the most
strict limitations on employees whose duties carry the greatest
potential for conflict of interest. In the past, FDA used various tests
to determine which employees should be covered by the most strict
prohibitions on financial interests. Compare 37 FR 24349 with 43 FR
7621. Under Sec. 5501.104, the test is simplified: The most strict
prohibition applies to those employees required to file either a public
financial disclosure statement or a confidential financial disclosure
statement, pursuant to 5 CFR part 2634. With certain exceptions, such
employees are prohibited from holding or acquiring any interest in a
significantly regulated organization. All other employees are allowed,
pursuant to Sec. 5501.104(b)(2), to hold or acquire such interests,
subject to essentially the same limitations contained in the prior FDA
rule.
Section 5501.104 excepts interests in certain investment and
pension funds from the financial interest restrictions. To qualify for
this exception, the fund must not be self-directed and must not have an
express policy or practice of concentrating its investments in
significantly regulated organizations. For example, a widely
diversified mutual fund generally would be a permissible holding, even
though the fund holds some stocks of significantly regulated
organizations whereas a sector fund that focused on the pharmaceutical
industry would not.
The new rule also excepts pensions arising from employment with a
significantly regulated organization. This exception does not appear in
the prior FDA rule, but it does codify an FDA policy that has been in
effect since 1976. The Food and Drug Administration has determined that
such an exception is necessary to facilitate recruitment of qualified
scientific and professional personnel, many of whom may have begun
their careers in industry.
Furthermore, Sec. 5501.104 provides FDA employees with the
opportunity to request an individual exception in cases involving
exceptional circumstances. Where the employee can demonstrate
exceptional circumstances, FDA may grant an individual exception,
provided that the application of the financial interest prohibition is
not necessary to ensure public conference in the impartiality or
objectivity with which FDA programs are administered or to avoid a
violation of 5 CFR part 2635.
Finally, consistent with prior FDA policy, the prohibition relating
to financial interests would continue to apply to the spouses and minor
children of FDA employees. FDA has made the determination, pursuant to
5 CFR 2635.403(a), that there is a direct and appropriate nexus between
this prohibition as applied to spouses and minor children and the
efficiency of the service. It should be noted, however, that
Sec. 5501.104 is not intended to prohibit employment by spouses and
minor children in regulated industry, although any actual or apparent
conflicts of interests created as to FDA employees by such employment
must be resolved under other applicable provisions of 5 CFR part 2635.
Section 5501.105 Exemption For Otherwise Disqualifying Financial
Interests Derived From Indian or Alaska Native Birthrights
Section 208(a) of title 18 of the United States Code prohibits an
employee of the executive branch from participating personally and
substantially as a Government employee in any proceeding, application,
request for a ruling or other determination, contract, claim,
controversy, or other particular matter in which the employee, the
employee's spouse, minor child, or organization in which the individual
is employed, otherwise serving, or seeking other employment, has a
financial interest.
The Ethics Reform Act of 1989 amended 18 U.S.C. 208(b)(4) to
provide that the conflict of interest prohibition does not apply to a
financial interest resulting solely from the interest of the employee
or the employee's spouse or minor child in birthrights in a federally
recognized Indian tribe or Alaska Native village corporation, in an
Indian allotment held in trust by the United States, or in an Indian
claims fund held in trust or administered by the United States, if the
particular matter does not involve the Indian allotment or claims fund
or the Indian tribe or village corporation as a specific party or
parties. Section 5501.105 incorporates the statutory exemption
referenced in the OGE Standards at 5 CFR 2635.402(d).
Section 5501.106 Outside Employment and Other Outside Activities
Section 5501.106 establishes supplemental regulations concerning
the outside employment and other outside activities of HHS employees,
other than special Government employees. The section covers both
compensated and uncompensated activities and addresses traditional
outside employment relationships, as well as other outside activities.
The Department is authorized by Secs. 2635/802(a) and 2635.803 of the
OGE Standards, respectively, to prohibit its employees from engaging in
certain outside employment or other outside activities and to require
prior approval before engaging in other defined outside employment or
activities.
(a) Applicability. The outside employment and activity prohibitions
and the prior approval requirements imposed by paragraphs (c) and (d),
respectively, do not apply to special Government employees.
Nevertheless, special Government employees remain subject to other
statutory and regulatory authorities governing their outside
activities, including the criminal representation statutes, 18 U.S.C.
203 and 205, and other applicable provisions of 5 CFR part 2635 and
this part.
(b) Definitions. Section 5501.106(b) sets forth definitions of the
terms used in the section.
(c) Prohibited Outside Employment and Activities. Section
5501.106(c) prohibits certain outside employment and activities that,
if engaged in by an HHS employee, would pose a conflict with the
employee's official duties, would cause a reasonable person to question
the impartiality with which agency programs are administered, or would
otherwise compromise agency interests.
[[Page 39759]]
(1) Prohibited Assistance in the Preparation of Grant Applications
or Contract Proposals. More specifically, Sec. 5501.106(c)(1) prohibits
an HHS employee from engaging in consultative or professional services,
for compensation, to prepare, or assist in the preparation of, grant
applications, contract proposals, program reports, or any other matters
that are intended to be the subject of dealings with HHS. Such conduct,
if undertaken on an uncompensated basis, though not expressly
prohibited by paragraph (c)(1), is subject to the prior approval
requirement in paragraph (d). This provision carries forward
longstanding policy reflected in the now superseded HHS Standards of
Conduct at 45 CFR 73.735-704(a)(2).
(2) Prohibited Employment in HHS-Funded Activities. Section
5501.106(c)(2) prohibits an HHS employee from engaging in compensated
work on an HHS-funded grant, contract, cooperative agreement,
cooperative research and development agreement, or other similar
project or arrangement authorized by statute. The paragraph precludes
the provision of personal services, whether as an employee, consultant,
contractor, or otherwise, that are rendered in the performance of a
particular grant, contract, or agreement for which the project derives
funding from HHS. This provision does not per se bar employment with an
entity that receives HHS funds, but rather if focuses on discrete
matters for which the employee's services and attendant compensation
can be attributed to a defined HHS-funded project or contractual
arrangement.
This provision codifies prior HHS policy, as implemented by the HHS
Form 520, ``Request for Approval of Outside Activity.'' The prohibition
was deemed necessary to preclude the appearance that a compensated
employment or business opportunity may have been obtained through the
use of the employee's official position and to address a number of
other potential ethics concerns. Given that millions of dollars in HHS
grants and contracts are awarded annually, the Department has
determined that maintaining the policy against compensated outside
employment in grant or contract implementation is critical to protect
against questions arising regarding the impartiality and objectivity of
its employees and the administration of the Department's programs. In
fulfilling its mission, the Department would be hindered if members of
the public were to question whether HHS employees were using their
public position or workplace connections for private remunerative gain
attributable, directly or indirectly, to appropriated funds.
