[Federal Register Volume 81, Number 143 (Tuesday, July 26, 2016)]
[Rules and Regulations]
[Pages 48687-48693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17553]



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  Federal Register / Vol. 81, No. 143 / Tuesday, July 26, 2016 / Rules 
and Regulations  

[[Page 48687]]



OFFICE OF GOVERNMENT ETHICS

5 CFR Part 2635

RIN 3209-AA04


Standards of Ethical Conduct for Employees of the Executive 
Branch; Amendments to the Seeking Other Employment Rules

AGENCY: Office of Government Ethics (OGE).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Office of Government Ethics is issuing a final rule 
amending portions of the Standards of Ethical Conduct for Employees of 
the Executive Branch regarding seeking other employment. The final rule 
incorporates past interpretive advice, updates examples, improves 
clarity, and makes technical corrections. In addition, the final rule 
implements the statutory notification requirements that apply to 
individuals required to file public financial disclosure reports under 
section 101 of the Ethics in Government Act of 1978 when they negotiate 
for or have an agreement of future employment or compensation.

DATES: This final rule is effective August 25, 2016.

FOR FURTHER INFORMATION CONTACT: Elaine Newton, Associate Counsel, or 
Rachel Dowell, Assistant Counsel, Office of Government Ethics, Suite 
500, 1201 New York Avenue NW., Washington, DC 20005-3917; Telephone: 
(202) 482-9300; TTY: (800) 877-8339; FAX: (202) 482-9237.

SUPPLEMENTARY INFORMATION:

I. Background

    On February 17, 2016, the U.S. Office of Government Ethics (OGE) 
published a proposed rule in the Federal Register, 81 FR 8008, Feb. 17, 
2016, proposing to amend subpart F of the Standards of Ethical Conduct 
for Employees of the Executive Branch regarding seeking other 
employment. These regulations combine the standards imposed by a 
criminal statute, 18 U.S.C. 208(a), with the standards imposed by 
Executive Order 12674, as modified by Executive Order 12731. Section 
208(a) of Title 18 requires an employee to recuse from participating 
personally and substantially in any particular matter that, to the 
employee's knowledge, will have a direct and predictable effect on the 
financial interests of a person with whom the employee is negotiating 
or has any arrangement concerning prospective employment. Beyond this 
statutory requirement, subpart F incorporates the standards imposed by 
the Executive Order, addressing issues of lack of impartiality that 
require recusal from any particular matter that affects the financial 
interests of a prospective employer, even where the employee's actions 
in seeking employment may fall short of negotiating for employment. The 
final rule also implements the notification requirements under section 
17 of the Stop Trading on Congressional Knowledge Act of 2012 (STOCK 
Act), Public Law 112-105, 126 Stat. 303, 5 U.S.C. app. 101 note, which 
apply to employees who file public financial disclosure reports.

II. Comments

    The proposed rule was published on February 17, 2016. It provided a 
60-day comment period, which ended on April 18, 2016. OGE did not 
receive any comments. The rationale for the proposed rule, which OGE is 
now adopting as final, is explained in the preamble at: https://www.gpo.gov/fdsys/pkg/FR-2016-02-17/pdf/2016-03214.pdf.
    OGE has made nine technical changes in the final rule. First, OGE 
added the phrase ``personally and substantially'' in several places 
within the regulation. This phrase is consistent with the statutory 
language at 18 U.S.C. 208(a) and is parallel to the language that is 
currently within the regulation. Second, in 5 CFR 2635.602, Example 1 
to paragraph (a), OGE removed the phrase ``who is not a public filer'' 
to better clarify the example. Third, OGE clarified in 5 CFR 2635.602, 
Example 2 to paragraph (a) that the employee is not currently 
participating in any particular matters affecting the University of 
Maryland. OGE further clarified that, if the employee is assigned to 
participate in a particular matter affecting the University of Maryland 
while she is seeking employment with the University, she must take 
whatever steps are necessary to avoid working on the grant, in 
accordance with Sec.  2635.604. This revised language corresponds with 
5 CFR 2635.602(a) in the proposed rule. Fourth, OGE added the citation 
for the Foreign Gifts and Decorations Act, 5 U.S.C. 7342, to 5 CFR 
2635.602(b)(3). Fifth, OGE replaced the terms ``person'' and 
``potential employer'' with the term ``prospective employer'' in 5 CFR 
2635.603, Example 4 to paragraph (b) to use consistent defined terms. 
Sixth, OGE added the following to 5 CFR 2635.603, Example 10 to 
paragraph (b): Provided she does not receive a response indicating an 
interest in employment discussions. A letter merely acknowledging 
receipt of the resume is not an indication of interest in employment 
discussions. In addition, the clause ``with a response indicating an 
interest in employment discussions'' was added to 5 CFR 
2635.604(a)(ii). This language parallels the discussion in the 
definition section of the previous regulation and corresponds with 5 
CFR 2635.604, Example 3 to paragraph (a) in the proposed rule. Seventh, 
OGE made a grammatical correction in 5 CFR 2635.603, Example 2 to 
paragraph (c), replacing the word ``they'' with ``it.'' Eighth, OGE 
clarified in 5 CFR 2635.604, Example 2 to paragraph (b) that the 
employee is reviewing an application from the same pharmaceutical 
company, which is seeking FDA approval for a new drug product. This 
language parallels the discussion in the recusal section of the 
previous regulation and corresponds with 5 CFR 2635.604(b) in the 
proposed rule. Finally, OGE replaced the word ``should'' with the word 
``must'' in 5 CFR 2635.604, Example 2 to paragraph (b): Once the 
employee makes a response that is not a rejection to the company's 
communication concerning possible employment, the employee must recuse 
from further participation in the review of the application. This 
language corresponds with 5 CFR 2635.604(b) in the proposed rule.

