Summary and Action Requested
This memorandum presents draft regulations for Section 3.218 of the Campaign and Governmental Conduct Code (C&GCC), as it will be amended on October 12 by Proposition D (approved March 2024).
Staff recommends the Commission review, discuss, and approve the proposed regulations as drafted.
Regulations for Section 3.218 Regarding Incompatible Activities
In March, voters approved Proposition D, a measure placed on the ballot by the Ethics Commission to strengthen and standardize the City’s ethics rules. Proposition D will become operative on October 12.
Section 3.218 of the C&GCC currently sets forth rules regarding departmental Statements of Incompatible Activities (SIAs). Departmental SIAs are based on a template created by the Ethics Commission, restate some core ethics rules, and contain some rules that are unique to specific departments. Proposition D will amend Section 3.218 to eliminate departmental SIAs and move the core rules from those SIAs into the amended Section 3.218. Section 3.218 as amended, will contain rules for City officers and employees regarding activities that are incompatible with their City service. An excerpt from Proposition D regarding Section 3.218 has been provided as Attachment 1.
Last October, the Commission held two interested persons meetings to discuss potential regulations regarding Section 3.218, should it be approved by voters. The purpose of these meetings was to create additional opportunities for stakeholders and members of the public to share their thoughts and priorities with the Commission regarding regulations for the potential implementation of this section.
The interested persons meetings in October were attended by various stakeholders, including those affiliated with the Mayor’s office, the War Memorial Board of Trustees, the League of Women Voters, and the San Francisco Human Services Network. In general, participants were supportive of the Commission enacting regulations to address the matters discussed during the meetings.
In January, Staff shared draft regulations for Section 3.218 with the Commission and recommended moving forward with noticing the draft regulations to bargaining units, to give them the opportunity to meet-and-confer over the proposals if desired. In April, Staff updated the Commission that these meetings were underway and scheduled for April and May.
Since noticing the draft regulations to bargaining units in March, Staff met with the Municipal Executives Association (MEA) in April and exchanged several communications with MEA over the regulations. At the same time, Staff also continued engagement with other City stakeholders, including representatives from the Mayor’s Office, the City Administrator’s Office, and the Office of Economic and Workforce Development. On August 30, the Employment Relations Division (ERD) of the Department of Human Resources sent a close out notice to MEA, stating that the City had met its meet-and-confer obligation and considers the matter closed.
The communications above led to revisions to the draft regulations that are detailed in the table below. Regulations 3.218-2, 3.218-7, and 3.218-8 have all been added since the draft regulations were last shared with the Commission in January.
The draft regulation amendments are presented as Attachment 2 and summarized in the table below. These draft regulations have been developed to clarify terms in, create limited exceptions to, specify the scope of, and assist with the implementation of Section 3.218, prior to it becoming operative on October 12.
