[Federal Register Volume 65, Number 131 (Friday, July 7, 2000)]
[Rules and Regulations]
[Pages 41879-41882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17130]


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LEGAL SERVICES CORPORATION

45 CFR Part 1635


Timekeeping Requirement

AGENCY: Legal Services Corporation.

ACTION: Final rule.

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SUMMARY: This final rule revises the Legal Services Corporation's rule 
on timekeeping to assure that allocations of expenditures of LSC funds 
are supported by accurate records. The final rule requires that 
recipient time records for attorneys and paralegals reflect the date as 
well as the amount of time spent on each case, matter or supporting 
activity. The final rule also requires that part-time attorneys and 
paralegals who also work for organizations that engage in restricted 
activities certify that they have not worked on such restricted 
activities (except for de minimis actions) during any time for which 
they are compensated with LSC funds nor used recipient resources for 
restricted activities. Finally, the final rule adds a definition for 
the term restricted activities.

EFFECTIVE DATE: This final rule is effective on August 7, 2000.

FOR FURTHER INFORMATION CONTACT: Mattie C. Condray, Senior Assistant 
General Counsel, Office of Legal Affairs, Legal Services Corporation, 
750 First Street, N.E., Washington, DC 20002-4250; 202-336-8817; 
[email protected].

SUPPLEMENTARY INFORMATION: The publication of this final rule completes 
a process dating back to early 1998. In February of that year, the 
LSC's Office of Inspector General (OIG) issued a Summary Report on 
Audits of Selected Grantees for Compliance with Selected Regulations 
which found that timekeeping records could not demonstrate that 
recipients' part-time attorneys and paralegals do not work on 
restricted activities during any time for which they are compensated by 
the recipient for their services. The OIG recommended that the LSC 
revise its timekeeping rule to require that part-time attorneys and 
paralegals maintain timekeeping records for all hours worked for the 
recipient by date and time of day. The Operations and Regulations 
Committee (Committee) of the LSC Board of Directors (Board) met in 
September 1998, to consider the OIG recommendation and other proposed 
revisions to the existing timekeeping rule. Following that meeting, LSC 
published a Notice of Proposed Rulemaking (NPRM) for public comment on 
October 22, 1998 (63 FR 56594).
    Under the existing rule, all recipients are required to keep 
contemporaneous records of the amount of time their attorneys and 
paralegals spend on each case, matter or supporting activity. The NPRM 
proposed three changes to this

[[Page 41880]]