[[Page 48688]]

III. Matters of Regulatory Procedure

Regulatory Flexibility Act

    As Director of the Office of Government Ethics, I certify under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) that this final rule 
would not have a significant economic impact on a substantial number of 
small entities because it primarily affects current Federal executive 
branch employees.

Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) does not apply 
because this regulation does not contain information collection 
requirements that require approval of the Office of Management and 
Budget.

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
chapter 5, subchapter II), this final rule would not significantly or 
uniquely affect small governments and will not result in increased 
expenditures by State, local, and tribal governments, in the aggregate, 
or by the private sector, of $100 million or more (as adjusted for 
inflation) in any one year.

Executive Order 13563 and Executive Order 12866

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select the regulatory approaches that 
maximize net benefits (including economic, environmental, public health 
and safety effects, distributive impacts, and equity). Executive Order 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This rulemaking has been designated as a ``significant regulatory 
action'' although not economically significant, under section 3(f) of 
Executive Order 12866. Accordingly, this rule has been reviewed by the 
Office of Management and Budget.

Executive Order 12988

    As Director of the Office of Government Ethics, I have reviewed 
this final rule in light of section 3 of Executive Order 12988, Civil 
Justice Reform, and certify that it meets the applicable standards 
provided therein.

List of Subjects in 5 CFR Part 2635

    Conflict of interests, Executive Branch standards of ethical 
conduct, Government employees.

    Approved: July 20, 2016.
Walter M. Shaub, Jr.,
Director, Office of Government Ethics.
    Accordingly, the Office of Government Ethics is amending 5 CFR part 
2635 as set forth below:

PART 2635--STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES OF THE 
EXECUTIVE BRANCH

0
1. The authority citation for part 2635 continues to read as follows:

    Authority:  5 U.S.C. 7301, 7351, 7353; 5 U.S.C. App. (Ethics in 
Government Act of 1978); 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.

0
2. Subpart F of part 2635 is revised to read as follows:
Subpart F--Seeking Other Employment
Sec.
2635.601 Overview.
2635.602 Applicability and related considerations.
2635.603 Definitions.
2635.604 Recusal while seeking employment.
2635.605 Waiver or authorization permitting participation while 
seeking employment.
2635.606 Recusal based on an arrangement concerning prospective 
employment or otherwise after negotiations.
2635.607 Notification requirements for public financial disclosure 
report filers regarding negotiations for or agreement of future 
employment or compensation.

Subpart F--Seeking Other Employment


Sec.  2635.601  Overview.

    This subpart contains a recusal requirement that applies to 
employees when seeking non-Federal employment with persons whose 
financial interests would be directly and predictably affected by 
particular matters in which the employees participate personally and 
substantially. Specifically, it addresses the requirement of 18 U.S.C. 
208(a) that an employee not participate personally and substantially in 
any particular matter that, to the employee's knowledge, will have a 
direct and predictable effect on the financial interests of a person 
``with whom the employee is negotiating or has any arrangement 
concerning prospective employment.'' See Sec.  2635.402 and Sec.  
2640.103 of this chapter. Beyond this statutory requirement, this 
subpart also addresses issues of lack of impartiality that require 
recusal from particular matters affecting the financial interests of a 
prospective employer when an employee's actions in seeking employment 
fall short of actual employment negotiations. In addition, this subpart 
contains the statutory notification requirements that apply to public 
filers when they negotiate for or have agreements of future employment 
or compensation. Specifically, it addresses the requirements of section 
17 of the Stop Trading on Congressional Knowledge Act of 2012 (STOCK 
Act), Public Law 112-105, 126 Stat. 303, 5 U.S.C. app. 101 note, that a 
public filer must submit a written statement identifying the entity 
involved in the negotiations or agreement within three business days 
after commencement of such negotiations or agreement and must submit a 
notification of recusal whenever there is a conflict of interest or an 
appearance of a conflict of interest.


Sec.  2635.602  Applicability and related considerations.

