'Tis the Season: Gift Guidance for Federal Employees and Contractors

By Jeremy R. Brooks and Eric M. Dante (December 2013)

This time of year, it is especially important to be aware of the rules that govern gift-giving, whether one is a federal employee or a contractor who does business with federal or state government agencies. This article provides a brief reminder of the limitations that apply in the public contract context.

Federal Employees
Federal employees need to be aware of the rules and regulations regarding gifts from outside sources. The general rules for federal personnel are set forth in the Standards of Ethical Conduct for Employees of the Executive Branch.  See 5 C.F.R. § 2635 et seq. While the rules fill 47 pages of the Code of Federal Regulations, they are relatively straightforward and easy to understand.

The general rule is that “an employee shall not, directly or indirectly, solicit or accept a gift: (1) from a prohibited source; or (2) given because of the employee’s official position.”  5 C.F.R. § 2635.202. The regulations define “gift” broadly to include almost anything of value (Id. at (b)) and define “prohibited source” as any person or entity that: (1) has business before the employee’s agency; (2) does or seeks business with the agency; (3) is regulated by the agency; or (4) has interests that may be affected by the employee. Id. at (d).

The expansive definitions of “gift” and “prohibited source” severely limit federal employees from requesting or receiving anything of value. However, federal personnel also need to be aware that gifts given to their family members may be considered an “indirect gift” and be prohibited under the rules too. Id. at (f).

There are “exclusions” (which are not considered gifts) and “exceptions” (which are gifts but are permitted) to the gift rules that allow federal employees to accept items of value in certain situations. For example, employees can accept refreshments from prohibited sources (Id. at (b)(1)) or accept gifts on the basis of a personal relationship. 5 C.F.R. § 2635.204(b). If a federal employee does want to accept any gift, it’s advisable that he or she seeks out the advice of his or her agency’s designated ethics counselor instead of making the determination of whether an exclusion or exception would apply as each situation needs to be analyzed on its specific facts.

While at first glance the gift rules may seem daunting, a federal employee can avoid most unethical situations by using common sense and remembering two of the fourteen general principles of federal service: (1) “public service is a public trust” (5 C.F.R. § 2635.101(a)(1) and (2) employees should avoid any appearances of unethical conduct. 5 C.F.R. § 2635.101(a)(14). Additionally, when a federal employee is in doubt, he or she should consult their ethics counselor.

Government Contractors
The rules governing companies that contract with the federal or state governments also need to be considered, especially during the holiday season. First of all, government contracts frequently contain conflict-of-interest clauses that prohibit the giving of any gifts to government employees related to the public contract, so the contract should be consulted before anything is given by a public contractor to a government employee. Second of all, while most ethics rules on this topic apply to the government employees of lobbyists, some states have enacted gift-giving statutes that, if violated, may put the business relationship at risk.

For example, Alabama prohibits the giving of anything to a public official or employee, whether or not for value, if the purpose is to corruptly influence official action. Ala. Code 1975 § 36-25-7(a). So a contractor doing business in Alabama needs to be very careful that any gifts given by its employees cannot reasonably be construed as attempting to influence official action (i.e., procurement of more state contracts).  In contrast, Louisiana prohibits anyone who has a business relationship with a state agency from giving food, drink or refreshments worth more than fifty dollars (subject to inflation) to any public employee with whom they work. LSA-R.S. § 1124.3.  

State rules vary greatly, and public contractors need to be sure that their employees’ actions comply with the laws of whatever jurisdictions the entity contracts with. No business wants to put a large state contract in jeopardy because an employee sent a seventy-five dollar fruit basket for the holidays.

The gift rules for government employees and for contractors doing business with the government are relatively straight-forward. However, the rules do vary among jurisdictions and when confronted with a gift issue, it is best to seek legal advice. 


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About the Authors

Jeremy R. Brooks is an attorney in the U.S. Navy Judge Advocate General’s Corps

Eric M. Dante is an associate in the Newark Office of LeClairRyan. His practice is focused on corporate transactions and public contract law.

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