(3) Prohibited Outside Activities Applicable to Employees of the
Food and Drug Administration and the Office of the Chief Counsel.
Under FDA's prior rule, originally adopted in 1972, those employees
whose duties pose the greatest potential for conflict of interest
generally could not engage in employment with significantly regulated
organizations. 45 CFR 73a.735-401(b). The basis for this rule was
essentially the same as the basis for the rule restricting financial
interests in significantly regulated organizations (see discussion of
Sec. 5501.104 above). Not only are such employees in a position to
affect the financial interests of these organizations through the
performance of their official duties, but the employees may have access
to nonpublic information that could be used to the advantage of the
organizations. Therefore, Sec. 5501.106(c)(3) will substantially
preserve this prohibition, with respect to employees who are required
to file public or confidential financial disclosure reports.
The new rule provides two exceptions to the prohibition on
employment with a significantly regulated organization. The first
exception, at paragraph (c)(3)(ii)(A), essentially continues an
exception found in FDA's prior rule. The purpose of the exception is to
allow employees who are licensed to practice various medical
professions to remain current in their professions, including the
maintenance of licenses or certifications. The list of practices in the
exception (medicine, dentistry, veterinary medicine, pharmacy, nursing)
is not exclusive, but illustrative. The practice of the various medical
professions usually is precisely defined and highly regulated by State
law, and FDA cannot give a definition of each practice that is covered
by the exemption. However, the exception is intended to cover only
employment that involves the provision of medical professional
services. Thus, for example, the exception would not cover the practice
of law or accounting. Moreover the exception is not intended to allow
FDA employees to be employed by a medical product manufacturer in the
conduct of biomedical research.
The second exception, in paragraph (c)(3)(ii)(B), will allow
clerical or similar employment (such as cashier or janitorial work)
with retail stores that are significantly regulated by FDA. Normally,
such positions would pose little risk for abuse of nonpublic
information obtained from FDA, and any potential conflicts of interest
can be dealt with on a case by case basis.
In addition to employment with a significantly regulated
organization, the new rule also prohibits certain self-employed
business activities. Certain sole proprietorships in fields subject to
significant FDA regulation may not constitute ``employment,'' within
the meaning of 5 CFR 2635.603(a), but such activities pose the same, if
not greater, risks. Therefore, public and confidential disclosure
report filers would be prohibited from engaging in self-employed
business activities where the sale or promotion of FDA-regulated
products is expected to constitute ten percent or more of annual gross
sales or revenues.
(4) Prohibited Outside Practice of Law Applicable to Attorneys in
the Office of the General Counsel.
Summary. Section 5501.106(c)(4) prohibits attorneys in or
supervised by the Office of the General Counsel from practicing law
outside their official positions where the activity, in fact or in
appearance, may require the assertion of a legal position that
conflicts with the interests of the Department. Office of the General
Counsel attorneys are also prohibited from engaging in any outside law
practice that might require the interpretation of a statute,
regulation, or rule administered or issued by the Department.
Exceptions. Consistent with Federal policy embodied in the
exceptions to the representational bans contained in 18 U.S.C. 203 and
205, nothing in the section precludes representation or advice, if
approved by the appropriate official or supervisor, that is: (1)
Rendered, with or without compensation, to specified relatives or an
estate for which an employee serves as a fiduciary; or (2) provided,
without compensation, to an employee subject to disciplinary, loyalty,
or other personnel administration proceedings.
In order to take advantage of the exceptions to 18 U.S.C. 203 and
205 or representing family members or an estate, both statutes
expressly require the approval of the Government official responsible
for the employee's appointment. See 18 U.S.C. 203(d) and 205(e). The
parallel provision in 18 U.S.C. 205(d) that permits an employee to
provide uncompensated legal assistance to another employee in
disciplinary, loyalty, or other personnel administration proceedings
does not explicitly contain an authorization requirement, but specifies
that the activity must not be ``inconsistent with the faithful
performance of [the employee's] duties.'' The Office of Government
Ethics has issued an
[[Page 39760]]
opinion concluding that an employee may not unilaterally make this
finding; as a result, supervisory approval is required. OGE Informal
Advisory Letter 82 X 19 (December 9, 1982), as published in ``The
Informal Advisory Letters and Memoranda and Formal Opinions of the
United States Office of Government Ethics,'' (the ``OGE Advisory
Publication''), 313 (1979-1988), which is available for purchase from
the Government Printing Office. As an outside professional activity,
such representation would be subject, in any event, to the prior
approval procedures in Sec. 5501.106(d) of this part.
Paragraph (c)(4)(ii)(C) makes explicit that neither the ban on
asserting contrary positions nor the prohibition on interpreting agency
statutes is intended to proscribe the giving of testimony under oath.
Asseting Contrary Legal Positions. Paragraph (c)(4)(i)(A) is
consistent with the rules of professional conduct governing the
attorney-client relationship. Precluding outside law practice that may
require the assertion of legal positions adverse to the Department
derives from the unique and sensitive relationship between an attorney
and a client, which for attorneys in the Office of the General Counsel,
is the Department of Health and Human Services.
Morever, the Department has a legitimate interest in maintaining
the consistency and credibility of the Department's position before the
Federal courts. For the most part, the representational bans contained
in 18 U.S.C. 203 and 205 would preclude outside practice by Department
attorneys in the Federal courts because nondiversity cases within the
Federal jurisdiction generally involve controversies in which the
United States is a party or has a direct and substantial interest.
However, cases may arise involving the interpretation or application of
Federal statutes or regulations that do not necessarily implicate the
direct and substantial interests of the United States.
The Office of Government Ethics and the Office of Legal Counsel at
the Department of Justice have opined that the combined involvement of
a Federal statute and a Federal forum in and of itself does not create
a direct and substantial interest on the part of the United States for
purposes of sections 203 and 205. OGE 94 X 7 (February 7, 1994), as
published in the 1994 Supplement to the ``OGE Advisory Publication'';
14 Op. O.L.C. 139 (June 7, 1990). As a consequence, Department
attorneys representing private clients might appear in front of the
same judges before whom they appear in their official capacities and
argue different interpretations of Federal statutes or regulations.
Depending upon the visibility of the issues and any attendant
controversy, asserting conflicting legal positions may diminish the
persuasiveness of the advocate and undermine the credibility of both
clients. Paragraph (c)(4)(i)(A) is intended, therefore, to safeguard
the interests of the Department as the primary client to which the
attorney employee owes a professional responsibility.
Concededly, while representing a private client, a Department
attorney might take legal positions on a myriad of issues not directly
related to Federal interests or agency programs--such as jurisdiction,
service of process, standing, evidence, or statutory construction--that
differ from those the attorney might have asserted while acting in a
governmental capacity. The section is not intended to proscribe
instances of outside practice merely because such issues would have
been handled differently if the matters arose in the prosecution or
defense of an agency case. Advocacy with respect to ancillary issues
unrelated to substantive legal positions or agency administered
statutes would only rarely have an impact sufficiently adverse to
agency interests to be proscribed by the regulation.
