Financial Interests in Contracts for State Employees
The information provided is educational in nature and should not be considered legal advice. Persons with questions about a specific situation should contact the Ethics Commission at (617) 371-9500 and ask to speak to the Attorney of the Day, or submit a request on our website for free confidential advice.
Section 7 of G.L. c. 268A, the conflict of interest law, generally prohibits a state employee (paid or unpaid, appointed or elected, full-time or part-time) from having a financial interest, directly or indirectly, in a contract made by the state or a state agency. There are, however, several exemptions from this prohibition.
All state employees must comply with an exemption to § 7 in order to lawfully have a financial interest in a state contract.
Any current state employee who wants to add another state position that is appointed and compensated must qualify for an exemption. Similarly, if the state employee wishes to have a financial interest in a state contract that does not involve another state position, she must also qualify for an exemption.
If a prospective state employee already has a financial interest in a contract with the state, he must qualify for an exemption when he begins to serve as a state employee.
Section 7 does not apply if the state employee's financial interest is the ownership of less than one percent of the stock of a corporation. It also does not apply to a state employee who in good faith and within 30 days after he learns of an actual or prospective violation of the section makes a full disclosure of his financial interest to the contracting agency and terminates or disposes of his interest.
Section 7 does not apply to a state employee who provides services or furnishes goods to a recipient of public assistance, provided that such services or such supplies, goods and materials are provided in accordance with a schedule of charges promulgated by the department of transitional assistance or the division of health care policy and finance and provided, further, that such recipient has the right under law to choose and in fact does choose the person or firm that will provide such services or furnish such supplies, goods and materials.
The section does not prohibit a state employee from teaching or performing other related duties on a part-time basis in an educational institution of the Commonwealth, provided he does not participate in or have official responsibility for the financial management of the institution.
An employee of the Massachusetts Port Authority who is eligible for any residential sound insulation program or the bayswater environmental program administered by Massport is not prohibited from participating in the program, provided she has no responsibility for the administration of the program.
A state employee, other than a member of the General Court, may have a financial interest in a contract with the state if:
- the state employee is not employed by and does not participate in or have responsibility for the activities of the contracting agency or an agency which regulates the activities of that agency;
- the contract is made after public notice or competitive bidding; and
- the state employee files with the Ethics Commission a disclosure of his and/or his family's interest.
In addition, if the contract is for personal services, additional requirements must be met; a state employee seeking a contract for personal services should seek advice from the Ethics Commission.
A member of the General Court may have a financial interest in a contract with an agency other than the General Court if:
- the member's direct and indirect interests and those of his immediate family in the corporation or other commercial entity with which the contract is made do not in the aggregate amount to ten percent (10%) of the total interests; and
- the contract is made after public notice or competitive bidding; and
- the member files with the Ethics Commission a disclosure of his and/or his family's interest.
Finally, a state employee is not prohibited from being employed part-time at any 24-hour facility of the state, provided that he does not participate in or have responsibility for the financial management of the facility. Such facilities include mental health, public health and correctional facilities that operate on an uninterrupted and continuous basis. The state employee may not work more than four hours at the facility on any day in which he is otherwise compensated by the Commonwealth and faces restrictions on the amount of compensation he can earn, and the head of the facility must file a written certification that there is a critical need for the services of the employee.
The Commission has promulgated a number of regulatory exemptions that will permit state employees, in certain situations, to engage in conduct that would otherwise be prohibited by G.L. c. 268A, Section 7, due to a determination that the conduct either serves a legitimate public purpose, or does not pose a genuine risk of a conflict of interest or the appearance of a conflict of interest, or both. These exemptions are set forth in the Commission’s regulations at 930 CMR 6.00. Many of these exemptions require a state employee to file a disclosure; disclosure forms are available on the Commission’s website.
Regulatory exemptions from Section 7 are potentially available in situations in which a state employee:
- accepts an additional position on a voluntary basis with the state;
- provides services to any of the following:
- the National Guard;
- a foster child or children;
- the Committee for Public Counsel Services; or
- a person receiving services from a state agency;
- teaches at a state educational institution;
- sells conservation land or a similar interest to the state;
- has a second job on state-leased premises;
- receives benefits from a state mitigation, disaster relief, or renewable energy or energy efficiency program;
- settles an eminent domain matter with the state;
- enters into any fee-based contractual relationship with the state that is available at a set price to the general public, such as buying a T pass;
- buys or rents housing or parking in a building leased from the state;
- participates in a state-sponsored college savings and investment fund plan or program that is available to the general public; or
- enters public service with a pre-existing financial interest in a state contract.
If you need advice about whether a contractual arrangement in which you seek to have a financial interest is prohibited by Section 7 and/or whether you may qualify for one of these exemptions, please contact the Commission’s Legal Division for advice.
Special State Employees
The Legislature created "special state employee" status to allow the state to engage individuals who otherwise might not be able to serve because of their private activities or because they already are state employees or special state employees in another capacity.
A special state employee is a state employee who is:
- serving in a position that is not compensated, or
- not elected and occupies a position which permits personal or private employment during normal working hours, provided that disclosure of such classification or permission is filed in writing with the state ethics commission prior to the commencement of any personal or private employment, or does not earn compensation for more than eight hundred hours during the preceding three hundred and sixty-five days.
For this purpose compensation by the day shall be considered as equivalent to compensation for seven hours per day. A special state employee shall be in such a status on days for which he is not compensated as well as on days on which he earns compensation.
Special state employee status narrows, but does not eliminate, the scope of the restrictions applicable to him or her.
Additional Exemptions for Special State Employees
A special state employee may have a financial interest in a state contract if she "does not participate in or have official responsibility for any of the activities of the contracting agency" and she files with the State Ethics Commission a disclosure of her interest and her immediate family's interest.
A special state employee who either participates in or has official responsibility for any of the activities of the contracting agency must not only file a disclosure but also obtain the approval of the governor for an exemption.
The Commission has also created a regulatory exemption from Section 7 for persons serving as special state employees by reason of performing contracted legal or other professional services for a public agency. Such a person may have a financial interest in an additional state contract when:
- the special state employee did not participate in or have official responsibility for the contents, design, making, or award of the additional contract, and the contract was awarded as a result of a competitive selection process in accordance with all applicable laws or agency policy, or
- the person is a special state employee by reason of performing services as a special assistant attorney general, and has another case involving the Commonwealth or one of its agencies, provided that the special public employee complies with the Massachusetts Rules of Professional Conduct.
It's complicated! You are encouraged to contact the Ethics Commission at (617) 371-9500 for specific advice.
Revised February 19, 2014