[Federal Register Volume 62, Number 78 (Wednesday, April 23, 1997)]
[Rules and Regulations]
[Pages 19668-19670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10487]


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DEPARTMENT OF COMMERCE

Office of the Secretary

15 CFR Parts 15, 15a, and 15b

[Docket No. 970416092-7092-01]
RIN 0690-XX03


Statement of Policy and Procedures Regarding Indemnification of 
Department of Commerce Employees

AGENCY: Department of Commerce.

ACTION: Final rule.

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SUMMARY: This final rule adds a statement of policy and procedures 
regarding indemnification of Department of Commerce employees. During 
the 1980s, largely in response to the flood of Bivens type lawsuits, 
Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 
403 U.S. 388 (1971), approximately a dozen agencies issued regulations 
establishing procedures and policies to indemnify their employees 
against personal liability for actions taken within the

[[Page 19669]]

scope of their employment. The Justice Department's Office of Legal 
Counsel has issued several opinions upholding the legality of these 
regulations. In addition, there is a logical connection between the 
achievement of an agency's underlying mission and protecting the 
agency's employees from financial liability for actions taken within 
the scope of their employment. At present there is no Department of 
Commerce (the ``Department'') policy that allows for the payment of 
Department funds to indemnify Department employees who suffer adverse 
money judgments as a result of official acts, or for the settlement of 
personal damages claims by the payment of Department funds. This policy 
statement will permit such payment in appropriate cases as determined 
by the Secretary.

Effective Date: May 23, 1997.

FOR FURTHER INFORMATION CONTACT: M. Timothy Conner or Donald J. Reed, 
Department of Commerce, Office of the General Counsel, Room 5890, 
Washington, DC 20230, (202) 482-1067.

SUPPLEMENTARY INFORMATION: Unlike most state and local governments and 
private sector corporations, the Department does not now indemnify its 
employees who are sued personally and suffer an adverse judgment as a 
result of conduct taken within the scope of employment, nor does it 
settle ``individual capacity'' claims with Department funds. Lawsuits 
against federal employees in their individual capacity have 
proliferated since the 1971 Supreme Court decision in Bivens. As 
reported by the Department of Justice, over 12,000 claims have been 
filed against federal employees since 1971; nearly 5,000 actions are 
now pending. These suits personally attack officials at all levels of 
government and target all federal activities, particularly law 
enforcement.
    The prospect of personal liability and the burden of defending a 
claim arising from the performance of an employee's official duties has 
a negative and chilling impact on the Department's law enforcement 
effectiveness. Uncertainty regarding what conduct may lead to a claim 
tends to intimidate employees, stifle creativity, and limit decisive 
action. As Professor Kenneth Culp Davis noted, ``The public suffers 
whenever a government employee resolves doubt in order to protect his 
own pocketbook instead of resolving doubt in order to protect the 
public interest * * *. Courageous action of public employees is 
discouraged by the threat of a lawsuit against the employee 
personally.'' K. Davis, Constitutional Torts at 25, 26 (1984).
    The Department believes that lawsuits against Federal employees in 
their personal capacity are an impediment to the Department's effective 
functioning. A Departmental policy to permit the indemnification of 
employees would facilitate the removal of this impediment and accord 
Department employees the same protection now enjoyed by most state and 
local government employees as well as most corporate employees. This 
policy would permit, but not require, the Department to indemnify an 
employee who suffers an adverse verdict, judgment or other monetary 
award, provided that the actions giving rise to the judgment were taken 
within the scope of employment and that such indemnification is in the 
interest of the Department as determined by the Secretary. The policy 
also allows the Department, in rare cases, to settle an ``individual 
capacity'' claim with Department funds prior to entry of judgment. 
However, absent exceptional circumstances, the Department will not 
agree either to indemnify or settle before entry of an adverse 
judgment. This policy is thus designed to discourage the filing of 
lawsuits against employees in their individual capacity solely in order 
to pressure the government into settlement.
    In addition to adding the policy and procedures for indemnification 
of employees, these regulations reorganize 15 CFR parts 15, 15a, and 
15b into one part 15 in order to streamline regulations regarding legal 
proceedings and Department of Commerce employees.
    These regulations are published in final form without the 
opportunity for public notice and comment because they constitute a 
general statement of policy regarding Department of Commerce management 
and personnel; consequently, publication for public notice and comment 
is not required (5 U.S.C. 533(a)(2)).
    Since a notice of proposed rulemaking is not required by 5 U.S.C. 
533, or any other law, the analytical requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq., are inapplicable.
    These amendments do not impose additional reporting or 
recordkeeping requirements on the public that require the approval of 
the Office of Management and Budget under 44 U.S.C. 3501 et seq.

List of Subjects in 15 CFR Part 15

    Administrative practice and procedure, Alimony, Child support, 
Courts, Government employees, Indemnity payments, NOAA Corps 
allotments, Wages.

    For the reasons set forth in the preamble, the Department of 
Commerce amends 15 CFR parts 15, 15a, and 15b as follows:

PART 15--LEGAL PROCEEDINGS

    1. The authority for part 15 is revised to read as follows:

    Authority: 5 U.S.C. 301; 15 U.S.C. 1501, 1512, 1513, 1515 and 
1518; Reorganization Plan No. 5 of 1950; 3 CFR, 1949-1953 Comp., p. 
1004; 44 U.S.C. 3101; subpart C is issued under 37 U.S.C. 101, 706; 
15 U.S.C. 1673; 42 U.S.C. 665.