Interpreting Agency Administered Statutes. Paragraph (c)(4)(i)(B)
is intended to effectuate the prohibition on the use of public office
for private gain, to preclude inconsistent legal positions on core
issues affecting the interests of the Department, and to protect the
public interest by preventing any lay perception that an attorney's
employment with the Department signifies extraordinary competency on
agency related issues, or that an agency attorney's interpretation
implicitly is sanctioned or approved by the Department.
For the most part, outside practice involving agency administered
statutes would be precluded as a conflicting activity. If the subject
matter of the proposed representation and the assigned duties of the
attorney correlate, the outside activity potentially would require,
under the standards set forth in 5 CFR 2635.402 and 2635.502, the
employee's disqualification from matters so central or critical to the
performance of the employee's official duties that the employee's
ability to perform the duties of the employee's position would be
materially impaired. Similarly, representation on matters involving the
application of agency statutes may implicate direct and substantial
interests of the United States, thus contravening the representational
bans in 18 U.S.C. 203 and 205.
Although the regulation to some extent covers areas that are
subject to existing prohibitions, paragraph (c)(4)(i)(B) reaches
situations not specifically addressed in the existing standards. Absent
the prohibition contained in this section, a Department attorney
principally engaged in advising a client component conceivably could
obtain outside employment advising, as opposed to representing, a
private client on areas of agency law to which the attorney is not
assigned. In these circumstances, there is considerable risk that the
employment position held by the individual may convey an impression of
authoritativeness or access to agency experts that may not necessarily
be warranted. Moreover, private clients, and those aware of the agency
attorney's involvement, may assume incorrectly that the agency
attorney's interpretation has been vetted through the Department and is
effectively a Departmental interpretation as well. Rendering legal
services that may require the interpretation of any statute,
regulation, or rule administered or issued by the Department creates an
appearance that the employee has used the employee's official position
to obtain an outside business opportunity. Further, if counsel were
engaged in law practice that involved agency statutes, the potential
for asserting legal positions adverse to the interests of the
Department would be heightened.
Other Prohibitions and Procedures. As a professional activity
within the meaning of 5 CFR 2636.305(b)(1), the outside practice of law
must be authorized in advance under the prior approval provisions
contained in section 5501.106(d). If an outside activity is expected to
involve conduct prohibited by a statute or Federal regulation,
including 5 CFR part 2635 and this part, approval must be denied.
The prohibitions contained in the criminal law, the OGE Standards
and this supplement constitute considerable impediments to outside law
practice. Subject to such exceptions as are contained in the cited
authorities, permission cannot be granted, for example, if the
activity:
(1) Creates an actual or apparent conflict with the employee's
official duties under the criminal conflict of interest provisions in
18 U.S.C. 208 or the standards set forth in 5 CFR 2635.402 and
2635.502;
(2) Involves compensated representational services before any
[[Page 39761]]
department, agency, or court, in relation to any proceeding or other
particular matter in which the United States is a party or has a direct
and substantial interest, as proscribed by 18 U.S.C. 203; or
(3) Entails, irrespective of compensation, prosecution of claims
against the Government or service as an agent or attorney before any
department, agency, or court, in connection with any covered matter in
which the United States is a party or has a direct and substantial
interest, in contravention of 18 U.S.C. 205.
Further, if the proposed outside activity would reflect adversely
upon the Department so as to constitute conduct prejudicial to the
Government within the meaning of 5 CFR 735.203, approval would be
denied. In addition, any approved outside activity requiring absence
from duty is subject to the denial or cancellation of leave due to
exigencies of staffing and workload.
Alternatives Considered. In developing this regulation, the
Department considered several options. The confluence of the many
restrictions outlined above point in the direction of banning all
outside practice of law. However, public interest considerations
require rejection of such a policy. Attorneys in the Federal government
can play a significant role in providing legal assistance to those in
need without running afoul of these provisions. In keeping with their
ethical obligation to the system of justice, Department attorneys may
provide legal services pro bono publico in areas such as landlord-
tenant disputes, State criminal defense work, and State workers'
compensation claims, that are unlikely to pose a conflict or other
ethical concern. Indeed, the Department encourages such volunteer
activities, if not inconsistent with the laws and regulations described
above. Executive Order 12988 specifically directs that all Federal
agencies ``develop appropriate programs to encourage and facilitate pro
bono legal and other volunteer service by government employees to be
performed on their own time, including attorneys, as permitted by
statute, regulation, or other rule or guideline.''
The Department considered a proposal to ban compensated practice of
law. The availability of pecuniary gain could increase instances of
outside representation or induce the continuous practice of law with
concomitant administrative, management, and conflicts avoidance burdens
that are not implicated by the infrequent or occasional uncompensated
activities currently permitted on behalf of indigent clients, specified
relatives and estates, and individuals subject to disciplinary,
loyalty, or other personnel administration proceedings. On the other
hand, the Department recognizes that many compensated activities--such
as preparing a will, drafting Subchapter S incorporation documents,
searching real estate titles, advising on State law contract disputes,
or representing a client in traffic court--can generally be undertaken
without detriment to the agency's interests, provided that the employee
adheres to the limitations of this rule. The Department, therefore,
opted for the less restrictive approach embodied in this regulation.
(d) Prior Approval for Outside Employment and Other Outside
Activities. Section 2635.803 of the OGE Standards provides that an
agency, by supplemental regulation, may require its employees to obtain
advance administrative approval before engaging in certain types of
outside employment or other outside activities, where the agency has
determined that such a requirement is necessary or desirable for the
purpose of administering its ethics program. Provisions in the HHS
Standards of Conduct and the FDA Supplement, 45 CFR parts 73 and 73a
(which are superseded by this rule), have long required employees to
obtain written approval prior to engaging in certain outside employment
or other outside activities. Section 5501.106(d) continues this
requirement.
The prior approval requirement has been an integral part of the HHS
ethics program. Its continuance is deemed necessary to ensure that an
employee's participation in outside employment or other outside
activities does not adversely affect operations within the employing
component or place the employee at risk of violating applicable
statutes and regulations governing employee conduct.
(1) General Approval Requirement. Section 5501.106(d)(1) enumerates
the employment or activities, with or without compensation, for which
prior approval is required: (i) Providing consultative or professional
services, including service as an expert witness; (ii) engaging in
teaching, speaking, writing or editing that relates to an employee's
official duties or that is undertaken as a result of an invitation from
a prohibited source; and (iii) providing services to a non-Federal
entity as an officer, director, or board member, or as a member of a
group, however denominated, that renders advice, counsel, or
consultation.
Paragraph (d)(1)(iii), however, does not require prior approval for
uncompensated (other than reimbursement of expenses) service as an
officer, director, board member, or advisory group member in a
political, religious, social, fraternal or recreational organization,
unless the position held by the employee requires the provision of
professional services. For example, an HHS employee trained as an
accountant may serve, without prior approval, on a church board and
keep the church's books. Providing accounting services is not a
requirement of service on the board. However, if the church were to
hire the employee, with or without compensation, as its accountant,
prior approval would be required.