    (a) Applicability. (1) To ensure that an employee does not violate 
18 U.S.C. 208(a), section 17 of the STOCK Act, or the principles of 
ethical conduct contained in Sec.  2635.101(b), an employee who is 
seeking employment or who has an arrangement concerning prospective 
employment must comply with the applicable recusal requirements of 
Sec. Sec.  2635.604 and 2635.606 if particular matters in which the 
employee will be participating personally and substantially would, to 
the employee's knowledge, directly and predictably affect the financial 
interests of a prospective employer or of a person with whom the 
employee has an arrangement concerning prospective employment. 
Compliance with this subpart also will ensure that the employee does 
not violate subpart D or E of this part. In addition, a public filer 
who negotiates for or has an agreement of future employment or 
compensation must comply with the requirements of Sec.  2635.607.
    (2) An employee who is seeking employment with a person whose 
financial interests are not, to the employee's knowledge, affected 
directly and predictably by particular matters in which the employee 
participates personally and substantially has no obligation to recuse 
under this subpart. In addition, nothing in this subpart requires an 
employee, other than a public filer, to notify anyone that the employee 
is seeking employment unless a notification is necessary to implement a 
recusal pursuant to Sec.  2635.604(b). A public filer who negotiates 
for or has an agreement of future employment or compensation must 
comply with the notification requirements in Sec.  2635.607. An 
employee may, however, be subject to other statutes that impose 
requirements on employment contacts

[[Page 48689]]

or discussions, such as 41 U.S.C. 2103, which is applicable to agency 
officials involved in certain procurement matters. Employees are 
encouraged to consult with their ethics officials if they have any 
questions about how this subpart may apply to them. Ethics officials 
are not obligated by this subpart to inform supervisors that employees 
are seeking employment.

    Example 1 to paragraph (a): Recently, an employee of the 
Department of Education submitted her resume to the University of 
Delaware for a job opening that she heard about through a friend. 
The employee has begun seeking employment. However, because she is 
not participating in any particular matters affecting the University 
of Delaware, she is not required to notify anyone that she has begun 
seeking employment.
    Example 2 to paragraph (a):  The employee in the preceding 
example has been approached about an employment opportunity at the 
University of Maryland. Because the University of Maryland has 
applied for grants on which she has been assigned to work in the 
past, she wants to make certain that she does not violate the ethics 
rules. The employee contacts her ethics official to discuss the 
matter. The employee informs the ethics official that she is not 
currently participating in any particular matters affecting the 
University of Maryland. As a result, the ethics official advises the 
employee that she will have no notification obligations under this 
subpart. However, the ethics official cautions the employee that, if 
the employee is assigned to participate in a particular matter 
affecting the University of Maryland while she is seeking employment 
with the University, she must take whatever steps are necessary to 
avoid working on the grant, in accordance with Sec.  2635.604.

    (b) Related restrictions--(1) Outside employment while a Federal 
employee. An employee who is contemplating outside employment to be 
undertaken concurrently with the employee's Federal employment must 
abide by any limitations applicable to the employee's outside 
activities under subparts G and H of this part, including any 
requirements under supplemental agency regulations to obtain prior 
approval before engaging in outside employment or activities and any 
prohibitions under supplemental agency regulations related to outside 
employment or activities. The employee must also comply with any 
applicable recusal requirement of this subpart, as well as any 
applicable recusal requirements under subpart D or E of this part as a 
result of the employee's outside employment activities.
    (2) Post-employment restrictions. An employee who is contemplating 
employment to be undertaken following the termination of the employee's 
Federal employment should consult an agency ethics official to obtain 
advice regarding any post-employment restrictions that may be 
applicable. The regulation implementing the Governmentwide post-
employment statute, 18 U.S.C. 207, is contained in part 2641 of this 
chapter. Employees are cautioned that they may be subject to additional 
statutory prohibitions on post-employment acceptance of compensation 
from contractors, such as 41 U.S.C. 2104.
    (3) Interview trips and entertainment. Where a prospective employer 
who is a prohibited source as defined in Sec.  2635.203(d) offers to 
reimburse an employee's travel expenses, or provide other reasonable 
amenities incident to employment discussions, the employee may accept 
such amenities in accordance with Sec.  2635.204(e)(3). Where a 
prospective employer is a foreign government or international 
organization, the employee must also ensure that he or she is in 
compliance with the Foreign Gifts and Decorations Act, 5 U.S.C. 7342.


Sec.  2635.603  Definitions.

    For purposes of this subpart:
    (a) Employment means any form of non-Federal employment or business 
relationship involving the provision of personal services by the 
employee, whether to be undertaken at the same time as or subsequent to 
Federal employment. It includes but is not limited to personal services 
as an officer, director, employee, agent, attorney, consultant, 
contractor, general partner, or trustee.