    2. The heading of part 15 is revised to read as set forth above.

PART 15--[REDESIGNATED AS SUBPART A OF PART 15 (Secs. 15.1-15.3)]

    3. Part 15 is redesignated as subpart A of part 15 consisting of 
Secs. 15.1, 15.2, and 15.3.

PART 15A--[REDESIGNATED AS SUBPART B OF PART 15 (Secs. 15.11-
15.18)]

    4. Part 15a is redesignated as subpart B of part 15 consisting of 
Secs. 15.11, 15.12, 15.13, 15.14, 15.15, 15.16, 15.17 and 15.18.

PART 15B--[REDESIGNATED AS SUBPART C OF PART 15 [Secs. 15.21-
15.25)]

    5. Part 15b is redesignated as subpart C of part 15 consisting of 
Secs. 15.21, 15.22, 15.23, 15.24, and 15.25.
    6. In the regulatory text of newly designated subparts A, B, and C, 
all references to ``part'' are redesignated to read ``subpart''.
    7. In the regulatory text of newly designated subparts A, B, and C, 
references are amended as indicated in the table below:

[[Page 19670]]



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                 Section                             Removed                              Added                 
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15.1(c)..................................  Part 15a...................  Subpart B.                              
15.16, introductory text.................  15a.1 through 15a.6........  15.11 through 15.16.                    
15.17 (twice)............................  15a.1 through 15a.8........  15.11 through 15.18.                    
15.24(b).................................  15b........................  15.25.                                  
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    8. A new subpart D is added to part 15 to read as follows:
Subpart D--Statement of Policy and Procedures Regarding Indemnification 
of Department of Commerce Employees
Sec.
15.31  Policy.
15.32  Procedures for the handling of lawsuits against Department 
employees arising within the scope of their office or employment.

Subpart D--Statement of Policy and Procedures Regarding 
Indemnification of Department of Commerce Employees


Sec. 15.31  Policy.

    (a) The Department of Commerce may indemnify a present or former 
Department employee who is personally named as a defendant in any civil 
suit in state or federal court, or other legal proceeding seeking 
damages against a present or former Department employee personally, for 
any verdict, judgment or other monetary award which is rendered against 
such employee, provided that the conduct giving rise to the verdict, 
judgment or award was taken within the scope of his/her employment and 
that such indemnification is in the interest of the Department as 
determined by the Secretary or his/her designee.
    (b) The Department may settle or compromise a personal damage claim 
against a present or former employee by the payment of available funds 
at any time provided the alleged conduct giving rise to the personal 
property claim was taken within the employee's scope of employment and 
such settlement is in the interest of the Department as determined by 
the Secretary or his/her designee.
    (c) Absent exceptional circumstances, as determined by the 
Secretary or his/her designee, the Department will not consider a 
request either to indemnify or to settle a personal damage claim before 
entry of an adverse verdict, judgment or award.
    (d) Any payment under this section either to indemnify a present or 
former Department employee or to settle a personal damage claim shall 
be contingent upon the availability of appropriated funds of the 
Department of Commerce.


Sec. 15.32  Procedures for the handling of lawsuits against Department 
employees arising within the scope of their office or employment.

    The following procedures shall be followed in the event that a 
civil action or proceeding is brought, in any court, against a present 
or former employee of the Department (or against his/her estate) for 
personal injury, loss of property or death, resulting from the 
Department employee's activities while acting within the scope of his/
her office or employment:
    (a) After being served with process or pleadings in such an action 
or proceeding, the employee (or the executor(rix) or 
administrator(rix)) of the estate shall within five (5) calendar days 
of receipt, deliver all such process and pleadings or an attested true 
copy thereof, together with a fully detailed report of the 
circumstances of the incident giving rise to the court action or 
proceeding to the General Counsel. Where appropriate, the General 
Counsel, or his/her designee, may request that the Department of 
Justice provide legal representation for the present or former 
Department employee.
    (b)(1) Only if a present or former employee of the Department has 
satisfied the requirements of paragraph (a) of this section in a timely 
fashion, may the employee subsequently request indemnification to 
satisfy a verdict, judgment, or award entered against that employee.
    (2) No request for indemnification will be considered unless the 
employee has submitted a written request, with appropriate 
documentation, including copies of the verdict, judgment, appeal bond, 
award, or settlement proposal through the employee's supervisory chain 
to the head of the employee's component. The written request will 
include an explanation by the employee of how the employee was working 
within the scope of employment and whether the employee has insurance 
or any other source of indemnification.
    (3) The head of the component or his/her designee will forward the 
employee's request with a recommendation to the General Counsel for 
review. The request for indemnification shall include a detailed 
analysis of the basis for the recommendation. The head of the component 
will also certify to the General Counsel that the component has funds 
available to pay the indemnification.
    (c) The General Counsel or his/her designee will review the 
circumstances of the incident giving rise to the action or proceeding, 
and all data bearing upon the question of whether the employee was 
acting within the scope of his/her employment. Where appropriate, the 
agency shall seek the views of the Department of Justice and/or the 
U.S. Attorney for the district embracing the place where the action or 
proceeding is brought.
    (d) The General Counsel shall forward the request, the accompanying 
documentation, and the General Counsel's recommendation to the 
Secretary or his/her designee for decision.
Alden F. Abbott,
Assistant General Counsel for Finance and Litigation.
[FR Doc. 97-10487 Filed 4-22-97; 8:45 am]
BILLING CODE 3510-BW-P