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Introduction. The Ethics Reform Act of 1989 imposed a number
of restrictions on the outside earned income of Members and senior staff1
of the House and Senate, as well as senior officials in the other branches
of government. One of these restrictions is a prohibition on their receiving
"compensation for practicing a profession which involves a fiduciary relationship."
5 U.S.C. app. 4 §502(a)(3); House Rule 47, cl. 2(3).2
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This Committee is responsible for implementing these provisions in the
House, and under them, the Committee has generally held that Members and
senior staff may not receive pay for services rendered in the fields
of law, real estate or insurance. Otherwise, however, up to now the Committee
has implemented these provisions in a way that has allowed compensation
for certain professional services, even though they are generally viewed
as involving a fiduciary relationship.
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After receiving inquiries on whether Members who are doctors may collect
fees for providing medical services, the Committee decided to review its
policy in this area. With this memorandum, the Committee announces that
it will no longer approve the receipt of compensation for any professional
services that involve a "fiduciary relationship" as that term is generally
defined in law. The prohibition, as now implemented by the Committee, extends
to the practice of medicine for compensation. In the Committee's view,
the approach previously used - to the extent it allowed receipt of compensation
for such professional services - was not consistent with the terms or the
legislative history of the Ethics Reform Act. Furthermore, that approach
was not consistent with that used in the Senate or the Executive Branch.
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Elaboration on the background and the terms of the Committee's action follows.
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Background. As a result of the Ethics Reform Act of 1989,
both statutory law and the House rules include provisions that prohibit
Members and senior staff from doing, as here relevant, three things:
"receiv[ing] compensation for practicing a profession which involves a
fiduciary relationship,"
"receiv[ing] compensation for affiliating with or being employed by a firm,
partnership . . . or other entity which provides professional services
involving a fiduciary relationship," and
permitting one's name to be used by such an entity.
5 U.S.C. app. 4 §502(a); House Rule 47, cl. 2.3
When the Committee began to implement these provisions in 1990-91, it elected,
with regard to the key provision on professional practice, not to
use a conventional legal definition of the term "fiduciary relationship."
Instead, as reflected on page 103 of the House Ethics Manual, 102d
Cong., 2d Sess. (April 1992), the Committee elected to "evaluate the nature
and circumstances of each individual's particular employment on a case-by-case
basis in light of the objectives of the Act." In this regard, the Committee
adopted a three-part test for determining whether any particular employment
involved a prohibited fiduciary relationship, i.e., (1) Could the employment
result in a conflict of interest between private and public responsibilities?
(2) Does the employment create an appearance that an official position
is being used for private gain? and (3) Does the compensation appear to
be an effort to circumvent the ban on honoraria?
Using this three-part test, the Committee has issued advisory opinions
stating that a Member or senior staffer could not earn income from providing
legal advice, selling insurance, or acting as a real estate broker (see
page 145 of the Manual). However, using this test, the Committee
has also occasionally allowed compensation for certain professional services,
even though the services involved a "fiduciary relationship" as that term
is conventionally defined.
The Committee Action. As noted above, last year the Committee
was formally asked, for the first time since the 1989 Act took effect,
whether Members who are doctors may receive compensation for practicing
medicine. Recently the Committee decided, on the basis of essentially three
factors, that those Members may not receive compensation for practicing
medicine. First, the statute and rule are straightforward in banning
receipt of compensation for practicing a profession involving a fiduciary
relationship, and it is undisputed that state laws generally establish
a fiduciary relationship between a doctor and his or her patient.
Second, while it has been argued that these provisions were not intended
to ban the compensated practice of medicine, the report of the 1989 House
Bipartisan Task Force on Ethics, which authored these provisions, states
the following with regard to their intended scope:
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The task force intends the ban to reach, for example, services such as
legal, real estate, consulting and advising, insurance, medicine, architecture,
or financial.
Report of the Bipartisan Task Force on Ethics on H.R.3660, 101st
Cong.,1st Sess. 16 (Nov. 15, 1989).
Finally, both in the Senate and in the Executive Branch, these provisions
are interpreted to prohibit the receipt of compensation for practicing
medicine. (The regulations issued by the U.S. Office of Government Ethics,
which are applicable to Executive Branch officials, are set out at 5 C.F.R.
§2636.305.)
In so deciding the question of compensated medical practice, the Committee
also decided that the three-part test set out on p. 103 of the Manual
will no longer be used to determine whether any professional services
involve a prohibited fiduciary relationship. Instead, in making that determination,
the Committee will henceforth rely on the above-quoted list of professions
set forth in the 1989 Task Force report, as well as the admonition in the
report (on page 16) that, "[T]he task force intends that the term fiduciary
not be applied in a narrow, technical sense and wants to ensure that honoraria
not reemerge in various kinds of professional fees from outside interests."
With regard to any particular profession, the Committee will also look
to whether any fiduciary relationship is established by the applicable
state law, and to the regulations issued by the U.S. Office of Government
Ethics.
In responding to the inquiries on medical practice, the Committee also
issued advice on how Members who are doctors may, consistent with the "fiduciary
relationship" provisions, continue to practice medicine on a limited basis.
Specifically, the Committee advised that a Member who is a doctor does
not violate those provisions when he or she receives, in any calendar
year, fees or other payments for medical services that do not exceed the
"actual and necessary expenses" incurred by the Member during the year
in connection with the practice. In other words, receipt of fees and other
income in that amount is not deemed to constitute the practice of
medicine for compensation.
The Committee adopted this position on medical practice in response to
two points made by Members who are doctors: they need to continue to practice
in order to maintain their skills, and perhaps even their license to practice
medicine, and medical practice necessarily entails a number of extraordinary
expenses, including in particular the cost of malpractice insurance. It
is also noteworthy that defining compensation in this manner accords with
the definition of that term used by the Office of Government Ethics. 5
C.F.R. §2636.303(b)(6). This limitation on the receipt of fees and
payments for medical services, which is keyed to the actual and
necessary expenses incurred in one's practice, precludes the receipt
of compensation from medical practice in any form.
Members and senior staff who receive outside income through the rendering
of professional services should consult with the Committee's Office of
Advice and Education (extension 5-3787) regarding the possible applicability
of the "fiduciary relationship" provisions in their circumstances. Any
questions about this memorandum should likewise be directed to the Office
of Advice and Education.
1
"Senior staff" refers to employees who are paid at or above a particular
threshold annual rate for more than 90 days in a calendar year. In 1998,
the threshold rate is $87,030.
2
As generally used, the term "fiduciary" refers to an obligation to act
in another person's best interests, or a relationship of trust in which
one relies on the integrity, fidelity and judgment of another. House
Ethics Manual, 102d Cong., 2d Sess. (April 1992), p. 102.
3
These same provisions also prohibit Members and senior staff from serving
for compensation as an officer or member of the board of any corporation
or other entity, and from receiving compensation for teaching without the
prior approval of this Committee. With regard to outside earned income
from permissible activities, Members and senior staff are also subject
to an annual limitation. In calendar year 1998, the outside earned income
limit is $20,505.
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