Prior approval is required for service as an officer, director,
board member, or advisory group member in a professional association or
similar organization. Officeholding in a professional association may
raise ``representation'' issues and other ethics concerns not usually
encountered in the context of political, religious, social, fraternal
or recreational organizations.
(2) Additional approval requirement applicable to employees of the
Food and Drug Administration and the Office of the Chief Counsel.
Under FDA's prior rule, adopted in 1972, all FDA employees have
been required to obtain prior approval for all outside employment, with
limited exceptions. 45 CFR 73a.735-401. This requirement proved to be
an effective mechanism for preventing inadvertent conflicts of interest
among FDA employees. Section 5501.106(d)(2) will continue this
requirement.
FDA estimates that approximately 25% of all consumer spending in
the United States is on products regulated by FDA. FDA can take actions
that affect enterprises as diverse as grocery retailers, home appliance
manufacturers, cosmetics distributors, and dairy farmers. Even non-
profit organizations, such as patient advocacy groups or blood banks,
can have an interest in FDA actions. In light of the pervasiveness and
variety of FDA-regulated and FDA-affected organizations in the United
States, there is a significant risk that employees engaged in outside
employment or self-employed business activity may confront actual or
apparent conflicts of interest.
The prior approval requirement in Sec. 5501.106(d)(2) will allow
FDA to assist employees in identifying organizations that are regulated
by FDA or significantly involved in FDA issues. Ultimately, prior
approval helps FDA employees to avoid conflicting activities with such
organizations.
Section 5501.106(d)(2) codifies existing practice by applying the
prior approval requirement to employees of
[[Page 39762]]
the FDA Office of the Chief Counsel. The rule also codifies current
practice by requiring prior approval for self-employed business
activity.
Consistent with the other prior approval provisions applicable to
all HHS employees, Sec. 5501.106(d)(2) will not require approval for
participation in the activities of a political, religious, social,
fraternal, or recreational organization, unless the position requires
the provision of professional services, or is rendered for compensation
(other than reimbursement of expenses). Moreover, the prior approval
requirement will not apply to those categories of employment that have
been exempted, pursuant to Sec. 5501.106(d)(5), based on a
determination that such employment activities generally would be
approved and are not likely to involve conduct prohibited by statute or
regulation.
(3) Submission of Requests for Prior Approval. This paragraph
specifies that requests for approval of outside activities must be
submitted to the employee's supervisor a reasonable time in advance of
the proposed activity. Prior approval requests must include information
sufficient to assess the activity, such as: the employee's name,
organizational location, position title, and grade or rank; the name of
the person or organization for whom the outside work is to be
performed; a description of the type and location of such work; the
method of compensation; the duration of the activity, and the number of
hours the employee expects to be engaged in such work.
In order to implement the prohibitions contained in paragraphs (c)
(1) and (2) of this section relating to HHS grant and contract
activities, the employee must provide additional information as
currently required on the HHS Form 520, ``Request for Approval of
Outside Activity.'' An employee who renders consultative or
professional services must state whether the client or outside employer
is a current or prospective HHS grantee or contractor. And, an
employee, irrespective of the type of services to be provided, must
identify any HHS funding sources for the specific activity in which the
employee proposes to engage.
For activities involving teaching, speaking, writing, or editing,
the employee must submit the proposed text of any disclaimer that is
required by either the OGE Standards or the agency instructions or
manual issuances authorized by paragraph (d)(5) of Sec. 5501.106.
Section 2635.807(b)(2) of the OGE Standards permits an employee who is
engaged in outside teaching, speaking or writing, to use, or permit the
use of, the employee's title or position in connection with an article
published in a scientific or professional journal, provided that the
title or position is accompanied by a reasonably prominent disclaimer
satisfactory to the agency. The disclaimer must indicate that the views
expressed in the article do not necessarily represent the views of the
agency or the United States.
(4) Standard for Approval. Paragraph (d)(4) specifies the standard
for approval of outside employment or other activities. An activity
that is not expected to involve conduct prohibited by statute or
regulation, including part 2635 and the agency supplemental, shall be
approved. However, a note following the paragraph cautions that during
the course of an otherwise approvable activity, situations may arise,
or actions may be contemplated, that, nevertheless, pose ethical
concerns.
(5) Responsibilities of the Designated Agency Ethics Official and
Component Agencies. Section 5501.106(d)(5) authorizes the Designated
Agency Ethics Official (DAEO) or the separate agency components, with
the concurrence of the DAEO, to issue instructions or manual issuances
exempting categories of employment or other activities from the prior
approval requirement based on a determination that the employment or
activities within those categories would generally be approved and are
not likely to involve conduct prohibited by statute or Federal
regulation, including the OGE Standards and this supplemental
regulation.
Through these instructions or manual issuances, agency components
may specify internal procedures governing the submission of prior
approval requests, designate appropriate officials to act on such
requests, and include examples of outside employment or other outside
activities that are permissible or impermissible consistent with the
OGE Standards and this part.
The OGE Standards also recognize that agencies may have policies
requiring advance agency review, clearance, or approval of certain
speeches, books, articles, or similar products to determine whether the
material contains an appropriate disclaimer, discloses nonpublic
information, or otherwise complies with the teaching, speaking and
writing provisions of 5 CFR 2635.807. Because the need for preclearance
and/or disclaimers may differ depending upon the activities and
missions of the various components of the Department, the rule
authorizes inclusion of such policies within the instructions or manual
issuances.
The Department will continue to employ HHS Form 520 as both a prior
approval request form and a record of the disposition by the approval
official. Paragraph (d)(5)(iii) of the section requires officials
responsible for the administrative aspects of these regulations to make
provisions for the filing and retention of these forms.
No provision is made in these regulations, however, for an annual
reporting of outside activities submitted on HHS Form 521, as
previously required by 45 CFR 73.735-709. That section elicited an
annual written verification whether the work or activity described in
the original request was actually performed and required the employee
to specify the amount of time spent and whether the activity would
continue unchanged. Because the HHS Form 520 contains a blank for
specifying duration and any substantive change in the scope of the
approved activity would constitute a new activity requiring submission
of another HHS Form 520, the annual report appears to be unnecessarily
duplicative. Moreover, the information requested would, in any event,
form the basis of a responsible dialogue between employees and
supervisors concerning workload allocation and the avoidance of
conflicts. The minimal benefit to be derived from an annual report does
not outweigh the considerable burden involved in collecting, tracking,
and reviewing the forms. Accordingly, the requirement for filing an
annual HHS Form 521 expires upon the effective date of this rule.
