Court Opinion

ID: 4120077
Source: CourtListenerOpinion
Date Created: 2017-01-27 22:45:04.659227+00
Date Added: 2024-06-11T14:37:31.493431
License: Public Domain

Employer’s Rental of an Employee’s Residence During His
 Participation in the President’s Executive Exchange Program

An em ployer m ay rent an em ployee’s house during his participation in the P resident’s' Executive
  E xchange Program on the same b asis as any ordinary renter. However, 18 U .S .C . § 209 would
  prohibit an arrangem ent whereby th e em ployer would rent without using the property o r perm it the
  em ployee to have continued access to the property, because this would have the effect of
  subsidizing the em p lo y ee’s governm ent service.

                                                                                 March 25, 1982

          MEMORANDUM OPINION FOR THE CHIEF COUNSEL,
                OFFICE O F GOVERNMENT ETHICS

   This responds to your request for our formal concurrence in the Office of
Personnel Management (OPM) June 20, 1980, opinion and the Office of Govern­
ment Ethics (OGE) July 16, 1980, concurring opinion regarding 18 U.S.C.
§ 209(e). Those opinions addressed a proposal by Corporation A to arrange for
the rental of an employee’s residence while the employee participated in the
President’s Executive Exchange Program. The Executive Director of the Presi­
dent’s Commission on Executive Exchange (PCEE) has sought our formal
concurrence in these opinions.
   The OPM memorandum concludes that “ arrangements by a company to assist
the participating exchange employee in the rental of his or her permanent
residence” during the exchange year would, “ depending upon the circum­
stances,” be permissible. If a company rents an employee’s residence “ on terms
similar to those that would obtain if the employee rented the residence directly to
an individual tenant,” OPM concludes that the rental will not offend § 209.
   Your memorandum agrees with this conclusion, noting that:

         the individual circumstances of any case would control. For
         example, excessive rental payments by the employer or the pay­
         ment by the employer of management fees for the rental property
         would be objectionable under 18 U.S.C. § 209. . . . But a rental
         where “ the employee is left in no better position than he would be
         in if he rented the residence directly to an individual tenant”
         would not be objectionable.

We concur in this conclusion, with the following comments.

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  Both the OPM and the OGE memoranda rely on prior OLC opinions. The
OPM memorandum quotes a 1978 OLC memorandum opinion for the President’s
Commission on White House Fellowships as follows:
       When the company arranges for the rent of the permanent resi­
       dence, or rents the residence itself, the employee should be left in
       no better position than he would be in if he rented the residence
       directly to an individual tenant. For example, the employee
       should bear any rental or management fees entailed in the firm’s
       renting the residence to an individual tenant; and if the arrange­
       ment provides fo r the firm to rent the residence and leave it
       unoccupied, the fair market rental should be reduced by a reason­
       able estimate of maintenance and other costs that foreseeably will
       not be incurred.
Memorandum Opinion for the Director, President’s Commission on White House
Fellowships, from Larry A. Hammond, Acting Assistant Attorney General,
Office of Legal Counsel, 2 Op. O.L.C. 267, 269 (1978) (emphasis added). A
footnote in that 1978 letter stated that “ implicit” in our conclusion that a
company could rent an employee’s personal residence during a White House
Fellowship was the understanding that “ the employee was prepared to rent the
house to a tenant who would reside there, so that the employer would not be
paying the employee for a residence the employee intended to leave vacant. In the
latter situation, the employer’s payment of rent could disguise a supplementation
of government salary.” Id. note 1, at 269.
   These statements may cause some confusion in assessing the permissibility of
any particular rental. While the text suggests that it would be proper for a
company to rent an employee’s home and leave it empty, the footnote suggests
that such an arrangement might serve as a disguised supplementation of salary,
which would, of course, be impermissible.
   To clarify this question, we believe it should be understood that an employer
may not rent an employee’s home during his or her exchange year merely to let
the house sit empty. As both the OGE and OPM memoranda emphasize, and as
prior OLC opinions have indicated, arrangements whereby an employer rents an
employee’s home during an exchange year are generally permissible insofar as
the employee is left in no better position than he or she would have been in if an
individual tenant were renting the residence. Thus, the terms of such rentals must
be comparable to the terms of any open-market agreement that might be reached.
   When a company pays rent to allow a rental property to remain vacant and
unused, however, ordinary rental-market principles are not being applied. Since
we are aware of no reason to enter into such an agreement except to provide an
extra benefit to the employee, and none have been suggested, such an arrange­
ment would have to be viewed as an impermissible supplementation of the
employee’s government salary.
   Therefore, a company may not arrange to rent an employee’s permanent
residence during the exchange year if the home is to be left vacant, or, alter­

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natively, if the employee is to be granted continued access to the residence. If,
however, (1) a company rents, or arranges the rental of, an employee’s home for a
fair market rental, for the purpose of either using the residence itself or renting it
to others during that year; (2) the employee and his or her family will not have use
of the residence during the rental period; and (3) the employee bears any rental,
management, or other fees and costs ordinarily borne by a lessor, so that the
employee is “ left in no better position than he would be in if he rented the
residence directly to an individual tenant,” we concur in your conclusion that
§ 209 is not offended. In essence, a company may arrange for rental of an
employee’s home during an exchange year on the same basis as any other renter,
but may not enter into arrangements that would not ordinarily obtain on the open
market or that would have the effect of “ subsidizing” the employee by, for
example, paying rent without using the property or permitting the employee to
have continued access to the property.

                                                    L a r r y L . S im m s
                                          D eputy Assistant Attorney General
                                               Office of Legal Counsel

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