    Example 1 to paragraph (a): An employee of the Bureau of Indian 
Affairs who has announced her intention to retire is approached by 
tribal representatives concerning a possible consulting contract 
with the tribe. The contractual relationship the tribe wishes to 
negotiate is employment for purposes of this subpart.
    Example 2 to paragraph (a): An employee of the Department of 
Health and Human Services is invited to a meeting with officials of 
a nonprofit corporation to discuss the possibility of his serving as 
a member of the corporation's board of directors. Service, with or 
without compensation, as a member of the board of directors 
constitutes employment for purposes of this subpart.
    Example 3 to paragraph (a): An employee at the Department of 
Energy volunteers without compensation to serve dinners at a 
homeless shelter each month. The employee's uncompensated volunteer 
services in this case are not considered an employment or business 
relationship for purposes of this subpart.

    (b) An employee is seeking employment once the employee has begun 
seeking employment within the meaning of paragraph (b)(1) of this 
section and until the employee is no longer seeking employment within 
the meaning of paragraph (b)(2) of this section.
    (1) An employee has begun seeking employment if the employee has 
directly or indirectly:
    (i) Engaged in negotiations for employment with any person. For 
these purposes, as for 18 U.S.C. 208(a) and section 17 of the STOCK 
Act, the term negotiations means discussion or communication with 
another person, or such person's agent or intermediary, mutually 
conducted with a view toward reaching an agreement regarding possible 
employment with that person. The term is not limited to discussions of 
specific terms and conditions of employment in a specific position;
    (ii) Made an unsolicited communication to any person, or such 
person's agent or intermediary, regarding possible employment with that 
person. However, the employee has not begun seeking employment if that 
communication was for the sole purpose of requesting a job application; 
or
    (iii) Made a response, other than rejection, to an unsolicited 
communication from any person, or such person's agent or intermediary, 
regarding possible employment with that person.
    (2) An employee is no longer seeking employment when:
    (i) The employee or the prospective employer rejects the 
possibility of employment and all discussions of possible employment 
have terminated; or
    (ii) Two months have transpired after the employee's dispatch of an 
unsolicited resume or employment proposal, provided the employee has 
received no indication of interest in employment discussions from the 
prospective employer.
    (3) For purposes of this definition, a response that defers 
discussions until the foreseeable future does not constitute rejection 
of an unsolicited employment overture, proposal, or resume nor 
rejection of a prospective employment possibility.

    Example 1 to paragraph (b): A paralegal at the Department of the 
Army is in his third year of law school. During a discussion with 
his neighbor, who is a partner in a large law firm in the community, 
the neighbor invited him to visit her law firm. The paralegal took 
her up on the offer and met with an associate at the firm. The 
associate shared with the paralegal her experiences looking for a 
legal position, discussed what she does in her position at the law 
firm, and explained why she chose her current law firm. There was no 
discussion of possible employment with the firm. The Army paralegal 
is not seeking

[[Page 48690]]

employment at this time. The purpose of the visit was informational 
only.
    Example 2 to paragraph (b): An employee of the Defense Contract 
Audit Agency (DCAA) is auditing the overhead accounts of an Army 
contractor. While at the contractor's headquarters, the head of the 
contractor's accounting division tells the employee that his 
division is thinking about hiring another accountant and asks 
whether the employee might be interested in leaving DCAA. The DCAA 
employee asks what kind of work would be involved. The DCAA employee 
has begun seeking employment because he made a response other than a 
rejection to the communication regarding possible employment with 
the Army contractor, although he has not yet begun negotiating for 
employment.
    Example 3 to paragraph (b): The DCAA employee and the head of 
the contractor's accounting division in the previous example have a 
meeting to discuss the duties of the position that the accounting 
division would like to fill and the DCAA employee's qualifications 
for the position. They also discuss ways the DCAA employee could 
remedy one of the missing qualifications, and the employee indicates 
a willingness to obtain the proper qualifications. They do not 
discuss salary. The employee has engaged in negotiations regarding 
possible employment with the contractor.
    Example 4 to paragraph (b): An employee at the Department of 
Energy (DOE) lists his job duties and employment experience in a 
profile on an online, business-oriented social networking service. 
The employee's profile is not targeted at a specific prospective 
employer. The employee has not begun seeking employment because the 
posting of a profile or resume is not an unsolicited communication 
with any prospective employer.
    Example 5 to paragraph (b): The DOE employee in the previous 
example was recently notified that a representative of a university 
has viewed his profile. The employee still has not begun seeking 
employment with the university. Subsequently, a representative of 
the university contacts the employee through the online forum to 
inquire whether the employee would be interested in working for the 
university, to which he makes a response other than rejection. At 
this point, the employee has begun seeking employment with the 
university until he rejects the possibility of employment and all 
discussions of possible employment have terminated.
    Example 6 to paragraph (b): The DOE employee in the previous two 
examples receives emails from various companies in response to his 
online profile. He does not respond. The employee has not begun 
seeking employment with the companies because he has not made a 
response.
    Example 7 to paragraph (b): An employee of the Centers for 
Medicare & Medicaid Services (CMS) is complimented on her work by an 
official of a State Health Department who asks her to call if she is 
ever interested in leaving Federal service. The employee explains to 
the State official that she is very happy with her job at CMS and is 
not interested in another job. She thanks him for his compliment 
regarding her work and adds that she'll remember his interest if she 
ever decides to leave the Government. The employee has rejected the 
unsolicited employment overture and has not begun seeking 
employment.
    Example 8 to paragraph (b): The employee in the preceding 
example responds by stating that she cannot discuss future 
employment while she is working on a project affecting the State's 
health care funding but would like to discuss employment with the 
State when the project is completed. Because the employee has merely 
deferred employment discussions until the foreseeable future, she 
has begun seeking employment with the State Health Department.
    Example 9 to paragraph (b): Three months prior to the end of the 
current administration, a political appointee at a large department 
receives a telephone call from the managing partner of an 
international law firm. The managing partner asks if the official 
would be interested in joining the law firm. The official says, ``I 
am not talking to anyone about employment until I leave the 
Government.'' The official has rejected the unsolicited employment 
overture and has not begun seeking employment.
    Example 10 to paragraph (b): A geologist employed by the U.S. 
Geological Survey sends her resume to an oil company. The geologist 
has begun seeking employment with that oil company and will be 
seeking employment for two months from the date the resume was 
mailed, provided she does not receive a response indicating an 
interest in employment discussions. A letter merely acknowledging 
receipt of the resume is not an indication of interest in employment 
discussions. However, if she withdraws her application or is 
notified within the two-month period that her resume has been 
rejected, she will no longer be seeking employment with the oil 
company as of the date she makes such withdrawal or receives such 
notification.