Table 1: Overview of Draft Regulations for Section 3.218
| Regulation | Description & Rationale |
| 3.218-1 (new) Activities Subject to the Department’s Jurisdiction – Actions on Behalf of Oneself or One’s Immediate Family | Description: Specifies that while an officer or employee may be party to or otherwise appear before their department or commission on behalf of themself or an immediate family member, they must also not participate in and must fully abstain from any involvement in such matters as part of their City duties. Rationale: While it is important for City officials to be able to engage with City services on their own behalf or the behalf of their immediate family, it is inappropriate for officials to then be involved in those same matters as a part of their City duties. Example: If a City building inspector also owns a home in the City, there may be situations (major renovations, etc.) where that City official’s property needs to be inspected by their department. The City official should be able to access City services the same as any other City resident. However, the City official should also be prohibited from participating in such matters, in any way, in their capacity as a City official. |
| 3.218-2 (new) Activities Subject to the Department’s Jurisdiction – Definition of “on behalf of oneself” | Description: Specifies that “on behalf of oneself” includes on behalf of the City officer or employee’s single-member LLC, sole proprietorship, or similar entity. Rationale: As described above, it is important for City officials to be able to engage with City services on their own behalf or the behalf of their immediate family. This should extend to entities owned by the City official, when there is no other owner who could potentially represent the entity in the matter before the department. Example: Similar to the prior example, if a City building inspector is the sole proprietor of a business that owns a property in the City, there may be situations (major renovations, etc.) where that property needs to be inspected by their department. The City official should be able to access City services for their business in the same as any other City resident. However, the City official should also be prohibited from participating in such matters, in any way, in their capacity as a City official. |
| 3.218-3 (new) Activities Subject to the Department’s Jurisdiction – Employment with an Entity Engaging in Activities Subject to the Department’s Jurisdiction | Description: Specifies that merely being employed by an entity that engages in activities subject to the department’s jurisdiction is not prohibited by Section 3.218(a)(1), as long as 1) the City official does not personally and substantially engage in activities that are subject to their department’s jurisdiction for their non-City employer and 2) that they do not participate in matters explicitly involving their non-City employer as part of their City duties. The regulation also illustrates the types of activities that would still be prohibited by Section 3.218(a)(1), which include working in a position that is majority-funded by the officer or employee’s City department and liaising with their department on behalf of their non-City employer. Rationale: Many City officials have additional employment outside of their role with the City. While this is often reasonable and appropriate, additional consideration is warranted when that outside employer engages in activities that are subject to the City official’s department, as this could lead to both real, and perceived, conflicts of interest. The proposed regulation would allow this outside employment to occur, while maintaining guardrails to prevent the City official from potentially using their City position to inappropriately benefit themself or their outside employer. Example: A City employee has a second job waiting tables at a San Francisco restaurant, while their City duties require them to perform health inspections of City restaurants. This regulation would specify that Section 3.218(a)(1) does not prohibit this outside employment. However, the City employee would be prohibited from working on things for the restaurant that are going to come before their department (such as communicating with other inspectors from their department about the restaurant). Additionally, as part of their City duties, this City employee must not participate in and must fully abstain from any involvement in any matters explicitly involving the restaurant. |
| 3.218-4 (new) Activities Subject to the Department’s Jurisdiction – Being an Officer or Exercising Management or Control over an Entity Engaging in Activities Subject to the Department’s Jurisdiction | Description: Specifies that owning or exercising management or control over an entity that engages in activities subject to the department’s jurisdiction is allowed if: 1) the City official does not engage in activities that are subject to their department’s jurisdiction for the non-City entity, 2) on behalf of the City, the City official does not participate in and fully abstains from matters involving the non-City entity, and 3) the entity does not contract with the City official’s department. Defines being an “officer or exercising management or control” over an entity as occupying the role of officer, director, partner, or other position that exercises management or control over an entity, owning more than five percent of a publicly traded entity, or owning more than 20% of a non-publicly traded entity. Rationale: City officials may have ownership interests in outside entities or serve on the boards of non-City organizations. Such