Statement of Policy and Procedures Regarding Indemnification of Department of Commerce Employees

DEPARTMENT OF COMMERCE

Office of the Secretary

15 CFR Parts 15, 15a, and 15b

[Docket No. 970416092-7092-01]

RIN 0690-XX03

Statement of Policy and Procedures Regarding Indemnification of

Department of Commerce Employees

AGENCY: Department of Commerce.

ACTION: Final rule.

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SUMMARY: This final rule adds a statement of policy and procedures

regarding indemnification of Department of Commerce employees. During

the 1980s, largely in response to the flood of Bivens type lawsuits,

Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics,

403 U.S. 388 (1971), approximately a dozen agencies issued regulations

establishing procedures and policies to indemnify their employees

against personal liability for actions taken within the

[[Page 19669]]

scope of their employment. The Justice Department's Office of Legal

Counsel has issued several opinions upholding the legality of these

regulations. In addition, there is a logical connection between the

achievement of an agency's underlying mission and protecting the

agency's employees from financial liability for actions taken within

the scope of their employment. At present there is no Department of

Commerce (the ``Department'') policy that allows for the payment of

Department funds to indemnify Department employees who suffer adverse

money judgments as a result of official acts, or for the settlement of

personal damages claims by the payment of Department funds. This policy

statement will permit such payment in appropriate cases as determined

by the Secretary.

Effective Date: May 23, 1997.

FOR FURTHER INFORMATION CONTACT: M. Timothy Conner or Donald J. Reed,

Department of Commerce, Office of the General Counsel, Room 5890,

Washington, DC 20230, (202) 482-1067.

SUPPLEMENTARY INFORMATION: Unlike most state and local governments and

private sector corporations, the Department does not now indemnify its

employees who are sued personally and suffer an adverse judgment as a

result of conduct taken within the scope of employment, nor does it

settle ``individual capacity'' claims with Department funds. Lawsuits

against federal employees in their individual capacity have

proliferated since the 1971 Supreme Court decision in Bivens. As

reported by the Department of Justice, over 12,000 claims have been

filed against federal employees since 1971; nearly 5,000 actions are

now pending. These suits personally attack officials at all levels of

government and target all federal activities, particularly law

enforcement.

The prospect of personal liability and the burden of defending a

claim arising from the performance of an employee's official duties has

a negative and chilling impact on the Department's law enforcement

effectiveness. Uncertainty regarding what conduct may lead to a claim

tends to intimidate employees, stifle creativity, and limit decisive

action. As Professor Kenneth Culp Davis noted, ``The public suffers

whenever a government employee resolves doubt in order to protect his

own pocketbook instead of resolving doubt in order to protect the

public interest * * *. Courageous action of public employees is

discouraged by the threat of a lawsuit against the employee

personally.'' K. Davis, Constitutional Torts at 25, 26 (1984).

The Department believes that lawsuits against Federal employees in

their personal capacity are an impediment to the Department's effective

functioning. A Departmental policy to permit the indemnification of

employees would facilitate the removal of this impediment and accord

Department employees the same protection now enjoyed by most state and

local government employees as well as most corporate employees. This

policy would permit, but not require, the Department to indemnify an

employee who suffers an adverse verdict, judgment or other monetary

award, provided that the actions giving rise to the judgment were taken

within the scope of employment and that such indemnification is in the

interest of the Department as determined by the Secretary. The policy

also allows the Department, in rare cases, to settle an ``individual

capacity'' claim with Department funds prior to entry of judgment.

However, absent exceptional circumstances, the Department will not

agree either to indemnify or settle before entry of an adverse

judgment. This policy is thus designed to discourage the filing of

lawsuits against employees in their individual capacity solely in order

to pressure the government into settlement.

In addition to adding the policy and procedures for indemnification

of employees, these regulations reorganize 15 CFR parts 15, 15a, and

15b into one part 15 in order to streamline regulations regarding legal

proceedings and Department of Commerce employees.

These regulations are published in final form without the

opportunity for public notice and comment because they constitute a

general statement of policy regarding Department of Commerce management

and personnel; consequently, publication for public notice and comment

is not required (5 U.S.C. 533(a)(2)).

Since a notice of proposed rulemaking is not required by 5 U.S.C.

533, or any other law, the analytical requirements of the Regulatory

Flexibility Act, 5 U.S.C. 601 et seq., are inapplicable.

These amendments do not impose additional reporting or

recordkeeping requirements on the public that require the approval of

the Office of Management and Budget under 44 U.S.C. 3501 et seq.

List of Subjects in 15 CFR Part 15

Administrative practice and procedure, Alimony, Child support,

Courts, Government employees, Indemnity payments, NOAA Corps

allotments, Wages.

For the reasons set forth in the preamble, the Department of

Commerce amends 15 CFR parts 15, 15a, and 15b as follows:

PART 15--LEGAL PROCEEDINGS

1. The authority for part 15 is revised to read as follows:

Authority: 5 U.S.C. 301; 15 U.S.C. 1501, 1512, 1513, 1515 and

1518; Reorganization Plan No. 5 of 1950; 3 CFR, 1949-1953 Comp., p.