    (c) Prospective employer means any person with whom the employee is 
seeking employment. Where contacts that constitute seeking employment 
are made by or with an agent or other intermediary, the term 
prospective employer means:
    (1) A person who uses that agent or other intermediary for the 
purpose of seeking to establish an employment relationship with the 
employee if the agent identifies the prospective employer to the 
employee; and
    (2) A person contacted by the employee's agent or other 
intermediary for the purpose of seeking to establish an employment 
relationship if the agent identifies the prospective employer to the 
employee.

    Example 1 to paragraph (c): An employee of the Federal Aviation 
Administration (FAA) has retained an employment search firm to help 
her find another job. The search firm has just reported to the FAA 
employee that it has given her resume to and had promising 
discussions with two airport authorities, which the search firm 
identifies to the employee. Even though the employee has not 
personally had employment discussions with either airport authority, 
each airport authority is her prospective employer. She began 
seeking employment with each airport authority upon learning its 
identity and that it has been given her resume.
    Example 2 to paragraph (c): An employee pays for an online 
resume distribution service, which sends her resume to recruiters 
that specialize in her field. The online service has just notified 
her that it sent her resume to Software Company A and Software 
Company B. Even though the employee has not personally had 
employment discussions with either company, each software company is 
her prospective employer. She began seeking employment with each 
company upon learning from the online service that Software Company 
A and Software Company B had been given her resume by the 
intermediary.

    (d) Direct and predictable effect, particular matter, and personal 
and substantial have the respective meanings set forth in Sec.  
2635.402(b)(1), (3), and (4).
    (e) Public filer means a person required to file a public financial 
disclosure report as set forth in Sec.  2634.202 of this chapter.


Sec.  2635.604  Recusal while seeking employment.

    (a) Obligation to recuse. (1) Except as provided in paragraph 
(a)(2) of this section or where the employee's participation has been 
authorized in accordance with Sec.  2635.605, the employee may not 
participate personally and substantially in a particular matter that, 
to the employee's knowledge, has a direct and predictable effect on the 
financial interests of a prospective employer with whom the employee is 
seeking employment within the meaning of Sec.  2635.603(b). Recusal is 
accomplished by not participating in the particular matter.
    (2) The employee may participate in a particular matter under 
paragraph (a)(1) of this section when:
    (i) The employee's only communication with the prospective employer 
in connection with the search for employment is the submission of an 
unsolicited resume or other employment proposal;
    (ii) The prospective employer has not responded to the employee's 
unsolicited communication with a response indicating an interest in 
employment discussions; and
    (iii) The matter is not a particular matter involving specific 
parties.

    Example 1 to paragraph (a): A scientist is employed by the 
National Science Foundation (NSF) as a special Government

