Attention Retired Military Personnel: Emoluments Clause Can Lead to Compensation Garnishment
- The Foreign Government Employment (FGE) program requires all retirees or reservists (officer and enlisted) of any of the U.S. uniformed services to seek approval before accepting employment with a foreign government.
- Depending on the circumstances, employment with a foreign government can involve serving as a consultant, lobbyist or contractor representing a foreign government or an entity owned, operated or controlled by a foreign government at any level (federal, state, local, etc.).
In a recently released investigation, the U.S. Air Force Inspector General's Office found that a retired general officer did not receive approval through the Foreign Government Employment (FGE) program before accepting employment with a company determined to be controlled by a foreign government.
The requirements under the FGE program stem from the Foreign Emoluments Clause of the U.S. Constitution, "[N]o Person holding any Office of Profit or Trust under [the United States], shall, without the Consent of the Congress, accept of any present, Emolument, Officer, or Title, of any kind whatever, from any King, Prince, or foreign State."
Simply put, if a person is retired or a reservist from a uniformed service of the U.S. government, they probably need to seek approval before accepting a position with a foreign government or any entity (like a corporation) controlled, owned or operated by a foreign government, depending on the circumstances.
What You Need to Know
Federal regulations require retirees or reservists of the uniformed services (officer and enlisted) to seek approval before accepting employment with a foreign government. As defined in 22 CFR § 3a.1(b), uniformed services include the following services and their reserve components:
- U.S. Air Force1
- U.S. Army
- U.S. Navy
- U.S. Marine Corps
- U.S. Coast Guard
- Commissioned Corps of the U.S. Public Health Service
- Commissioned Corps of the National Oceanic and Atmospheric Administration (NOAA)
Although there is no uniform definition for foreign government "employment" across the services, each service's definition includes the common element that a foreign government controls an individual's actions. For example, the U.S. Army definition includes "any person whose activities are directly or indirectly supervised, directed, controlled, financed, or subsidized, in whole or in major part, by any government of a foreign country."2 Additionally, the U.S. Air Force considers "whether the employer has the right to control and direct the employee."3
To determine foreign control, the U.S. Department of Defense (DoD) looks for the existence of an employer-employee relationship between the foreign government and the retiree by evaluating the:
- selection and engagement of the employee
- the payment of wages
- the power to discharge
- the power to control the employee's conduct
- the relationship of the work to the employer's business4
Finally, the term "foreign government" includes any level of foreign government (i.e., federal, state, local, etc.).5 In practice, this broad concept of "foreign government" would involve a diverse array of companies and businesses in foreign jurisdictions that may be subject to governmental control, even if such control or foreign government involvement is not obvious on the surface. The U.S. Department of Justice's (DOJ) Office of Legal Counsel (OLC), which provides legal advice to executive branch agencies, provides factors agencies should consider when determining if a foreign entity should be considered a "foreign government" for the purposes of seeking FGE approval, including "(1) whether a foreign government has an active role in the management of the decision-making entity; (2) whether a foreign government, as opposed to a private intermediary, makes the ultimate decision regarding the gift or emolument; and (3) whether a foreign government is a substantial source of funding for the entity."6
Who Needs to Apply
The most important factor triggering obligations under federal regulations is the existence of any position of employment in which an individual receives an emolument from a foreign government. In addition to employment in which an individual receives a salary directly from a foreign government, an emolument can also include foreign government payments received by a professional corporations for services, such as consulting, or distributions from a partnership if the retiree is a pro rata partner.
For example, if a retiree is part of a partnership and receives profits from the partnership derived from work with a foreign government client, this could trigger obligations under the appropriate FGE program. Depending on the circumstances, FGE requirements could apply to consultants, lobbyists or contractors that represent a foreign government.
Any individual meeting the requirements should submit an FGE application for approval. All applications should be submitted with the uniformed service from which the individual retired. Pursuant to federal regulations, the application should contain the following items at a minimum7:
- applicant's retiree status
- description of the proposed employment
- identity of the employer
- relationship of the employer to a foreign government8
In addition to seeking approval from the appropriate uniformed service, the applicant also requires approval from the U.S. Department of State (DOS) before accepting any position from a foreign government. The applicant's uniformed service will forward all applications to the DOS Bureau of Political-Military Affairs' Office of State-Defense Integration (PM/SDI).
The average processing time for an application is 30-90 days, depending on whether the information provided is enough to make a determination. The uniformed service or DOS will request more information as needed.
Retirees who do not have approval before accepting employment risk having their retirement compensation garnished. A retiree's retirement pay will be held in the amount equal to the foreign salary received during the unauthorized employment until the retiree obtains the requisite approval.
As an example, a retired Marine Corps major employed as an instructor for the Royal Saudi Naval Forces through a U.S. company had his retirement pay suspended pending approval through the Marine Corps' FGE program after a determination that the Saudi Arabian government could control and direct his actions.
In another example, a retiree employed and paid by a U.S. company was assigned to work for an Israeli company controlled by the government of Israel. It was determined that the U.S. company was acting as an employment agency, and the retiree had an employer-employee relationship with the Israeli company. As a result, the comptroller general recommended that his retirement pay be withheld until it equaled the amount he was paid by the Israeli company.
Members of the Holland & Knight International Trade Group have served in a variety of senior legal and policy positions across the U.S. government – including a former official on the DOS FGE evaluation team – and are well-suited to provide additional guidance. Please contact the authors or another member of Holland & Knight's International Trade Group for more information.
1 Although the U.S. Space Force is not an armed force as defined in 22 CFR § 3a.1(c) as a branch of the armed forces organized under the U.S. Air Force, the Space Force is likely to have similar requirements pursuant to 22 CFR § 3a.
2 Army Regulation 600–291.
3 Air Force Instruction 36-2913.
4 DoD Financial Management Regulation 7000.14-R
5 22 CFR 3.3(b).
6 Goteborg Award, 34 Op. O.L.C. at 3 (Oct. 6, 2010).
7 Each uniformed service may have requirements in addition to those in 22 CFR § 3a.4(a).
8 22 C.F.R. § 3a.4.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.