activity can often be reasonable and appropriate. However, when those outside entities engage in activities that are subject to the department’s jurisdiction, additional consideration is warranted to avoid both real, and perceived, conflicts of interest. This regulation would specify that such activity is not prohibited by Section 3.218(a)(1) as long as certain conditions are met, which serve as guardrails to prevent the City official from potentially using their City position to inappropriately benefit themself or the entity they are affiliated with. The language defining being an “officer or exercising management or control” is similar to what already exists Section 3.222, which prohibits City officers from contracting with the City. The regulation simplifies the language in Section 3.222 and captures ownership of limited liability companies. Example: A City employee owns 25% of their family’s restaurant that operates in the City. Part of their City duties involve reviewing and issuing permits to City restaurants. This regulation would specify that merely having this ownership interest is not prohibited by Section 3.218(a)(1). However, the City employee would be prohibited from engaging in activities that are subject to their department’s jurisdiction on behalf of their restaurant and would be prohibited from participating in any matters regarding their restaurant as a City employee. Additionally, the employee’s ownership of the restaurant would be incompatible with their City employment if the restaurant was contracting with their City department, as prohibited by Section 3.218(a)(1)(A) and Draft Regulation 3.218-6 (below). |
| 3.218-5 (new) Activities Subject to the Department’s Jurisdiction – Definition of “Engaging in Non-compensated, Volunteer Activity for a Nonprofit Organization” | Description: Specifies that the exception for non-compensated, volunteer activity in Section 3.218(a)(1) does include serving on the board of directors of a nonprofit organization, only if 1) in their capacity as a City official, they do not participate in and fully abstain from any involvement in any matters explicitly involving the nonprofit organization and 2) the nonprofit organization does not contract with their City department. Rationale: The exception in Section 3.218(a)(1) that allows for “engaging in non-compensated, volunteer activity for a nonprofit organization” was understood by Staff as intended to address direct service volunteer work (planting trees, tutoring children, etc.), not serving on the board of directors of a nonprofit organization. However, stakeholders have expressed that it can be important for City officials to serve on nonprofit boards, even when those nonprofits engage in activities subject to their department’s jurisdiction. This regulation would allow City officials to volunteer their time on nonprofit boards, with guardrails in place to prevent the City official from potentially using their City position to inappropriately benefit themself or the nonprofit organization they are affiliated with. |
| 3.218-6 (new) Activities Subject to the Department’s Jurisdiction – Definition of “Contracting With One’s Own Department” | Description: Specifies that “contracting with one’s own department” includes being an officer or exercising management or control over an entity that contracts with the City official’s department. Defines being an “officer or exercising management or control” over an entity as occupying the role of officer, director, partner, or other position that exercises management or control over an entity, owning more than five percent of a publicly traded entity, or owning more than 20% of a non-publicly traded entity. And specifies that this prohibition also applies to subcontracts. Rationale: Section 3.218(a)(1)(A) clearly prohibits City officials from contracting with their own department. This regulation clarifies that this prohibition includes City officials owning or leading an entity that contracts with their department. This language is similar to what already exists Section 3.222, which prohibits City officers from contracting with the City. The regulation simplifies the language in Section 3.222 and captures ownership of limited liability companies. Specifying that Section 3.218(a)(1)(A) applies to subcontracts is also consistent with the similar rule in Section 3.222. |
| 3.218-7 (new) Activities Subject to the Department’s Jurisdiction – Definition of “Serving on the Board of Directors” | Description: Specifies that “serving on the board of directors” as used in section 3.218(a)(1)(A), does not include serving on the board of directors of a public or quasi-public body, or a nonprofit organization, if 1) the City officer or employee is serving on the board as part of their City duties, 2) is representing the City or their department on the board, and 3) is not receiving any compensation, other than from the City, for their service on the board. Rationale: The rules in Section 3.218 are generally focused on prohibiting ‘outside activities,’ not activities that are being done as part of a City official’s City duties. However, City stakeholders have raised concerns about situations where an officer or employee is required to serve on the board of directors of an entity, including entities that contract with their department, as part of their City duties. This regulation provides added clarity that serving on the board of directors of certain entities is not prohibited, as long as such board service is part of the official’s City duties. Comparable language has also been duplicated above in Regulation 3.218-4, to likewise specify that such board service is not prohibited by other aspects of Section 3.218. Example: A department has a contract with a nonprofit organization and as part of that contract, the department has agreed to have one of their City employees sit on the nonprofit’s board of directors to represent the City. This regulation clarifies that such service is not prohibited by Section 3.218, as the service is part of their City duties and that they are representing the City on the board. This would only apply if the employee were not receiving any compensation from the nonprofit. |