[[Page 48691]]

employee to serve on a panel that reviews grant applications to fund 
research relating to deterioration of the ozone layer. She is 
discussing possible employment with a university that received an 
NSF grant several years ago to study the effect of fluorocarbons but 
has no current grant applications pending before NSF. The employee 
is seeking employment, but she does not need to recuse because there 
is no particular matter that would have a direct and predictable 
effect on the financial interests of the prospective employer. 
Recusal would be required if the university submits a new 
application for the panel's review.
    Example 2 to paragraph (a): An employee of the Food and Drug 
Administration is developing a regulation on research criteria for 
approving prescription drugs. She begins discussing possible 
employment with a pharmaceutical company. The employee may not 
participate personally and substantially in the development of the 
regulation because she has begun employment discussions with the 
pharmaceutical company and the regulation is a particular matter of 
general applicability which would have a direct and predictable 
effect on the financial interests of the pharmaceutical company.
    Example 3 to paragraph (a): A special Government employee of the 
Federal Deposit Insurance Corporation (FDIC) is assigned to advise 
the FDIC on rules applicable to all member banks. She mails an 
unsolicited letter to a member bank offering her services as a 
contract consultant. Although the employee is seeking employment, 
the employee may participate in this particular matter of general 
applicability until she receives some response indicating an 
interest in discussing her employment proposal. A letter merely 
acknowledging receipt of the proposal is not an indication of 
interest in employment discussions.
    Example 4 to paragraph (a): An employee of the Occupational 
Safety and Health Administration is conducting an inspection of one 
of several textile companies to which he sent an unsolicited resume. 
The employee may not participate personally and substantially in the 
inspection because he is seeking employment and the inspection is a 
particular matter involving specific parties that will affect the 
textile company.

    (b) Notification. An employee who becomes aware of the need to 
recuse from participation in a particular matter to which the employee 
has been assigned must take whatever steps are necessary to ensure that 
the employee does not participate in the matter. Appropriate oral or 
written notification of the employee's recusal may be made to an agency 
ethics official, coworkers, or a supervisor to document and help 
effectuate the employee's recusal. Public filers must comply with 
additional notification requirements set forth in Sec.  2635.607.

    Example 1 to paragraph (b): An employee of the Department of 
Veterans Affairs (VA) is participating in the audit of a contract 
for laboratory support services. Before sending his resume to a lab 
which is a subcontractor under the VA contract, the employee should 
recuse from participation in the audit. Since he cannot withdraw 
from participation in the contract audit without the approval of his 
supervisor, he should notify his supervisor of his need to recuse 
for ethics reasons so that appropriate adjustments in his work 
assignments can be made.
    Example 2 to paragraph (b): An employee of the Food and Drug 
Administration (FDA) is contacted in writing by a pharmaceutical 
company concerning possible employment with the company. The 
employee is reviewing an application from the same pharmaceutical 
company, which is seeking FDA approval for a new drug product. Once 
the employee makes a response that is not a rejection to the 
company's communication concerning possible employment, the employee 
must recuse from further participation in the review of the 
application. Where he has authority to ask his colleague to assume 
his reviewing responsibilities, he may accomplish his recusal by 
transferring the work to the employee designated to cover for him. 
However, to ensure that his colleague and others with whom he had 
been working on the review do not seek his advice regarding the 
review of the application or otherwise involve him in the matter, it 
may be necessary for him to advise those individuals of his recusal.

    (c) Documentation. An employee, other than a public filer, need not 
file a written recusal statement unless the employee is required by 
part 2634 of this chapter to file written evidence of compliance with 
an ethics agreement with the Office of Government Ethics or a 
designated agency ethics official, or is specifically directed by an 
agency ethics official or the person responsible for the employee's 
assignment to file a written recusal statement. However, it is often 
prudent for an employee to create a record of his or her actions by 
providing written notice to an agency ethics official, a supervisor, or 
other appropriate official. Public filers must comply with the 
documentation requirements set forth in Sec.  2635.607.

    Example 1 to paragraph (c): The General Counsel of a regulatory 
agency will be engaging in discussions regarding possible employment 
as corporate counsel of a regulated entity. Matters directly 
affecting the financial interests of the regulated entity are 
pending within the Office of General Counsel, but the General 
Counsel will not be called upon to act in any such matter because 
signature authority for that particular class of matters has been 
delegated to an Assistant General Counsel. Because the General 
Counsel is responsible for assigning work within the Office of 
General Counsel, he can, in fact, accomplish his recusal by simply 
avoiding any involvement in matters affecting the regulated entity. 
However, because it is likely to be assumed by others that the 
General Counsel is involved in all matters within the cognizance of 
the Office of General Counsel, he would benefit from filing a 
written recusal statement with an agency ethics official or the 
Commissioners of the regulatory agency and providing his 
subordinates with written notification of his recusal. He may also 
be specifically directed by an agency ethics official or the 
Commissioners to file a written recusal statement. If the General 
Counsel is a public filer, he must comply with the documentation 
requirements set forth in Sec.  2635.607.

    (d) Agency determination of substantial conflict. Where the agency 
determines that the employee's action in seeking employment with a 
particular person will require the employee's recusal 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, the agency may allow 
the employee to take annual leave or leave without pay while seeking 
employment, or may take other appropriate action.


Sec.  2635.605  Waiver or authorization permitting participation while 
seeking employment.