Section 5501.107 Teaching, Speaking and Writing by Special Government
Employees in the Public Health Service
Section 5501.107 is intended to deal with a common situation
presented by special Government employees in the health agencies of the
Department who participate as speakers in continuing medical education
(CME) courses and similar activities. These health agencies must rely
on special Government employees who are experts in various biomedical
fields. Such individuals tend to be active in private CME programs,
which frequently are sponsored or underwritten by the medical product
industry. At FDA, in particular, it is very common to find that
advisory committee members, in their private capacity as recognized
experts in various biomedical fields, receive regular requests to
participate in CME courses from medical product manufacturers.
Sometimes these manufacturers will have interests that
[[Page 39763]]
may be affected substantially by official matters to which the special
Government employee already has been assigned. This provision makes
clear that such employees may accept offers of compensation to
participate in CME courses and similar events only when the employee
recuses from the particular matter that would affect the interests of
the manufacturer.
Section 5501.108 Exception to the Prohibition Against Assisting in the
Prosecution of Claims Against, or Acting as an Agent or Attorney
Before, the Government, Applicable Only to Employees Assigned to
Federally Recognized Indian Tribes or Alaska Native Villages or
Regional or Village Corporations Pursuant to the Intergovernmental
Personnel Act
Section 2635.902 of the OGE Standards contains a list of statutory
provisions to which an employee's conduct must conform. Among these
provisions is the criminal prohibition of 18 U.S.C. 205, which
generally bans representational activities, whether or not for
compensation, performed by any employee in claims against, or in other
matters affecting, the Government.
The Indian Self-Determination Act (25 U.S.C. 450i(f)), however,
permits Federal employees detailed or assigned to Indian tribes or
Alaska Native villages or regional or village corporations, pursuant to
the Intergovernmental Personnel Act (5 U.S.C. 3372), to act as agents
or attorneys for, or appear on behalf of, such tribes or Alaska Native
villages or corporations in connection with any matter pending before
any department, agency, court, or commission, in which the United
States is a party or has a direct and substantial interest; provided
that each such employee advises in writing the head of the department,
agency, court, or commission before which the individual appears, of
any personal and substantial involvement the individual may have had as
an employee of the United States in connection with the matter. Section
5501.108 is added, therefore, to make explicit this exception to 18
U.S.C. 205, as referenced in Secs. 2635.801(d)(4) and 2635.902(d) of
the OGE Standards.
III. Matters of Regulatory Procedure
Administrative Procedure Act
The Department of Health and Human Services has found that good
cause exists under 5 U.S.C. 553(b) and (d) for waiving, as unnecessary
and contrary to the public interest, the general notice of proposed
rulemaking and the 30-day delay in effectiveness as to this final rule.
Similar regulations have been applicable to Department employees under
the now superseded HHS Standards of Conduct and FDA Supplement
contained at 45 CFR parts 73 and 73a. An immediate effective date is
necessary to effect a smooth regulatory transition and to avoid a lapse
in applicable procedural and substantive rules relating to prior
approval of outside activities and prohibited financial interests that
could otherwise occur due to the expiration of ``grandfathering''
provisions contained in the OGE Standards. See 60 FR 66857.
Moreover, the proposed rulemaking requirements of the
Administrative Procedure Act are not applicable because this rule deals
with agency organization, procedure, or practice, 5 U.S.C. 553(b), and
relates to matters of agency management and personnel, 5 U.S.C.
553(a)(2). The rule also contains several substantive provisions that
grant or recognize an exemption or relieve a restriction such that an
immediate effective date is permitted under 5 U.S.C.(d)(1).
Executive Order 12866, Regulatory Planning and Review
In issuing this rule, the Department of Health and Human Services
has adhered to the regulatory philosophy and the applicable principles
of regulations set forth in section 1 of Executive Order 12866 of
September 30, 1993. This rule is limited to agency organization,
management, or personnel matters, and thus is not a ``significant
regulatory action,'' as defined in sections 3(d) through (f) of the
Executive order.
Regulatory Flexibility Act
The Department of Health and Human Services has determined under
the Regulatory Flexibility Act (5 U.S.C. chapter 6) that this
regulation will not have a significant economic impact on a substantial
number of small business entities because it affects only HHS
employees.
Paperwork Reduction Act
The Department of Health and Human Services has determined that the
Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply because
this regulation does not impose any new information collection
requirements that require the approval of the Office of Management and
Budget.
List of Subjects in 5 CFR Part 5501
Conflict of interests, Government employees.
Dated: July 17, 1996.
Donna E. Shalala,
Secretary, Department of Health and Human Services.
Approved: July 22, 1996.
Stephen D. Potts,
Director, Office of Government Ethics.
For the reasons set forth in the preamble, the Department of Health
and Human Services, with the concurrence of the Office of Government
Ethics, is amending title 5 of the Code of Federal Regulations by
adding a new chapter XLV, consisting of part 5501, to read as follows:
5 CFR CHAPTER XLV--DEPARTMENT OF HEALTH AND HUMAN SERVICES
PART 5501--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES
OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES
Sec.
5501.101 General.
5501.102 Designation of HHS components as separate agencies.
5501.103 Gifts from federally recognized Indian tribes or Alaska
Native villages or regional or village corporations.
5501.104 Prohibited financial interests applicable to employees
of the Food and Drug Administration and the Office of the Chief
Counsel.
5501.105 Exemption for otherwise disqualifying financial
interests derived from Indian or Alaska Native birthrights.
5501.106 Outside employment and other outside activities.
5501.107 Teaching, speaking and writing by special Government
employees in the Public Health Service.
5501.108 Exception to the prohibition against assisting in the
prosecution of claims against, or acting as an agent or attorney
before, the Government, applicable only to employees assigned to
federally recognized Indian tribes or Alaska Native villages or
regional or village corporations pursuant to the Intergovernmental
Personnel Act.
Authority: 5 U.S.C. 301, 7301, 7353; 5 U.S.C. App. (Ethics in
Government Act of 1978); 25 U.S.C. 450i(f); 42 U.S.C. 216; E.O.
12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by E.O.
12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5 CFR 2635.105,
2635.203, 2635.403, 2635.802, 2635.803.
Sec. 5501.101 General.
(a) Purpose. The regulations in this part apply to employees of the
Department of Health and Human Services (HHS) and supplement the
Standards of Ethical Conduct for Employees of the Executive Branch
contained in 5 CFR part 2635. In addition to 5 CFR part 2635 and this
part, employees are required to comply with implementing guidance and
procedures issued by HHS components
[[Page 39764]]
in accordance with 5 CFR 2635.105(c). Employees are also subject to the
executive branch-wide financial disclosure regulations at 5 CFR part
2634, the Employee Responsibilities and Conduct regulations at 5 CFR
part 735, and the HHS regulations regarding conduct at 45 CFR part 73.
(b) Applicability. The regulations in this part apply to
individuals who are ``employees'' within the meaning of 5 CFR
2635.102(h). The regulations thus apply to special Government
employees, except to the extent they are specifically excluded from
certain provisions, and to uniformed service officers in the Public
Health Service Commissioned Corps on active duty.