basic requirement. First, LSC proposed that full-time attorneys and 
paralegals be required to record the date that time was spent on each 
case, matter or supporting activity, in addition to the amount of time 
spent. The second proposed change would have required that time records 
for part-time attorneys and paralegals who also work for organizations 
which engage in restricted activities (a term of art referring to those 
activities in which organizations receiving LSC funding may not engage 
due to statutory and regulatory limitations) provide the date and exact 
time of day for time spent on each case, matter or supporting activity. 
The third change proposed that time records for both full-time and 
part-time attorneys and paralegals be consistent with the recipient's 
time and attendance records used for payroll purposes.
    In addition to the proposed changes to the text of 
Sec. 1635.3(b)(1), LSC requested comment on whether LSC should, as an 
alternative to the date and time of day record requirement being 
proposed for part-time attorneys and paralegals, require such employees 
to certify in writing that they had not engaged in any restricted 
activities during any time for which they were paid by the recipient. 
The NPRM did not contain any proposed language relating to a 
certification requirement, but invited comment on the matter of 
certification or other alternatives to the recordkeeping requirement 
that might address the OIG's concerns.
    Most of the comments LSC received on the NRPM preferred the 
certification option over the date and time of day record proposed on 
the basis that the requirement to keep records by time of day was too 
onerous given the typical workday patterns of legal services attorney 
and paralegals. Some commenters also objected to the proposal that all 
attorney and paralegal time records reflect the date as well as the 
amount of time spent as unnecessary and administratively burdensome. 
Many of the comments also objected to the proposal that time records be 
consistent with payroll records, fearing that the proposal would place 
recipients in jeopardy of being in non-compliance with the Fair Labor 
Standards Act.
    The Committee met in February 1999, to consider the comments on the 
NPRM. After considering the comments received, along with the 
recommendations of the OIG and staff, the Committee decided to retain 
certain elements of the NPRM, revise others, and to republish the 
proposed rule for further public comment. The new proposed rule 
(``republished NPRM''), issued on April 5, 1999 (64 FR 16383), replaced 
the previous proposal that part-time attorneys and paralegals be 
required to record the exact date and time for time worked with a 
certification requirement. Under a new proposed Sec. 1635.3(e), LSC 
proposed to require part-time attorneys and paralegals who also work 
for organizations that engage in restricted activities to certify on a 
quarterly basis that they had not worked on restricted activities 
during any time for which they were compensated with LSC funds nor used 
recipient resources for restricted activities. The proposed 
certification requirement contained an exception for de minimis 
activities, acknowledging that certain activities, such as opening or 
briefly screening mail or taking a phone call to schedule another time 
to discuss restricted activity matters, are often unavoidable. Related 
to this issue, the republished NPRM added a new Sec. 1635.2 (c), 
containing a proposed definition of ``restricted activities.''
    The republished NPRM retained the previously proposed requirement 
that all attorney and paralegal time records provide the date for each 
timekeeping entry. LSC was not convinced that this requirement would 
pose an undue administrative burden on recipients and that reference to 
a particular timeframe was necessary to an understanding of the 
records. The republished NPRM, however, did invite specific comment 
from those recipients whose current recordkeeping systems did not 
include recording by date on the anticipated effect of the proposal.
    Finally, LSC deleted the previously proposed requirement that time 
keeping records be consistent with payroll records. Although LSC did 
not agree with the comments that the proposal would require recipients 
to run afoul of the Fair Labor Standards Act, LSC determined that the 
proposed recordkeeping consistency requirement was not necessary. The 
original proposal was intended to address a problem related to 
timekeeping records in a period during which many recipients were 
divesting themselves of matters which they were no longer permitted to 
handle as the result of legislative changes to the program in 1996. 
Since that time, however, the divestitures have been completed and LSC 
staff and OIG agreed that the risk of non-compliance with the new 
restrictions has decreased significantly, eliminating the need for 
consistency between payroll and timekeeping records. Thus, in light of 
the changed circumstances and the concerns raised by the comments, LSC 
decided simply to drop this proposal from the republished NPRM.
    LSC received three comments on the republished NPRM. All of the 
comments generally favored the certification approach over the earlier 
proposal requiring part-time attorneys and paralegals to keep time by 
recording the exact time of day for each case, matter or supporting 
activity. The comments suggested making some specific changes to the 
language in several of the sections to improve what the commenters 
considered the clarity of the language rather than the substance of the 
proposed requirements. These comments are discussed at greater length 
in the Section-by-Section Analysis, below.
    After a meeting in November 1999 to consider the comments and staff 
report on the republished NPRM, the Committee made a number of 
additional revisions to the rule and voted to recommend to the Board 
that the rule be adopted as revised. Subsequently, the Board adopted as 
final the Committee's revised and reported version of the rule, as set 
forth below.

Section-by-Section Analysis

Section 1635.1  Purpose

    The final rule retains the provisions of the current rule. No 
comments were received on this section.

Section 1635.2  Definitions

    The final rule adopts in Sec. 1635.2(c), a modified definition of 
the term ``restricted activities'' to clarify the meaning of that term 
as used in the certification requirement (Sec. 1635.3(d)). Restricted 
activities are now defined as those activities that are prohibited in 
45 CFR part 1610.
    Restricted activities is a term of art which refers to activities 
which recipients are statutorily prohibited from engaging in by the LSC 
Act or Section 504 of the 1996 LSC appropriations act. The term is 
defined at length in the LSC's regulations relating to the use of non-
LSC funds, transfer of LSC funds and program integrity at 45 CFR 1610.2 
(a) and (b). See 62 FR 27695 (May 21, 1997). Because these definitions 
cite to the restrictions' statutory sources and each restriction's 
implementing regulation, if available, LSC proposed to define 
``restricted activities'' as those activities inconsistent with section 
504 in 45 CFR 1610.2 (a) and (b).
    Several commenters requested that LSC clarify the definition. Upon 
further reflection, LSC determined that although the Sec. 1610.2 
definitions list the types of activities that are restricted by law, 
other portions of part 1610 provide additional useful information. For