    (a) Waiver. Where, as defined in Sec.  2635.603(b)(1)(i), an 
employee is engaged in employment negotiations for purposes of 18 
U.S.C. 208(a), the employee may not participate personally and 
substantially in a particular matter that, to the employee's knowledge, 
has a direct and predictable effect on the financial interests of a 
prospective employer. The employee may participate in such matters only 
where the employee has received a written waiver issued under the 
authority of 18 U.S.C. 208(b)(1) or (3). These waivers are described in 
Sec.  2635.402(d) and part 2640, subpart C of this chapter. For certain 
employees, a regulatory exemption under the authority of 18 U.S.C. 
208(b)(2) may also apply (see part 2640, subpart B of this chapter), 
including Sec.  2640.203(g) and (i).

    Example 1 to paragraph (a): An employee of the Department of 
Agriculture is negotiating for employment within the meaning of 18 
U.S.C. 208(a) and Sec.  2635.603(b)(1)(i) with an orange grower. In 
the absence of a written waiver issued under 18 U.S.C. 208(b)(1), 
she may not take official action on a complaint filed by a 
competitor alleging that the grower has shipped oranges in violation 
of applicable quotas.
    (b) Authorization by agency designee. Where an employee is 
seeking employment within the meaning of Sec.  2635.603(b)(1)(ii) or 
(iii) and is not negotiating for employment, a reasonable person 
would be likely to question the employee's impartiality if the 
employee were to participate personally and substantially in a 
particular matter that, to the employee's knowledge, has a direct 
and predictable effect on the financial interests of any such 
prospective employer. The

[[Page 48692]]

employee may participate in such matters only where the agency 
designee has authorized in writing the employee's participation in 
accordance with the standards set forth in Sec.  2635.502(d).

    Example 1 to paragraph (b): Within the past month, an employee 
of the Department of Education mailed her resume to a university. 
She is thus seeking employment with the university within the 
meaning of Sec.  2635.603(b)(1)(ii). In the absence of specific 
authorization by the agency designee in accordance with Sec.  
2635.502(d), she may not participate personally and substantially in 
an assignment to review a grant application submitted by the 
university.


Sec.  2635.606  Recusal based on an arrangement concerning prospective 
employment or otherwise after negotiations.

    (a) Employment or arrangement concerning employment. An employee 
may not participate personally and substantially in a particular matter 
that, to the employee's knowledge, has a direct and predictable effect 
on the financial interests of the person by whom he or she is employed 
or with whom he or she has an arrangement concerning future employment, 
unless authorized to participate in the matter by a written waiver 
issued under the authority of 18 U.S.C. 208(b)(1) or (3), or by a 
regulatory exemption under the authority of 18 U.S.C. 208(b)(2). These 
waivers and exemptions are described in Sec.  2635.402(d) and part 
2640, subparts B and C of this chapter.

    Example 1 to paragraph (a): A military officer has accepted a 
job with a defense contractor that will begin six months after his 
retirement from military service. During the period that he remains 
with the Government, the officer may not participate personally and 
substantially in the administration of a contract with that 
particular defense contractor unless he has received a written 
waiver under the authority of 18 U.S.C. 208(b)(1).
    Example 2 to paragraph (a): An accountant has just been offered 
a job with the Office of the Comptroller of the Currency (OCC) which 
involves a two-year limited appointment. Her private employer, a 
large corporation, believes the job will enhance her skills and has 
agreed to give her a two-year unpaid leave of absence at the end of 
which she has agreed to return to work for the corporation. During 
the two-year period that she is to be an OCC employee, the 
accountant will have an arrangement concerning future employment 
with the corporation that will require her recusal from 
participation personally and substantially in any particular matter 
that, to her knowledge, will have a direct and predictable effect on 
the corporation's financial interests.

    (b) Offer rejected or not made. The agency designee for the purpose 
of Sec.  2635.502(c) may, in an appropriate case, determine that an 
employee not covered by the preceding paragraph who has sought but is 
no longer seeking employment nevertheless will be subject to a period 
of recusal upon the conclusion of employment negotiations. Any such 
determination will be based on a consideration of all the relevant 
factors, including those listed in Sec.  2635.502(d), and a 
determination that the concern that a reasonable person may question 
the integrity of the agency's decision-making process outweighs the 
Government's interest in the employee's participation in the particular 
matter.
    Example 1 to paragraph (b): An employee of the Securities and 
Exchange Commission was relieved of responsibility for an 
investigation of a broker-dealer while seeking employment with the 
law firm representing the broker-dealer in that matter. The firm did 
not offer her the partnership position she sought. Even though she 
is no longer seeking employment with the firm, she may continue to 
be recused from participating in the investigation based on a 
determination by the agency designee that the concern that a 
reasonable person might question whether, in view of the history of 
the employment negotiations, she could act impartially in the matter 
outweighs the Government's interest in her participation.


Sec.  2635.607  Notification requirements for public financial 
disclosure report filers regarding negotiations for or agreement of 
future employment or compensation.