(c) Definitions. Unless a term is otherwise defined in this part,
the definitions set forth in 5 CFR part 2635 apply to terms in this
part. In addition, for purposes of this part:
(1) Federally recognized Indian tribe or Alaska Native village or
regional or village corporation means any Indian tribe, band, nation,
or other organized group or community, including any Alaska Native
village or regional or village corporation as defined in or established
pursuant to the Alaska Native Claims Settlement Act, 43 U.S.C. 1601 et
seq., which is recognized as eligible for the special programs and
services provided by the United States to Indians because of their
status as Indians.
(2) Significantly regulated organization means an organization for
which the sales of products regulated by the Food and Drug
Administration (FDA) constitute ten percent or more of annual gross
sales in the organization's previous fiscal year; where an organization
does not have a record of sales of FDA-regulated products, it will be
deemed to be significantly regulated if its operations are solely in
fields regulated by FDA.
Sec. 5501.102 Designation of HHS components as separate agencies.
(a) Separate agency components of HHS. Pursuant to 5 CFR
2635.203(a), each of the thirteen components of HHS listed below is
designated as an agency separate from each of the other twelve listed
components and, for employees of that component, as an agency distinct
from the remainder of HHS. However, the components listed below are not
deemed to be separate agencies for purposes of applying any provision
of 5 CFR part 2635 or this part to employees of the remainder of HHS:
(1) Administration on Aging;
(2) Administration for Children and Families:
(3) Agency for Health Care Policy and Research;
(4) Agency for Toxic Substances and Disease Registry;
(5) Centers for Disease Control and Prevention;
(6) Food and Drug Administration;
(7) Health Care Financing Administration;
(8) Health Resources and Services Administration;
(9) Indian Health Service;
(10) National Institutes of Health;
(11) Office of Consumer Affairs;
(12) Program Support Center; and
(13) Substance Abuse and Mental Health Services Administration.
(b) Definition--(1) Employee of a component includes, in addition
to employees actually within a component, an employee in a division or
region of the Office of the General Counsel that principally advises or
represents that component.
(2) Remainder of HHS means employees in the Office of the Secretary
and Staff Divisions, employees of the Office of the General Counsel
with Department-wide responsibility, and any HHS employee not in one of
the 13 components designated as separate agencies in paragraph (a) of
this section.
(c) Applicability of separate agency designations. The designations
in paragraph (a) of this section identify an employee's ``agency'' for
purposes of:
(1) Determining when a person is a prohibited source within the
meaning of 5 CFR 2635.203(d) for purposes of applying:
(i) The regulations at subpart B of 5 CFR part 2635 governing gifts
from outside sources; and
(ii) The regulations at Sec. 5501.106 requiring prior approval of
outside employment and other outside activities; and
(2) Determining whether teaching, speaking or writing relates to
the employee's official duties within the meaning of 5 CFR
2635.807(a)(2)(i).
Sec. 5501.103 Gifts from federally recognized Indian tribes or Alaska
Native villages or regional or village corporations.
(a) Tribal or Alaska Native gifts. In addition to the gifts which
come within the exceptions set forth in 5 CFR 2635.204, and subject to
all provisions of 5 CFR 2635.201 through 2635.205, an employee may
accept unsolicited gifts of native artwork or crafts from federally
recognized Indian tribes or Alaska Native villages or regional or
village corporations, provided that the aggregate market value of
individual gifts received from any one tribe or village under the
authority of this paragraph shall not exceed $200 in a calendar year.
(b) Limitations on use of exception. If the donor is a tribe or
village that has interests that may be substantially affected by the
performance or nonperformance of an employee's official duties, the
employee may accept the gifts authorized by paragraph (a) of this
section only where there is a written finding by the agency designee
that acceptance of the gift is in the agency's interest and will not
violate any of the limitations on the use of exceptions contained in 5
CFR 2635.202(c).
Sec. 5501.104 Prohibited financial interests applicable to employees
of the Food and Drug Administration and the Office of the Chief
Counsel.
(a) General prohibition. Except as permitted by paragraph (b) of
this section, no employee or spouse or minor child of an employee,
other than a special Government employee or the spouse or minor child
of a special Government employee, of the Food and Drug Administration
or of the Office of the Chief Counsel shall have a financial interest
in a significantly regulated organization.
(b) Exceptions. Notwithstanding the prohibition in paragraph (a) of
this section:
(1) An employee or spouse or minor child of an employee may hold a
pension arising from employment with a significantly regulated
organization.
(2) An employee who is not required to file a public or
confidential financial disclosure report pursuant to 5 CFR part 2634,
or the spouse or minor child of such employee, may hold a financial
interest in a significantly regulated organization if:
(i) The total cost or value, measured at the time of acquisition,
of the combined interests of the employee and the employee's spouse and
minor children in the regulated organization was $5,000 or less;
(ii) The holding, if it represents an equity interest, constitutes
less than 1 percent of the total outstanding equity of the
organization; and
(iii) The total holdings in significantly regulated organizations
account for less than 50 percent of the total value of the combined
investment portfolios of the employee and the employee's spouse and
minor children.
(3) An employee or spouse or minor child of an employee may have an
interest in a significantly regulated organization that constitutes any
interest in a publicly traded or publicly available investment fund
(e.g., a mutual fund), or a widely held pension or similar fund, which,
in the literature it distributes to prospective and current
[[Page 39765]]
investors or participants, does not indicate the objective or practice
of concentrating its investments in significantly regulated
organizations, if the employee neither exercises control nor has the
ability to exercise control over the financial interests held in the
fund.
(4) In cases involving exceptional circumstances, the Commissioner
or the Commissioner's designee may grant a written exception to permit
an employee, or the spouse or minor child of an employee, to hold a
financial interest in a significantly regulated organization based upon
a determination that the application of the prohibition in paragraph
(a) of this section is not necessary to ensure public confidence in the
impartiality or objectivity with which HHS programs are administered or
to avoid a violation of part 2635 of this title.
Note: With respect to any excepted financial interest, employees
are reminded of their obligations under 5 CFR part 2635, and
specifically their obligation under subpart D to disqualify
themselves from participating in any particular matter in which
they, their spouses or minor children have a financial interest.
Furthermore, the agency may prohibit or restrict an individual
employee from acquiring or holding any financial interest or a class
of financial interests based on the agency's determination that the
interest creates a substantial conflict with the employee's duties,
within the meaning of 5 CFR 2635.403.
Sec. 5501.105 Exemption for otherwise disqualifying financial
interests derived from Indian or Alaska Native birthrights.
