Oregon Advisory Opinions January 01, 1977: OP 7391

Advisory Opinion Text

DEPATRMENT OF JUSTICE

100 STATE OFFICE BUILDING

SALEM.OREGON 97310

TELEPHONE:(503)378-6368

January 10, 1977

No. 7391

This opinion is issued in response to questions presented by Ken Underdahl, Chairman, Governor's Management Council.

FIRST QUESTION PRESENTED

May the State of Oregon, consistent with constitutional requirements, prohibit a state employe from accepting employment with a regu­lated entity, where such employe had previously worked for the regulatory agency?

ANSWER GIVEN

Yes, to the extent the restriction imposed is necessary to protect a legitimate state interest.

SECOND QUESTION PRESENTED

May the state or a state agency impose such a restriction on future employment under existing statutes?

ANSWER GIVEN

Probably not. Enabling legislation would probably be necessary.

DISCUSSION

As a general proposition, a person's "right" to hold specific private employment and to follow a chosen profession free from unreasonable governmental interference does come within the purview and protection of Fifth Amendment "liberty" and "property" concepts. While public employment may be denied altogether, it may not be subjected to unreasonable conditions or the surrender of an individual's constitutional protections. To paraphrase a recent United States Supreme Court case, the problem is to arrive at a balance between the interests of the employe as a citizen, in following a chosen profession in the private sector, and the interests of the state, as an employer, in promoting the fair and efficient delivery of public services it performs through its employes. See , Greene v. McElroy , 360 US 474, 492 (1959); Keyishian v. Board of Regents , 385 US 589 (1967) ; Mehan v. Macy , 392 F2d 822 (DC Cir 1968) ; Pickering v. Board of Education , 391 US 563 (1968).

Statutes specifically dealing with post-employment conflicts are relatively few and narrow in application. Most contemplate a two-year moratorium on doing business with the government, with some statutes additionally prohibiting partners of former officials from engaging in government business. An example of existing statutory schemes is 18 USC Sec.2 07 which provides that no former employe shall act as an agent or attorney for any one other than the United States, in connection with any matter in which the former employe participated personally and sub­stantially as an employe; and that no such former employe shall appear personally before any court or department or agency of the government, as agent or attorney for any one other than the United States, in connection with any matter which was under such employe's official responsibility as an employe of the government within a period of one year prior to the termination of such responsibility. Partners of former employes are likewise prohibited from such activities. The constitutionality of this statute was upheld in U.S. v. Nasser , 476 F2d 1111 (7th Cir 1973). Nasser was a former United States Internal Revenue Service employe accused of violating 18 USC Sec.207 (a) by acting as an agent or attorney in regard to income tax matters in which he had substantially and personally par­ticipated while a Service employe. The court stated:

"... the statute is within the classifi­cation of a rule of general applicability for the accomplishment of a legitimate legislative purpose. The purpose of protecting the govern­ment, which can act only through agents, from the use against it by former agents of information gained in the course of their agency, is clearly a proper one. The restriction, against acting as agent or attorney for another in a matter in which the person participated personally and substantially as an officer or employee, is equally clearly a wholly rational means of pursuing that purpose." 476 F2d at 1116.

The court went on to note that:

"Section 207(a) does not disqualify former government employees from all or a segment of the practice of law. It disqualifies only from par­ticular cases where Congress could rationally make the judgment that participation would be evil as a result of an individual's previous activity as a government employee in the same matter." 476 F2d at 1117.

The question of post-employment activities has been heavily litigated in the private sector, and the cases are pertinent to the present discussion. In order to protect a business from the competition of a former employe taking advantage of professional knowledge and skills acquired during his employment, employers many times as a condition of employment require that the employe not engage in any competitive business after his termination. Such non-competition agreements are not favored by the courts and are therefore narrowly construed. Non-competition agree­ments, because they are in restraint of trade and therefore contrary to public policy, are enforceable only to the extent that they are reasonably limited in effect to a time and terri­tory necessary to protect the previous employer's business expec­tations. The reasonableness of time and area limitations is a determination made by the courts on a case by case basis, and turns almost entirely upon the peculiar facts of each employ­ment relationship: e.g., the territorial extent of the employer's business, the nature of the business and existing competition, the hardship visited upon the employe in terms of obtaining futur employment, etc. See, Lavey v. Edwards , 264 Or 331, 505 P2d 342 (1973).

An analysis of the above authorities clearly indicates that a governmental body may impose restrictions upon the post-employment activities of its servants. However, the restrictions imposed must bear some rational relationship to the interests of the state in seeking such protection. The question then becomes: Is the state's interest in protecting the fiduciary relationship of its employes both 'during and after their employ­ment, such that it may impose as a condition of employment, a prohibition of later employment by a regulated entity where the employe had previously worked for the regulating agency?

To meet constitutional muster, any such prohibition must be reasonably calculated to protect the governmental interest, and cannot extend beyond that which is necessary to so do. The problem one confronts, of course, is that the relationship of individual employes of regulatory agencies, during that employ­ment, to regulated potential future employers, can vary in infinite progression from no relationship at all to a situa­tion in which the employe is directly responsible for enforce­ment of regulations against that particular potential future employer. A statute or rule attempting to cover all situations in which potential future employment by a regulatee could affect performance of duty, may suffer from vagueness on the one hand or overbreadth on the other. But a statute or rule could theo­retically be precise enough to prohibit future employment (for a prescribed period) by a regulated industry with the regula­tion of which the employe has had a direct and substantial part, but allow such employment if the employe's role in regu­lation of the particular potential future employer was insub­stantial. In such case, there would appear to be a rational relationship between the past activity and the public interest sufficient to sustain the prohibition, in applicable cases, and there would be no prohibition in cases in which the rela­tionship is insufficient to justify it. Drafting of such a statute or rule should be undertaken with extreme care.

We are also asked whether such a prohibition on future employment may be imposed consistent with statutory require­ments. We take this to ask whether the Executive Department or an individual regulatory agency may impose such a require­ment by rule or otherwise under present law.

For positions in the unclassified service, it is possible that such a requirement could be made a part of the employment contract of new employes, and made a specific condition of continued employment for existing employes. But on the whole, it appears that even here enabling legislation would be desirable and perhaps necessary. The problem is of enforceability; after termination of state employment, what sanction can be imposed (in the absence of a statute) on a person who takes a pro­hibited job?

We have not reviewed the specific rulemaking authorities of all regulatory agencies of the state, but it appears unlikely that there is anything in present law to authorize adoption of rules by any individual agency restricting post-employment activi­ties. For example, the Public Utility Commissioner may adopt rules pursuant to ORS 756.060 "... relative to all statutes administered by him ..." The authority to adopt rules con­cerning post-employment activities of employes is clearly not contemplated by the above section and any inference to the con­trary is negated by ORS 7 56.026, which very specifically sets forth "prohibited interests" for PUC employes: All specifically relating to interests' during , rather than after employment.

We further suggest that if legislation is adopted to meet the problems discussed in this opinion, it should take the form of enabling legislation, authorizing (or directing) any agency with regulatory authority to adopt a rule prohibiting or limiting employment by regulated businesses after termination of employ­ment by the agency. Such an individual agency rule directed specifically to problems which the particular agency faces, would be much more likely to meet the standards discussed above, than any attempt to adopt a uniform rule covering all state agencies and their employes.

JAMES A. REDDEN

Attorney General

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