[[Page 41881]]

example, part 1610 also contains information which explains the scope 
of the restrictions, especially in regard to the types of funds that 
may not be used for various activities. LSC, accordingly, is changing 
the definition of ``restricted activities'' in this final rule to refer 
to the use of that term in the entirety of part 1610. LSC believes that 
making reference to part 1610 for definition of the ``restricted 
activities'' will sufficiently inform recipients as to the intended 
meaning and scope of the term, as they should be well versed in the 
provisions of part 1610 whose violations have serious implications for 
their LSC funding. LSC also believes that the revised definition 
clarifies that nothing in the proposed rule is intended to expand the 
scope of any restriction or the type of recipient funds implicated by a 
particular statutory or regulatory restriction.
    The final rule retains, with minor clarifying changes, the 
definition of matter in 1635.2(b). The term ``referral'' is added to 
the list of examples of indirect services to clarify that the process 
of interviewing an applicant, determining eligibility and making a 
referral to a PAI attorney or other agency is a matter.
    The final rule retains the definitions of case in 1635.2(a) and 
supporting activity in 1635.2(d).

Section 1635.3  Timekeeping Requirement

    Section 1635.3(b)(1) of the final rule adopts a requirement that 
all recipient attorneys and paralegals provide the date as well as the 
amount of time spent on each case, matter or supporting activity in 
their time-keeping records.
    LSC believes that timekeeping records have little significance 
unless put into the context of a particular time frame. The previous 
rule already implied a connection between timekeeping records and a 
particular date because it required that timekeeping records be made 
contemporaneously. In practice, the timekeeping records of most LSC 
recipients already provide the date in their timekeeping records. Thus, 
LSC did not consider the proposal to add a date requirement to the 
regulation to be burdensome. Nonetheless, when the proposed rule was 
republished, LSC requested those recipients whose records did not 
provide the date to comment on how the requirement might affect their 
programs. No comments were received on this particular issue. Rather, 
one comment on the date requirement stated that it was not an 
unreasonable additional burden on recipients, in part because most 
current timekeeping systems used by LSC recipients already include the 
date in the information routinely collected. Accordingly, LSC has 
adopted the date requirement in the final rule.
    The final rule contains a new paragraph (d) (corresponding to 
proposed paragraph (e) in the republished NPRM) requiring that any 
attorney or paralegal who works part-time for a recipient and part-time 
for an organization that engages in restricted activities to certify in 
writing that, with the exception of de minimis actions, he or she has 
not worked on restricted activities during the time he or she was being 
compensated by the recipient, nor used recipient resources for 
restricted activities. Paragraph (d) also sets forth a standard for 
determining if an action can be classified as de minimis: de minimis 
actions are those that are of little substance; require little time; 
are not initiated by the part-time attorney or paralegal; and, for the 
most part, are unavoidable.
    Activities that would meet the standard include answering the 
telephone and establishing another non-LSC program time with the caller 
to discuss the restricted activity, or opening and briefly screening 
mail. Actions that would not meet this standard include researching, 
preparing legal documents, meeting with or providing advice to the 
client and conferring with third parties on behalf of the client. 
Although the examples listed above are not intended to provide an 
exhaustive list of permissible and impermissible actions, LSC cautions 
recipients that it intends to interpret the de minimis standard 
strictly to permit only a very narrow range of actions. LSC is taking 
this position in order to ensure that part-time attorneys and 
paralegals are not engaged in restricted activities while being 
compensated by the recipient or using recipient resources for 
restricted activities.
    In the republished NPRM, the proposed regulatory text for this 
paragraph contained examples of de minimis actions. Two comments 
requested that LSC provide additional examples of permitted actions and 
clarify the meaning of the exception. Rather than cluttering up the 
regulatory text with additional examples, LSC believes that it is 
better to set forth a standard for de minimis actions in the regulatory 
text and include a discussion and examples of de minimis actions in the 
preamble. The final rule reflects this judgment.
    The proposed regulatory text and the related preamble discussion 
had stated that the certification requirement did not apply to de 
minimis actions ``related to a restricted activity that does not 
involve working on the restricted activity.'' LSC received a comment 
noting that the references to ``working on the related activity'' 
constitute a tautology that reiterates the same concept without 
providing sufficient guidance on the scope of the exception. LSC agrees 
that the reference to ``working on restricted activities'' is vague and 
repetitive. Accordingly, that phrase has been deleted from the final 
rule.
    LSC also received comments suggesting adding the term ``non-
substantive'' after de minimis. LSC has determined that the term ``non-
substantive'' should not be added to the regulation because it does not 
clarify the meaning of de minimis. The meaning of de minimis (trifling; 
small matter; of little importance) is sufficiently similar to that of 
the term ``non-substantive'' (small amount; having little practical 
importance) that including both terms would be repetitive and not 
helpful.
    One comment suggested replacing ``works'' with ``is employed'' to 
clarify that the part-time attorney or paralegal has an employee/
employer relationship with the recipient. For the purposes of this 
rule, either term has the same meaning. Accordingly, the final rule 
retains the term ``works'' as proposed, without change.
    Another comment requested a clarification that the term ``time 
period'' refers to the specific hours or work days the part-time 
attorney or paralegal is expected to work for the recipient rather than 
payroll periods during which the employee may work part-time for both 
the recipient and another organization that engages in restricted 
activities. LSC has deleted the word ``period'' from the final rule so 
that the language makes clear that the time referred to is the specific 
time the attorney or paralegal works for the recipient and for which he 
or she is paid by the recipient.
    The final rule requires that certifications be made quarterly on a 
form determined by LSC. The republished NPRM proposed that 
certifications be made to LSC on a quarterly basis on dates established 
by LSC. One comment questioned the need for quarterly certifications 
stating that such frequent reporting would put a significant 
administrative burden on the recipient. The comment also suggested that 
LSC not establish a specific date on which a certification needs to be 
made, but require certification on or before a particular date instead. 
One comment also noted that the LSC has not always provided recipients 
with the appropriate forms in a timely manner. LSC disagrees that the 
quarterly requirement would impose a significant