(a) Under 18 U.S.C. 208(b)(4), an employee who otherwise would be
disqualified may participate in a particular matter where the otherwise
disqualifying financial interest that would be affected results solely
from the interest of the employee, or the employee's spouse or minor
child, in birthrights:
(1) In an Indian tribe, band, nation, or other organized group or
community, including any Alaska Native village corporation as defined
in or established pursuant to the Alaska Native Claims Settlement Act,
which is recognized as eligible for the special programs and services
provided by the United States to Indians because of their status as
Indians;
(2) In an Indian allotment the title to which is held in trust by
the United States or which is inalienable by the allottee without the
consent of the United States; or
(3) In an Indian claims fund held in trust or administered by the
United States.
(b) The exemption described in paragraph (a) of this section
applies only if the particular matter does not involve the Indian
allotment or claims fund or the Indian tribe, band, nation, organized
group or community, or Alaska Native village corporation as a specific
party or parties.
Sec. 5501.106 Outside employment and other outside activities.
(a) Applicability. This section does not apply to special
Government employees.
(b) Definitions. For purposes of this section:
(1) Compensation has the meaning set forth in 5 CFR
2635.807(a)(2)(iii).
(2) Consultative services means the provision of personal services
by an employee, including the rendering of advice or consultation,
which requires advanced knowledge in a field of science or learning
customarily acquired by a course of specialize instruction and study in
an institution of higher education, hospital, or other similar
facility.
(3) Professional services means the provision of personal services
by an employee, including the rendering of advice or consultation,
which involves the skills of a profession as defined in 5 CFR
2636.305(b)(1).
(c) Prohibited outside employment and activities--(1) Prohibited
assistance in the preparation of grant applications or contract
proposals. An employee shall not provide consultative or professional
services, for compensation, to or on behalf of any other person to
prepare, or assist in the preparation of, any grant application,
contract proposal, program report, or other document intended for
submission to HHS.
(2) Prohibited employment in HHS-funded activities. An employee
shall not, for compensation, engage in employment, as defined in 5 CFR
2635.603(a), with respect to a particular activity funded by an HHS
grant, contract, cooperative agreement, cooperative research and
development agreement, or other funding mechanism authorized by
statute.
(3) Prohibited outside activities applicable to employees of the
Food and Drug Administration and the Office of the Chief Counsel. An
employee of the Food and Drug Administration or the Office of the Chief
Counsel who is required to file a public or confidential financial
disclosure report pursuant to 5 CFR part 2634 shall not:
(i) Engage in any self-employed business activity for which the
sale or promotion of FDA-regulated products is expected to constitute
ten percent or more of annual gross sales or revenues; or
(ii) Engage in employment, as defined in 5 CFR 2635.603(a), whether
or not for compensation, with a significantly regulated organization,
as defined in Sec. 5501.101(c)(2), unless the employment meets either
of the following exceptions:
(A) The employment consists of the practice of medicine, dentistry,
veterinary medicine, pharmacy, nursing, or similar practices, provided
that the employment does not involve substantial unrelated non-
professional duties, such as personnel management, contracting and
purchasing responsibilities (other than normal ``out-of-stock''
requisitioning), and does not involve employment by a medical product
manufacturer in the conduct of biomedical research; or
(B) The employment is limited to clerical or similar services (such
as cashier or janitorial services) in retail stores, such as
supermarkets, drug stores, or department stores.
(4) Prohibited outside practice of law applicable to attorneys in
the Office of the General Counsel.
(i) An employee who serves as an attorney in or under the
supervision of the Office of the General Counsel shall not engage in
any outside practice of law that might require the attorney to:
(A) Assert a legal position that is or appears to be in conflict
with the interests of the Department of Health and Human Services, the
client to which the attorney owes a professional responsibility; or
(B) Interpret any statute, regulation or rule administered or
issued by the Department.
(ii) Exceptions. Nothing in this section prevents an employee from:
(A) Acting, with or without compensation, as an agent or attorney
for, or otherwise representing, the employee's parents, spouse, child,
or any person for whom, or for any estate for which, the employee is
serving as guardian, executor, administrator, trustee, or other
personal fiduciary to the extent permitted by 18 U.S.C. 203 and 205, or
from providing advice or counsel to such persons or estate; or
(B) Acting, without compensation, as an agent or attorney for, or
otherwise representing, any person who is the subject of disciplinary,
loyalty, or other personnel administration proceedings in connection
with those proceedings to the extent permitted by 18 U.S.C. 205, or
from providing uncompensated advice or counsel to such person; or
(C) Giving testimony under oath or from making statements required
to be made under penalty for perjury or contempt.
[[Page 39766]]
(iii) Specific approval procedures.
(A) The exceptions to 18 U.S.C. 203 and 205 described in paragraph
(c)(4)(ii)(A) of this section do not apply unless the employee obtained
the approval of the Government official responsible for the appointment
of the employee to a Federal position.
(B) The exception to 18 U.S.C. 205 described in paragraph
(c)(4)(ii)(B) of this section does not apply unless the employee has
obtained the approval of a supervisory official who has authority to
determine whether the employee's proposed representation of another
person in a personnel administration matter is consistent with the
faithful performance of the employee's duties.
(d) Prior approval for outside employment and other outside
activities--(1) General approval requirement. Except to the extent that
an employment or other activity has been exempted under paragraph
(d)(5) of this section, an employee shall obtain written approval prior
to engaging, with or without compensation, in the following outside
employment or activities:
(i) Providing consultative or professional services, including
service as an expert witness.
(ii) Engaging in teaching, speaking, writing, or editing that:
(A) Relates to the employee's official duties within the meaning of
5 CFR 2635.807(a)(2)(i)(B) through (E); or
(B) Would be undertaken as a result of an invitation to engage in
the activity that was extended to the employee by a person who is a
prohibited source within the meaning of 5 CFR 2635.203(d), as modified
by Sec. 5501.102.
(iii) Providing services to a non-Federal entity as an officer,
director, or board member, or as a member of a group, such as a
planning commission advisory council, editorial board, or scientific or
technical advisory board or panel, which requires the provision of
advice, counsel, or consultation, unless the service is provided
without compensation other than reimbursement of expenses to a
political, religious, social, fraternal, or recreational organization
and the position held does not require the provision of professional
services within the meaning of paragraph (b)(3) of this section.
(2) Additional approval requirement for employees of the Food and
Drug Administration and the Office of the Chief Counsel.
(i) In addition to the general approval requirements set forth in
paragraph (d)(1) of this section, an employee of the Food and Drug
Administration or the Office of the Chief Counsel shall obtain written
approval prior to engaging in any outside employment, as defined in 5
CFR 2635.603(a), whether or not for compensation, or any self-employed
business activity.
(ii) The requirement of paragraph (d)(2)(i) of this section does
not apply to participation in the activities of a political, religious,
social, fraternal, or recreational organization, unless the position
held requires the provision of professional services or is performed
for compensation other than the reimbursement of expenses.
(iii) The requirement of paragraph (d)(2)(i) of this section shall
not apply to the extent that an employment activity has been exempted,
pursuant to paragraph (d)(5) of this section.
