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COOLING-OFF PERIOD FOR RETIRED GOVERNMENT EMPLOYEES

Introduction

The cooling-off period refers to a period during which an employee is prohibited from securing employment that may be prejudicial to the concerns of his previous employer.[1] The cooling-off period is particularly important for retired government employees due to them being privy to confidential information. Rule 26 of the All India Services (Death-cum-Retirement Benefits) Rules, 1958 prohibits retired government officials from accepting commercial employment before the completion of one year from the date of retirement without the approval of the Central Government. This one-year period is essentially known as the cooling-off period. However, this period may be relaxed if prior approval of the Central Government is taken by the retired official.[2] Recently, the Central Vigilance Commission expressed concerns over some retired government officials not observing the mandatory cooling-off period.[3] It further stated that failure to observe the cooling-off period would amount to serious misconduct on their part.[4] This blog would analyze the provision for a mandatory cooling-off period for retired government employees. It would do so by first identifying the benefits of the provision and then identifying the costs of the provision. It would then do a cost-benefit analysis to argue that the benefits far outweigh the costs. It would also provide certain suggestions to reduce the costs of the cooling-off period before concluding the paper.

Benefits of Cooling-off period

One of the most important reasons for the existence of a mandatory cooling-off period is to prevent the misuse of confidential information held by retired government employees. The retired government employees in question here are “Group ‘A’ Officers” that belong to the highest class of government employees. These officers are privy to confidential information which could be misused during their commercial employment. A long mandatory cooling-off period may render the confidential information outdated. Another important benefit of the existence of a cooling-off period is the minimization of conflict of interest.[5] The provision to allow government officials to join commercial employment immediately after retirement may increase the risk of influence peddling.[6] For example, a prospective employer may influence the government official to give him preferential treatment in exchange for a job immediately after retirement. Even though a cooling-off period may not defer such unscrupulous acts in their entirety, it does disincentivize such actions.

The above benefits are related to the interest of the public at large. However, there exists some benefits of the cooling-off period for retired government employees as well. A cooling-off period helps in preserving the integrity of the retired official in the eyes of the public. It provides assurance to the public that the official in question has undergone cooling-off and would not be biased towards the government. Another more subtle benefit is the reduction of the risk of holding the retired government official liable for potential conflict of interests if the official is hired by government agencies on a contractual basis.[7] A lack of a cooling-off period may create questions of favouritism and fairness of the functioning of government organizations. This may lead to an increase in the chance of litigation against the retired officer which may create an unnecessary burden on him. 

Costs of Cooling-off period

The most apparent cost to the application of the cooling-off period against retired government employees is the potential harm it can cause to their career prospects. A cooling-off period implies that the retired officials will have to wait for one year before getting into commercial employment. It may not be worthwhile for the prospective employer to wait this long for the official and he may look for alternative employees to suit his requirements. This seriously hampers the future career prospects of the retired official who is deprived of commercial employment. This would essentially mean that the cooling-off period which is supposed to be of only one year has a cascading effect that may extend beyond that one year. Furthermore, a cooling-off period may discourage people from getting a high-ranking government job as they would be afraid that their future career prospects may get dampened.[8] This would compel them to move towards private sector jobs causing significant hindrance to the government’s recruitment efforts as more and more quality people to become unavailable for public sector jobs. This would be against the public interest as it would lead to inefficient government functioning and efficiency lag.

Another significant cost of the cooling-off period on the retired government employees is the infringement of the freedom of making their own decisions. A cooling-off period acts as a restraint on their freedom to choose their place of employment. Also, it undermines the autonomy of the government employees by locking them in their job as they have little hope of alternate employment options.[9] This makes these officials warier in challenging or providing changes to government decisions to secure their current job. Also, a major public cost of this period is the deprivation of the expertise gained by the retired government employee during his government job.[10] Since the official has to wait for one year before joining commercial employment, the expertise gained by him would go unutilized for the period in which he is not working. For example, a company that could have benefited from the expertise of an experienced government auditor may have to settle for a lesser experienced private auditor.

Conclusion and Suggestions

A cost-benefit analysis would suggest that the mandatory cooling-off period should remain in force. This is because the benefits are largely derived by the public at large while the costs are mostly confined to a few individuals. The benefit of keeping confidential information safe and minimizing the conflict of interests is larger than the potential harm to career prospects and the autonomy of retired officials. Some possible policy changes could be enforced to further reduce the costs of the cooling-off period. For example, the possible harm to the government agencies recruiting efforts due to people preferring private jobs could be tackled by providing government jobs with additional perks and incentives to attract quality personnel to the public sector. Also, the Ministry of Personnel had already reduced the mandatory cooling-off period from two years to one year at the request of retired government officials in 2015.[11] A further slash in the cooling-off period would not be possible as it would defeat the purpose of the period rendering it ineffective. With regard to the concerns raised by the Central Vigilance Commission regarding non-compliance of mandatory cooling-off period by certain officials, the government should devise proper rules and regulations to enforce the cooling-off period.

A possible change would be to increase the penalty upon the violation of the mandatory period. Currently, the only penalty imposed is that the retired officer would forgo his right to pension and the government can withhold his pension.[12] Such a penalty is quite meagre and unsatisfactory. The government could bring in rules to impose the penalty based on the amount earned by the official during his commercial employment in addition to withholding his pension. This would act as a deterrent for the retired government officials from violating the cooling-off period.  In conclusion, the cooling-off period is a necessary requirement for retired government employees. The costs, after including the suggestions mentioned, are far less than the benefit derived from the enforcement of such a period. Therefore, the cooling-off period should remain in force and proper rules need to be framed to ensure its effective compliance.

Author(s) Name: Paras Khetan (National Law School of India University, Bangalore)

References:

[1] ‘Cooling-off Periods | Ethics’ <https://ethics.od.nih.gov/cooloff> accessed 22 February 2022

[2] All India Services (Death-cum-Retirement Benefits) Rules, 1958, r. 26

[3] Bharti Jain / Updated: Jun 4 and others, ‘Cooling-off Period Needed for Ex-Babus to Join Private Jobs: CVC | India News – Times of India’ (The Times of India, no date) <https://timesofindia.indiatimes.com/india/cooling-off-period-needed-for-ex-babus-to-join-private-jobs-cvc/articleshow/83222444.cms> accessed 22 February 2022

[4] Ibid

[5] Wendy L. Gerlach, ‘Amendment of the Post-Government Employment Laws’ (1991) 33 Ariz L Rev 401, 412

[6] Ibid 412

[7] Cecilia Wang, ‘Stop That Revolving Door: Analysis of the Appropriate Application of the Cooling-off Period beyond Senior Government Employees’ (2017) 15 Cardozo Pub L Pol’y & Ethics J 297, 304

[8] Gerlach (n 5) 413

[9] Ibid 414

[10] Ibid 414

[11] ‘1-Year Cooling-off Period for Babus Seeking Post-Retirement Jobs – The Economic Times’ (22 December 2015) <https://economictimes.indiatimes.com/news/economy/policy/1-year-cooling-off-period-for-babus-seeking-post-retirement-jobs/articleshow/50268423.cms> accessed 24 February 2022s

[12] All India Services (Death-cum-Retirement Benefits) Rules, 1958, r. 26