Self-Dealing, Financial Interests and the Rule of Necessity for State Employees- Conflict of Interest Law Primer

The information provided is educational in nature and should not be considered legal advice. Persons with questions about a specific situation should contact the State Ethics Commission at (617) 371-9500 for free confidential advice.

The conflict of interest law, G. L. c. 268A, is intended to prevent, among other things, self-dealing.  Section 6 of the law generally prohibits a state employee (paid or unpaid, appointed or elected, full-time or part-time) from participating in any particular matter in which the state employee, an immediate family member, partner, or a business organization in which he or she has certain affiliations, has a financial interest.

Immediate Family

A state employee generally may not act on matters affecting the financial interest of the state employee him or herself, his or her spouse and/or the parents, siblings and children of both the state employee and the spouse.  In-laws who marry into the "immediate family" are not considered to be members of the immediate family.

Example:  A sister-in-law, who is married to a state employee's brother, is not an immediate family member; a sister-in-law, who is the sister of the state employee’s spouse, is an immediate family member.  Similarly, nieces, nephews, cousins and grandchildren are not immediate family members.  (They are, however, relatives, and acting on matters involving relatives may create the appearance of a conflict of interest.  Section 23(b)(3) of the conflict of interest law addresses this.)

In determining if a state employee may act in matters involving an immediate family member, the family member's financial interest must be considered.

Example:  A particular matter before a state agency might affect the financial interest of the business organization that employs the mother of the state employee.  That financial interest alone won't disqualify the employee from acting, however, unless the particular matter also affects the mother's financial interests.

Business Organization

A state employee who is an officer, director, trustee, partner or employee of a business organization may not participate in matters affecting the financial interest of that person or organization.  The term business organization includes a non-profit organization that is substantially engaged in business activities, such as buying and selling goods or providing services in return for a fee.  A state employee also may not participate in matters affecting the financial interest of any person or organization with whom he is negotiating or has an arrangement concerning future employment.  In that situation, it does not matter if the organization is a private, for profit entity, a non-profit organization or a state agency.  For instance, a state employee may not participate in a decision that affects the funding of a program for another state agency with which he is interviewing for a job, even if he would not be working for that program.

Example: An employee of a state environmental agency who is interviewing for a position with a vendor whose contract he is responsible for overseeing must disclose in writing to his appointing authority the fact that he is involved in such negotiations and may not continue to oversee the contract unless he first gets written permission from his appointing authority allowing him to do so.

Financial Interest

Although the conflict of interest law does not define the term financial interest, the Ethics Commission has a long-standing interpretation of that phrase.  The restrictions of the conflict of interest law apply in any instance when the private financial interests are directly and immediately affected or when it is reasonably foreseeable that the financial interests would be affected.

Example:  A state employee who owns property abutting a state building project has a financial interest in the project.  The Commission presumes a financial interest in matters affecting abutting or nearby property.

The conflict of interest law generally prohibits any type of official action regardless of whether the financial interest is large or small or whether the proposed action would positively or negatively affect the private financial interest.

Example:  A state engineer owns property abutting a proposed landfill.  If the landfill is approved, it will negatively affect the value of the engineer's property.  The engineer may not participate in the review any proposals for the landfill or any discussions concerning the landfill.

Participating and Voting

reviewing, discussing, giving advice and/or making recommendations on particular matters.  Therefore, a state employee will be deemed to have participated in the particular matter if he discusses the matter, even if he abstains from the final vote or decision.  Often, discussing, providing advice or making recommendations about a particular matter may have more of an effect than the employee's single vote or final decision.  It does not follow, however, that if a state employee votes or makes a final decision without participating in any discussion or otherwise acting regarding the matter in question, that vote or decision will not amount to participation.  Regardless of whether the vote tally is unanimous or split, voting constitutes participation.  The decision to delegate a matter to a co-worker or to a subordinate also constitutes participation in the particular matter.

Example:  A state board member who discusses with her board, the license application of the private corporation in which she holds a majority of shares, but then abstains from the final vote, will nevertheless have participated by discussing the application.

The law includes an exemption from the general prohibition for appointed state employees.  This exemption is not available to elected state employees.

An appointed state employee, whose duties would otherwise require him or her to participate in a particular matter, must make a written disclosure of the particular matter and the financial interest to his or her appointing authority.  A copy must also be filed with the Ethics Commission.  A state employee's appointing authority is not necessarily his or her immediate supervisor; the appointing authority is the official or board responsible for the state employee's appointment to his or her position.