[[Page 41882]]

administrative burden on recipients, but agrees that it is unnecessary 
for LSC to set a date upon which the certification is due. The final 
rule reflects these determinations. In addition, the final rule 
requires LSC to provide recipients with an appropriate form by the 
effective date of the final rule.
    LSC received one comment suggesting that LSC require recipients to 
submit the certifications to LSC. LSC does not believe such a 
requirement is necessary. The certification requirement is intended to 
be a recordkeeping rather than a reporting requirement. The information 
is to be maintained by recipients so that it is available to auditors 
or LSC staff for annual audits or on-site reviews. A recipient would 
need to submit certifications to LSC only when requested to do so by 
LSC. Accordingly, this suggestion has not been adopted in the final 
rule.
    The final rule eliminates the old paragraph (c) because it is 
outdated. This paragraph required that the time keeping system must be 
implemented within 30 days of the effective date of the regulation or 
within 30 days of the effective date of a grant or contract, whichever 
is later. The preamble states that the final rule becomes effective 30 
days after publication. LSC management routinely provides new grantees 
with deadlines for compliance with various grant requirements, such as 
governing board composition and reporting requirements. Thus, the 
continued inclusion of this requirement is not necessary. This change 
was not contained in either the original or republished NPRMs, but as 
it is a technical, procedural change that has no adverse effect on 
recipients subject to this rule it may be made without prior public 
notice and comment. 5 U.S.C. 553(b).
    In the final rule, paragraph (d) is relettered as (c) and contains 
a minor conforming language change. The final rule deletes the phrase 
``from the time of implementation.'' The timekeeping system must be 
capable of aggregating the time record information on both closed and 
pending cases by the legal problem type from the commencement of the 
case. The deleted phrase is confusing and unnecessary.

Section 1635.4  Administrative Provisions

    The final rule retains the provisions of the current rule. No 
comments were received on this section.