1004; 44 U.S.C. 3101; subpart C is issued under 37 U.S.C. 101, 706;

15 U.S.C. 1673; 42 U.S.C. 665.

2. The heading of part 15 is revised to read as set forth above.

PART 15--[REDESIGNATED AS SUBPART A OF PART 15 (Secs. 15.1-15.3)]

3. Part 15 is redesignated as subpart A of part 15 consisting of

Secs. 15.1, 15.2, and 15.3.

PART 15A--[REDESIGNATED AS SUBPART B OF PART 15 (Secs. 15.11-

15.18)]

4. Part 15a is redesignated as subpart B of part 15 consisting of

Secs. 15.11, 15.12, 15.13, 15.14, 15.15, 15.16, 15.17 and 15.18.

PART 15B--[REDESIGNATED AS SUBPART C OF PART 15 [Secs. 15.21-

15.25)]

5. Part 15b is redesignated as subpart C of part 15 consisting of

Secs. 15.21, 15.22, 15.23, 15.24, and 15.25.

6. In the regulatory text of newly designated subparts A, B, and C,

all references to ``part'' are redesignated to read ``subpart''.

7. In the regulatory text of newly designated subparts A, B, and C,

references are amended as indicated in the table below:

[[Page 19670]]

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Section Removed Added

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15.1(c).................................. Part 15a................... Subpart B.

15.16, introductory text................. 15a.1 through 15a.6........ 15.11 through 15.16.

15.17 (twice)............................ 15a.1 through 15a.8........ 15.11 through 15.18.

15.24(b)................................. 15b........................ 15.25.

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8. A new subpart D is added to part 15 to read as follows:

Subpart D--Statement of Policy and Procedures Regarding Indemnification

of Department of Commerce Employees

Sec.

15.31 Policy.

15.32 Procedures for the handling of lawsuits against Department

employees arising within the scope of their office or employment.

Subpart D--Statement of Policy and Procedures Regarding

Indemnification of Department of Commerce Employees

Sec. 15.31 Policy.

(a) The Department of Commerce may indemnify a present or former

Department employee who is personally named as a defendant in any civil

suit in state or federal court, or other legal proceeding seeking

damages against a present or former Department employee personally, for

any verdict, judgment or other monetary award which is rendered against

such employee, provided that the conduct giving rise to the verdict,

judgment or award was taken within the scope of his/her employment and

that such indemnification is in the interest of the Department as

determined by the Secretary or his/her designee.

(b) The Department may settle or compromise a personal damage claim

against a present or former employee by the payment of available funds

at any time provided the alleged conduct giving rise to the personal

property claim was taken within the employee's scope of employment and

such settlement is in the interest of the Department as determined by

the Secretary or his/her designee.

(c) Absent exceptional circumstances, as determined by the

Secretary or his/her designee, the Department will not consider a

request either to indemnify or to settle a personal damage claim before

entry of an adverse verdict, judgment or award.

(d) Any payment under this section either to indemnify a present or

former Department employee or to settle a personal damage claim shall

be contingent upon the availability of appropriated funds of the

Department of Commerce.

Sec. 15.32 Procedures for the handling of lawsuits against Department

employees arising within the scope of their office or employment.

The following procedures shall be followed in the event that a

civil action or proceeding is brought, in any court, against a present

or former employee of the Department (or against his/her estate) for

personal injury, loss of property or death, resulting from the

Department employee's activities while acting within the scope of his/

her office or employment:

(a) After being served with process or pleadings in such an action

or proceeding, the employee (or the executor(rix) or

administrator(rix)) of the estate shall within five (5) calendar days

of receipt, deliver all such process and pleadings or an attested true

copy thereof, together with a fully detailed report of the

circumstances of the incident giving rise to the court action or

proceeding to the General Counsel. Where appropriate, the General

Counsel, or his/her designee, may request that the Department of

Justice provide legal representation for the present or former

Department employee.

(b)(1) Only if a present or former employee of the Department has

satisfied the requirements of paragraph (a) of this section in a timely

fashion, may the employee subsequently request indemnification to

satisfy a verdict, judgment, or award entered against that employee.

(2) No request for indemnification will be considered unless the

employee has submitted a written request, with appropriate

documentation, including copies of the verdict, judgment, appeal bond,

award, or settlement proposal through the employee's supervisory chain

to the head of the employee's component. The written request will

include an explanation by the employee of how the employee was working

within the scope of employment and whether the employee has insurance

or any other source of indemnification.

(3) The head of the component or his/her designee will forward the

employee's request with a recommendation to the General Counsel for

review. The request for indemnification shall include a detailed

analysis of the basis for the recommendation. The head of the component

will also certify to the General Counsel that the component has funds

available to pay the indemnification.

(c) The General Counsel or his/her designee will review the

circumstances of the incident giving rise to the action or proceeding,

and all data bearing upon the question of whether the employee was

acting within the scope of his/her employment. Where appropriate, the

agency shall seek the views of the Department of Justice and/or the

U.S. Attorney for the district embracing the place where the action or

proceeding is brought.

(d) The General Counsel shall forward the request, the accompanying

documentation, and the General Counsel's recommendation to the

Secretary or his/her designee for decision.

Alden F. Abbott,

Assistant General Counsel for Finance and Litigation.

[FR Doc. 97-10487 Filed 4-22-97; 8:45 am]

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