| 3.218-8 (new) Definition of “Department” | Description: Defines “department” for the purposes of Section 3.218 as the department, board, commission, office, or other unit of government which a City officer or employee directly serves. The regulation also sets out a series of factors the Commission can use when determining what unit of government an officer or employee directly serves. Rationale: The Ethics Commission has an existing regulation (Regulation 3.216(b)-3) that defines “department” for the purposes of Section 3.216(b), which is the rule against gifts from restricted sources. Using this definition, the Ethics Commission is able to identify units of government that are considered their own department for the purposes of Section 3.216. The proposed regulation would duplicate Regulation 3.216(b)-3 to apply it to Section 3.218. Several City departments have complex relationships with other departments, despite them essentially operating as separate entities. This regulation will allow the Commission to identify situations where two related units of government should be treated as separate departments for the purposes of Section 3.218. Staff intends to make such determinations available on the Commission’s website so City officers and employees can know how specific rules apply to their activities. Example: The Office of Economic and Workforce Development (OEWD) shares some administrative resources with the Small Business Commission (SBC) and the Office of Small Business (OSB), which in some ways are considered a division of OEWD. However, based on information provided by OEWD and consultation with the City Attorney’s Office, the Small Business Commission and the Office of Small Business should be considered their own department, distinct from OEWD, for the purposes of Section 3.216 and 3.218. This would mean that, for example, an SBC/OSB employee who only serves SBC/OSB would only be prohibited by Section 3.218 from contracting with SBC/OSB, not from OEWD. However, it is possible that a City employee could serve both SBC/OSB and OEWD; in such a situation, the employee would be prohibited from contracting with both SBC/OSB and OEWD, as they would directly serve both units of government. |
| 3.218-1 – 3.218-8 (current) | Description: Current Ethics Commission Regulations 3.218-1 through 3.218-8 would be removed as part of this proposed regulation change. Rationale: The current regulations regarding Section 3.218 will no longer be relevant once Proposition D becomes operative on October 12, as the current regulations are focused on departmental SIAs which will cease to exist at that time. |
Following the interested persons meetings in October, Staff also engaged directly with officials from the Department of Public Health (DPH) regarding these regulations, including Greg Wagner, who is the current Chief Operating Officer of DPH. The officials from DPH shared concerns, which were largely over how DPH nurses, some of whom work additional shifts for non-City healthcare providers, may be impacted by Section 3.218. Based on this feedback from DPH, Staff revised earlier drafts, which were then also shared with DPH officials. Earlier in January, Staff met for a second time with DPH officials, who said the current draft regulations addressed their main concerns, while also maintaining strong conflict of interest rules. Staff intends to remain in contact with DPH and has encouraged DPH to contact the Commission in the future if other potential issues arise. Staff would like to thank DPH for their time and willingness to collaborate on these draft regulations.
Staff would also like to thank the representatives from the Mayor’s Office, the City Administrator’s Office, and the Office of Economic and Workforce Development for their input into these draft regulations, as well as all who attended last year’s interested persons meetings on this topic.
Recommended Next Steps
With Proposition D becoming operative on October 12, Staff recommends the Commission vote to approve the proposed regulations during its September meeting. This will allow Staff time to give advice to City officers and employees regarding Section 3.218 based on the amended regulations prior to the rules changing on October 12. Approval in September will also give Staff time to ensure the Commission’s engagement and compliance materials align with amended regulations before the October operative date.
As of August 30, the City has met its obligations to meet-and-confer with bargaining units, so that duty does not prevent the Commission from acting. Additionally, the draft regulations from Attachment 2 have been noticed to the public more than 10 days prior to the Commission’s September meeting, as required by Charter Section 4.104. Thus, the Commission may vote to adopt the proposed regulations during its September meeting if desired.
Staff recommends the Commission vote to approve the proposed regulations as drafted.
Attachments:
Attachment 1: Section 3.218 – Excerpt from Ethics Commission 2024 Ballot Measure
Attachment 2: Draft Regulations for Section 3.218 – 9.16.24