(3) Submission of requests for approval. An employee seeking to
engage in any of the activities for which advance approval is required
shall make a written request for approval a reasonable time before
beginning the activity. This request should be directed to the
employee's supervisor who will forward it to the official authorized to
approve outside employment and activities requests for the employee's
component. All requests for prior approval shall include the following
information:
(i) The employee's name, organizational location, occupational
title, grade, and salary;
(ii) The nature of the proposed outside employment or other outside
activity, including a full description of the specific duties or
services to be performed;
(iii) A description of the employee's official duties that relate
in any way to the proposed activity;
(iv) The name and address of the person or organization for whom or
with which the work or activity will be done, including the location
where the services will be performed;
(v) The estimated total time that will be devoted to the activity.
If the proposed outside activity is to be performed on a continuing
basis, a statement of the estimated number of hours per year; for other
employment, a statement of the anticipated beginning and ending date;
(vi) A statement as to whether the work can be performed entirely
outside of the employee's regular duty hours and, if not, the estimated
number of hours of absence from that will be required;
(vii) The method of basis of any compensation (e.g., fee, per diem,
honorarium, royalties, stock options, travel and expenses, or other);
(viii) A statement as to whether the compensation is derived from
an HHS grant, contract, cooperative agreement, or other source of HHS
funding;
(ix) For activities involving the provision of consultative or
professional services, a statement indicating whether the client,
employer, or other person on whose behalf the services are performed is
receiving, or intends to seek, an HHS grant, contract, cooperative
agreement, or other funding relationship; and
(x) For activities involving teaching, speaking, writing or
editing, the proposed text of any disclaimer required by 5 CFR
2635.807(b)(2) or by the instructions or manual issuances authorized
under paragraph (d)(5) of this section.
(4) Standard for approval. Approval shall be granted unless it is
determined that the outside employment or other outside activity is
expected to involve conduct prohibited by statute or Federal
regulation, including 5 CFR part 2635 and this part.
Note: The granting of granting of approval for an outside
activity does not relieve the employee of the obligation to abide by
all applicable laws governing employee conduct nor does approval
constitute a sanction of any violation. Approval involves an
assessment that the general activity as described on the submission
does not appear likely to violate any criminal statutes or other
ethics rules. Employees are reminded that during the course of an
otherwise approvable activity, situations may arise, or actions may
be contemplated, that, nevertheless, pose ethical concerns.
Example 1: A clerical employee with a degree in library science
volunteers to work on the acquisitions committee at a local public
library. Serving on a panel that renders advice to a non-Federal
entity is subject to prior approval. Because recommending books for
the library collection normally would not pose a conflict with the
typing duties assigned the employee, the request would be approved.
Example 2: While serving on the library acquisitions committee,
the clerical employee in the preceding example is asked to help the
library business office locate a missing book order. Shipment of the
order is delayed because the publisher has declared bankruptcy and
its assets, including inventory in the warehouse, have been frozen
to satisfy the claims of the Internal Revenue Service and other
creditors. The employee may not contact the Federal bankruptcy
trustee to seek, on behalf of the public library, the release of the
books. Even though the employee's service on the acquisitions
committee had been approved, a criminal statute, 18 U.S.C. 205,
would preclude any representation by a Federal employee of an
outside entity before a Federal court or agency with respect to a
matter in which the United States is a party or has a direct and
substantial interest.
(5) Responsibilities of the designated agency ethics official and
component agencies. (i) The designated agency
[[Page 39767]]
ethics official or, with the concurrence of the designated agency
ethics official, each of the separate agency components of HHS listed
in Sec. 5501.102 may issue an instruction or manual issuance exempting
categories of employment or other outside activities from a requirement
of prior written approval based on a determination that the employment
or activities within those categories would generally be approved and
are not likely to involve conduct prohibited by statute or Federal
regulations, including 5 CFR part 2635 and this part.
(ii) HHS components may specify internal procedures governing the
submission of prior approval requests and designate appropriate
officials to act on such requests. The instructions or manual issuances
may include examples of outside employment and other outside activities
that are permissible or impermissible consistent with 5 CFR part 2635
and this part. With respect to teaching, speaking, writing, or editing
activities, the instructions or manual issuances may specify
preclearance procedures and/or require disclaimers indicating that the
views expressed do not necessarily represent the views of the agency or
the United States.
(iii) The officials within the respective HHS components who are
responsible for the administrative aspects of these regulations and the
maintenance of records shall make provisions for the filing and
retention of requests for approval of outside employment and other
outside activities and copies of the notification of approval or
disapproval.
Sec. 5501.107 Teaching, speaking and writing by special Government
employees in the Public Health Service.
(a) Applicability. This section applies to special Government
employees in the Public Health Service who otherwise are prohibited
from accepting compensation for teaching, speaking or writing that is
related to their official duties, within the meaning of 5 CFR
2635.807(a)(2)(i)(C), because the invitation or the offer of
compensation for the activity was extended at a time when the special
Government employee was assigned to perform official duties that may
substantially affect the interests of the inviter or offeror.
(b) Permissible compensation. A special Government employee may
accept compensation for teaching, speaking or writing in circumstances
described in paragraph (a) of this section only where the special
Government employee recuses from the official assignment that may
substantially affect the interests of the person who extended the
invitation to engage in the activity or the offer of compensation.
Sec. 5501.108 Exception to the prohibition against assisting in the
prosecution of claims against, or acting as an agent or attorney
before, the Government, applicable only to employees assigned to
federally recognized Indian tribes or Alaska Native villages or
regional or village corporations pursuant to the Intergovernmental
Personnel Act.
(a) 18 U.S.C. 205. Section 205 of title 18 of the United States
Code prohibits an employee, whether or not for compensation, from
acting as an agent or attorney for anyone in a claim against the United
States, or from acting in such capacity on behalf of another before any
department, agency, or other specified entity, in any particular matter
in which the United States is a party or has a direct and substantial
interest.
(b) Exception applicable only to employees assigned to federally
recognized Indian tribes or Alaska Native villages or regional or
village corporations pursuant to the Intergovernmental Personnel Act.
Notwithstanding the provisions of 18 U.S.C. 205, the Indian Self-
Determination Act (25 U.S.C. 450i(f)) authorizes Federal employees
detailed or assigned to Indian tribes or Alaska Native villages or
regional or village corporations, pursuant to the Intergovernmental
Personnel Act (5 U.S.C. 3372), to act as agents or attorneys for, or
appear on behalf of, such tribes or Alaska Native villages or
corporations in connection with any matter pending before any
department, agency, court, or commission, in which the United States is
a party or has a direct and substantial interest. Such employees must
advise, in writing, the head of the agency, with which they are dealing
on behalf of an Indian tribe or Alaska Native village or corporation,
of any personal and substantial involvement they may have had as an
officer or employee of the United States in connection with the matter
concerned.
[FR Doc. 96-19173 Filed 7-29-96; 8:45 am]
BILLING CODE 4150-04-M