    (a) Notification regarding negotiations for or agreement of future 
employment or compensation. A public filer who is negotiating for or 
has an agreement of future employment or compensation with a non-
Federal entity must file a statement notifying an agency ethics 
official of such negotiation or agreement within three business days 
after commencement of the negotiation or agreement. This notification 
statement must be in writing, must be signed by the public filer, and 
must include the name of the non-Federal entity involved in such 
negotiation or agreement and the date on which the negotiation or 
agreement commenced. When a public filer has previously complied with 
the notification requirement in this section regarding the commencement 
of negotiations, the filer need not file a separate notification 
statement when an agreement of future employment or compensation is 
reached with the previously identified non-Federal entity. There is 
also no requirement to file another notification when negotiations have 
been unsuccessful. However, employees may want to do so to facilitate 
the resumption of their duties.

    Example 1 to paragraph (a): An employee of the Merit Systems 
Protection Board who is a public filer was in private practice prior 
to his Government service. He receives a telephone call from a 
partner in a law firm who inquires as to whether he would be 
interested in returning to private practice. During this initial 
telephone call with the law firm partner, the employee indicates 
that he is interested in resuming private practice. They discuss 
generally the types of issues that would need to be agreed upon if 
the employee were to consider a possible offer to serve as ``of 
counsel'' with the firm, such as salary, benefits, and type of work 
the employee would perform. The employee has begun negotiating for 
future employment with the law firm. Within three business days 
after this initial telephone call, he must file written notification 
of the negotiations with his agency ethics official.
    Example 2 to paragraph (a): The employee in the previous example 
also negotiates a possible contract with a publisher to begin 
writing a textbook after he leaves Government service. Within three 
business days after commencing negotiations, the employee must file 
written notification with his agency ethics official documenting 
that he is engaged in negotiations for future compensation with the 
book publisher.

    (b) Notification of recusal. A public filer who files a 
notification statement pursuant to paragraph (a) of this section must 
file with an agency ethics official a notification of recusal whenever 
there is a conflict of interest or appearance of a conflict of interest 
with the non-Federal entity identified in the notification statement. 
The notification statement and the recusal statement may be contained 
in a single document or in separate documents.
    (c) Advance filing of notification and recusal statements. When a 
public filer is seeking employment within the meaning of Sec.  
2635.603(b)(1)(ii) or (iii) or is considering seeking employment, the 
public filer may elect to file the notification statement pursuant to 
paragraph (a) of this section before negotiations have commenced and 
before an agreement of future employment or compensation is reached. A 
public filer may also elect to file the recusal statement pursuant to 
paragraph (b) of this section before the public filer has a conflict of 
interest or appearance of a conflict of interest with the non-Federal 
entity identified in the notification statement. The public filer need 
not file the document again upon commencing negotiations or reaching an 
agreement of future employment or compensation. The advance filing of 
any such document is not construed as a statement that negotiations 
have or have not commenced or that a conflict of interest does or does 
not exist. Although the Office of Government Ethics encourages advance 
filing when a public filer anticipates a realistic possibility of 
negotiations or an agreement, the failure to make an

[[Page 48693]]

advance filing does not violate this subpart or the principles of 
ethical conduct contained in Sec.  2635.101(b).

    Example 1 to paragraph (c): An employee of the Federal Labor 
Relations Authority who is a public filer began negotiating for 
future employment with a law firm. At the time he began negotiating 
for future employment with the law firm, he was not participating 
personally and substantially in a particular matter that, to his 
knowledge, had a direct and predictable effect on the financial 
interest of the law firm. Although the employee was not required to 
file a recusal statement because he did not have a conflict of 
interest or appearance of a conflict of interest with the law firm 
identified in the notification statement, the Office of Government 
Ethics encourages the employee to submit a notification of recusal 
at the same time that he files the notification statement regarding 
the negotiations for future employment in order to ensure that the 
requirement of paragraph (b) of this section is satisfied if a 
conflict of interest or an appearance of a conflict of interest 
later arises. The agency ethics official should counsel the employee 
on applicable requirements but is under no obligation to notify the 
employee's supervisor that the employee is negotiating for 
employment.
    Example 2 to paragraph (c): An employee of the General Services 
Administration is contacted by a prospective employer regarding 
scheduling an interview for the following week to begin discussing 
the possibility of future employment. The employee discusses the 
matter with the ethics official and chooses to file a notification 
and recusal statement prior to the interview. The notification and 
recusal statement contain the identity of the prospective employer 
and an estimated date of when the interview will occur. The employee 
has complied with the notification requirement of section 17 of the 
STOCK Act.

    (d) Agreement of future employment or compensation for the purposes 
of Sec.  2635.607 means any arrangement concerning employment that will 
commence after the termination of Government service. The term also 
means any arrangement to compensate in exchange for services that will 
commence after the termination of Government service. The term 
includes, among other things, an arrangement to compensate for 
teaching, speaking, or writing that will commence after the termination 
of Government service.

[FR Doc. 2016-17553 Filed 7-25-16; 8:45 am]
 BILLING CODE 6345-03-P