    For reasons set forth above, LSC revises 45 CFR part 1635 to read 
as follows:
Sec.
1635.1   Purpose.
1635.2   Definitions.
1635.3   Timekeeping requirement.
1635.4   Administrative provisions.

    Authority: 42 U.S.C. 2996e(b)(1)(A), 2996g(a), 2996g(b), 
2996g(e).


Sec. 1635.1  Purpose.

    This part is intended to improve accountability for the use of all 
funds of a recipient by:
    (a) Assuring that allocations of expenditures of LSC funds pursuant 
to 45 CFR part 1630 are supported by accurate and contemporaneous 
records of the cases, matters, and supporting activities for which the 
funds have been expended;
    (b) Enhancing the ability of the recipient to determine the cost of 
specific functions; and
    (c) Increasing the information available to LSC for assuring 
recipient compliance with Federal law and LSC rules and regulations.


Sec. 1635.2  Definitions.

    As used in this part--
    (a) A case is a form of program service in which an attorney or 
paralegal of a recipient provides legal services to one or more 
specific clients, including, without limitation, providing 
representation in litigation, administrative proceedings, and 
negotiations, and such actions as advice, providing brief services and 
transactional assistance, and assistance with individual PAI cases.
    (b) A matter is an action which contributes to the overall delivery 
of program services but does not involve direct legal advice to or 
legal representation of one or more specific clients. Examples of 
matters include both direct services, such as but not limited to, 
community education presentations, operating pro se clinics, providing 
information about the availability of legal assistance, and developing 
written materials explaining legal rights and responsibilities; and 
indirect services, such as training, continuing legal education, 
general supervision of program services, preparing and disseminating 
desk manuals, PAI recruitment, referral, intake when no case is 
undertaken, and tracking substantive law developments.
    (c) Restricted activities means those activities that recipients 
may not undertake as set out in 45 CFR part 1610.
    (d) A supporting activity is any action that is not a case or 
matter, including management in general, and fund-raising.


Sec. 1635.3  Timekeeping requirement.

    (a) All expenditures of funds for recipient actions are, by 
definition, for cases, matters, or supporting activities. The 
allocation of all expenditures must be carried out in accordance with 
45 CFR part 1630.
    (b) Time spent by attorneys and paralegals must be documented by 
time records which record the amount of time spent on each case, 
matter, or supporting activity.
    (1) Time records must be created contemporaneously and account for 
time by date and in increments not greater than one-quarter of an hour 
which comprise all of the efforts of the attorneys and paralegals for 
which compensation is paid by the recipient.
    (2) Each record of time spent must contain: for a case, a unique 
client name or case number; for matters or supporting activities, an 
identification of the category of action on which the time was spent.
    (c) The timekeeping system must be able to aggregate time record 
information on both closed and pending cases by legal problem type.
    (d) Recipients shall require any attorney or paralegal who works 
part-time for the recipient and part-time for an organization that 
engages in restricted activities to certify in writing that the 
attorney or paralegal has not engaged in restricted activity during any 
time for which the attorney or paralegal was compensated by the 
recipient or has not used recipient resources for restricted 
activities. The certification requirement does not apply to a de 
minimis action related to a restricted activity. Actions consistent 
with the de minimis standard are those that meet all or most of the 
following criteria: actions that are of little substance; require 
little time; are not initiated by the part-time employee; and, for the 
most part, are unavoidable. Certifications shall be made on a quarterly 
basis and shall be made on a form determined by LSC.


Sec. 1635.4  Administrative provisions.

    Time records required by this section shall be available for 
examination by auditors and representatives of LSC, and by any other 
person or entity statutorily entitled to access to such records. LSC 
shall not disclose any time record except to a Federal, State or local 
law enforcement official or to an official of an appropriate bar 
association for the purpose of enabling such bar association official 
to conduct an investigation of an alleged violation of the rules of 
professional conduct.

Victor M. Fortuno,
General Counsel and Vice President for Legal Affairs.
[FR Doc. 00-17130 Filed 7-6-00; 8:45 am]
BILLING CODE 7050-01-P