Making an oral disclosure or making a written disclosure to an immediate supervisor, who is not an appointing authority, a co-worker or a subordinate who is also involved in a matter, is not sufficient to comply with the conflict of interest law.

After receipt of the written disclosure, the appointing authority then has the opportunity to take one of three steps:

  • Assign the particular matter to another employee;
  • Assume responsibility for the particular matter him or her self; or
  • Make a written determination that the financial interest is not so substantial as to be deemed likely to affect the integrity of the services which the commonwealth may expect from the employee.

Whether the state employee receives the written determination rests solely in the discretion of the appointing authority.  The Ethics Commission has no role in making the determination.

Like the disclosure, the determination must be in writing and must also be filed with the Ethics Commission where they are maintained as public records.

What is the rule of necessity?

If a member of a state board has a conflict of interest, that member will be disqualified from acting on that board matter.  In some cases, especially when more than one member is disqualified, a board cannot act because it does not have a quorum or some other number of members required to take a valid affirmative vote.  (If the number for a quorum is not set by law, a quorum is generally a majority of the board members.)  In these instances, an elected state board can use what is called the rule of necessity to permit the participation of the disqualified members in order to allow the board to act.

The rule of necessity is not a law written and passed by the Legislature.  Rather, the rule of necessity was developed because judges applied it in their court decisions.

How does the rule of necessity work?

The rule of necessity works in the following way:

  1. It may only be used if an elected board is legally required to act on a matter and it lacks enough members to take valid action solely because members are disqualified by the conflict of interest law from participating in the matter.

    Example: A five member board has a meeting and all members are present.  Three of the five members have conflicts.  Three members are the quorum necessary for a decision.  The two members without conflicts do not make a quorum.  The board cannot act.  The rule of necessity will permit all members to participate.

    Example:  A five member board has a meeting and four members are present (one member is sick at home).  Two of the four present members have conflicts.  A quorum is three.  The one member who is sick at home does not have a conflict.  The rule of necessity may not be used because there is a quorum of the board which is able to act.  Because one member of the board is absent does not permit use of the rule of necessity.

    Example:  A five member board has a meeting and all members are present.  One member has a conflict and is disqualified.  The vote is a two-to-two tie. The rule of necessity may not be used to break the tie.  In general, a tie vote defeats the issue being voted on.  Stated differently, a tie vote will maintain the status quo.

    Example:  All five members of a five member board are present.  A quorum is three.  However, one agenda item requires four votes, rather than the usual simple majority, for an affirmative decision.  Two of the board members have conflicts.  Although a quorum is available, the required four votes needed for this particular matter cannot be obtained without the participation of one or both of the members who have conflicts.  The rule of necessity may be invoked and all five members may participate.
    • The rule of necessity should be invoked by one or more of the otherwise disqualified members only upon advice from board counsel or the Ethics Commission because improper use of the rule could result in a violation of the conflict of interest law.
       
    • If it is proper for the rule of necessity to be used, it should be clearly indicated in the minutes of the meeting that the board was unable to obtain a quorum due to disqualification of members and, as a last resort, all those disqualified may now participate under the authority of the rule of necessity.  Each disqualified member who wishes to participate under the rule of necessity must first disclose publicly the facts that created the conflict.


Note:  Invoking the rule of necessity does not require previously disqualified members to participate; it merely permits their participation.

  1. The rule of necessity may only be used as a last resort.  Every effort must be made to find another board capable under the law of acting in place of the board that could not obtain a quorum.

The rule of necessity is also applicable to individual elected state officials such as constitutional officers.  For an individual elected state official to be able to use the rule of necessity, the same requirements explained above apply: the official must be legally required to act on a matter in which he is disqualified by a conflict of interest from acting, and there is no one else legally qualified to act in that matter.  In that situation, the individual elected state official may invoke the rule of necessity to the minimum extent necessary to allow him or her to take the required actions otherwise barred by the conflict of interest law.  If the legal duty to act permits the state official to delegate that duty, then the official may invoke the rule of necessity for the limited purpose of designating another person to carry out the required action.  If he delegates, he cannot otherwise participate in the matter.  However, if the legal duty to act is non-delegable, then the individual elected official may invoke the rule of necessity to take all actions required legally of her.  Any such invocation of the rule of necessity should be documented by the elected state official in a writing filed publicly with the Ethics Commission.

For more detailed information about the rule of necessity, see Commission Advisory 05-05 – the Rule of Necessity.

Feedback

Tell us what you think