Close
Login to MyACC
ACC Members


Not a Member?

The Association of Corporate Counsel (ACC) is the world's largest organization serving the professional and business interests of attorneys who practice in the legal departments of corporations, associations, nonprofits and other private-sector organizations around the globe.

Join ACC

By Dave Nadler and Ryan P. McGovern, Dickstein Shapiro, LLP

Government contractors often acquire valuable human capital by hiring former federal government employees. Before even beginning to discuss employment with a government employee, however, contractors should understand the statutory and regulatory restrictions, as well as the significant penalties that may result from violating those restrictions.

1. Recruiting Current Government Employees

Contractors recruiting current government employees must consider whether the employee's role limits the ability to discuss employment opportunities with the contractor. For example, current government employees cannot participate personally and substantially in a procurement for a contract exceeding $100,000 if the employee has engaged in "negotiations" with a bidder, unless the employee:(1) reports the contact to his/her supervisor and ethics official and (2) rejects the employment offer or disqualifies himself/herself in writing, and can only resume participating in the procurement after receiving authorization from the agency. Any contractor that engages in discussions with a government employee knowing that the employee has not complied with these requirements may be face severe penalties. Moreover, contractors must exercise caution in any employment-related discussions with a government employee because negotiations are broadly defined as any discussions "mutually conducted with a view toward reaching an agreement regarding possible employment," they do not require a formal offer or even discussion regarding the terms and conditions of a specific position. Additionally, current government officials, as well as employees of the executive branch and certain other government entities,cannot participate personally and substantially in any matter in which the individual, his/her spouse, child, general partner, or organization in which he/she is serving as an officer, director, trustee, general partner or employee, or any other organization with whom he/she is negotiating or has any arrangement concerning prospective employment, has a financial interest, except under certain limited circumstances.

2. One-Year Compensation Ban

Government employees that are involved in certain procurement activities cannot accept compensation from a contractor within one year after the employee: (1) served as a procuring contract officer, source selection authority, member of the source selection evaluation board, or chief of an evaluation team in a procurement for which the contractor received an award exceeding $10 million; (2) served as a program manager, deputy program manager, or administrative contracting officer for a contract awarded to the contractor exceeding $10 million; or (3) personally made a decision such as awarding a contract, subcontract, modification, or task order, or settling a claim in excess of $10 million to the contractor. This restriction, however, does not preclude compensation paid to a former employee by a division or affiliate of the contractor that does not produce the same or similar product or service as the contractor.

3. Restrictions Applicable to All Employees

Once a contractor determines that hiring a current or former government employee is legally permissible, the contractor must determine whether it must restrict the duties and responsibilities performed by the employee on the contractor's behalf. For example, all former government employees are permanently banned from disclosing contractor proposal information and sensitive source selection information as well as from communicating with or appearing before the government on behalf of their new employer or client regarding specific matters in which they participated personally and substantially during government service. All former employees also face a two-year ban from making representational communications to or appearances before the government regarding specific matters that were pending under their official responsibility during their last year of service.

4. Restrictions Applicable to Senior Employees

Former senior government employees face additional restrictions. Senior employees generally include political appointees, flag and general officers of the uniformed services, and civilians paid according to the Executive Schedule or at rates equivalent to Executive Schedule Level V. These former employees are prohibited from knowingly making any communication or appearance before their former agency with the intent to influence the agency for one year after leaving service. For certain "very senior" officials, the ban is extended to two years. Although the former government employee may provide advice to fellow employees, provided no classified, proprietary, or other non-public information is disclosed, the employee may not use his/her contacts to influence government action, such as a decision on a contract extension, or other matters that may affect the new employer.

5. Department of Defense Restrictions

The Department of Defense (DoD) imposes restrictions on hiring former "covered DoD officials," which includes individuals that:(1) served as a program manager, deputy program manager, procuring contracting officer, administrative contracting officer, source selection authority, member of the source selection evaluation board, or chief of an evaluation team for a contract exceeding $10 million, or (2) participated personally and substantially in a procurement with a value exceeding $10 million. Contractors cannot hire any such DoD officials within two years after the official leaves DoD service, unless the official received a written ethics opinion from agency counselor has not received an opinion after 30 days of seeking the opinion. Further, all DoD solicitations now require contractors to certify that all "covered DoD officials employed by or otherwise receiving compensation from the offeror" are in compliance with all post-government employment restrictions.

6. Foreign Employment Restrictions

Former government employees are also subject to restrictions on working for a foreign government or entity. For example, certain former "senior" employees cannot knowingly represent, aid, or advise a foreign government or foreign political party with the intent to influence any officer or employee of the United States. Further, retired military personnel may not accept employment from any foreign government, including corporations owned or controlled by foreign governments, without the consent of the Service Secretary and Secretary of State.

7. Penalties

Penalties for violations of post-government employment restrictions reach not only current and former government employees, but contractors as well. Penalties include suspension and debarment, as well as civil fines of up to $50,000 per violation plus twice the amount of compensation received for an individual or up to $500,000 per violation and twice the amount of compensation offered for a contractor. Contractors that falsely certify compliance with post-government employment restrictions may also face False Claims Act liability. Moreover, individuals are subject to criminal penalties, which can include imprisonment for up to five years.

8. Ethics Opinions

Contractors can minimize risk when hiring current and former federal government employees by having the employee obtain an advisory ethics opinion from agency counsel. Good faith reliance on an advisory ethics opinion shields a contractor from liability for violating the one-year ban prohibiting a former government employee who participated in source selection, program management, or payment decisions regarding a contract in excess of $10 million from accepting a job with the contractor who was awarded that contract. Further, the government employee can use the advisory ethics opinion as a shield against all civil or disciplinary action, as long as the employee relied on the opinion in good faith. Although advisory opinions are most effective when obtained by the government employee prior to seeking private sector employment, former government employees can avoid liability for future actions by obtaining an advisory opinion.

9. Expansion of Revolving Door Restrictions

Following a 2009 Obama Administration Executive Order, all executive agency appointees must complete an ethics pledge upon accepting appointment. The pledge includes a lobbyist gift ban and several revolving door restrictions for appointees and lobbyists entering and leaving the government. Appointees entering the government must agree not to participate in any matter directly and substantially related to the appointee's former employer or clients for two years. Lobbyists must additionally agree not to participate in any matter on which they lobbied within the two years before appointment or seek or accept employment with an executive agency he/she lobbied within the two years before appointment. Further, appointees and lobbyists leaving the government must pledge to abide by the post-employment restrictions on communicating with employees of their former executive agency for a period of two years. Lobbyists must also agree not to lobby any covered executive branch official or non-career Senior Executive Service appointee for the remainder of the Administration.

10. Revolving Door Statistics

Several recent Government Accountability Office (GAO) studies demonstrate the degree to which former government employees are leaving federal service for private sector jobs. For example, a 2008 GAO survey of just 52 defense contractors revealed that 86,181 of 1,857,004 personnel that left DoD service since 2001 were employed by those contractors, including 2,435 former DoD senior officials (e.g., generals, admirals, senior executives) and acquisition officials,65 percent of which were employed by 7 contractors. A more recent GAO study revealed that 56 percent of former high-ranking Coast Guard officials who left service between 2006 and 2011 were at some point during that period compensated by Coast Guard contractors.

Given the recent hiring trends of federal contractors and the significant penalties that can result from violations of post-government employment restrictions, contractors should maintain strong internal compliance programs to prevent improper employment discussions and to ensure that their former government employees support only appropriate matters.

Region: United States
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.
ACC