Clean Record Agreements: You Can Use Them Now, But Should You?

By Barbara Haga, December 6, 2022

With issuance of OPM’s final regulations covering Parts 315, 432, and 752 on Nov. 10, 2022 (87 FR 67765), the prohibition on clean record agreements will end.  Effective Dec. 12, you are free to hide the dirty laundry to your heart’s content. With this new regulation, you can agree to remove the information and let the employee – who, by the way, was so bad you were going through the time, paper, and process to fire or demote him or her – walk out the door with a record that says he or she was fine.  You can do it, but to me the important question is: Should you do it?

Under the microscope

Some may think the Trump EO 13839 prohibition on these agreements came out of the blue. That is not the case. The MSPB has been talking about issues related to these agreements for years. The Federal Circuit has said some not very favorable things about them for 25 years. In Pagan v. VA, 170 F.3d 1368, (Fed. Cir. 1999), the Fed Circuit repeated what they said earlier:

Settlement agreements may serve a useful purpose in terminating disputes without the necessity for further administrative or judicial proceedings. The incorporation into such agreements of a “clean record” requirement has proven to be a source of problems — problems that necessitate the very administrative or judicial proceedings sought to be avoided. As a result, this court has expressed its concern with agency settlement agreements that allow an unsatisfactory employee to resign in exchange for a personnel record clear of all charges and adverse actions. See Thomas v. Department of Housing & Urban Dev., 124 F.3d 1439, 1442 (Fed. Cir. 1997) (“It may well be that it is virtually impossible for agencies to ensure that settlement agreements such as this. . .can be performed to the letter … Perhaps as a matter of sound governmental administration such agency agreements should be prohibited.”). Indeed, such agreements invite trouble. The employee expects, perhaps unrealistically, that with a “clean record” potential employers will be unable to find out about adverse actions taken by the former employer. The former employer, when asked, must either outright lie, or attempt some artful evasion which, because other employers now recognize what these agencies do, in fact fools no one.

The decision went on to say:

Although reasonable settlement of employment disputes is commendable, when the agency is required to give no information or an agreed-upon “neutral” reference, “the practice of one government agency palming off an unacceptable employee on another government agency by withholding material evidence concerning the employee’s conduct hardly serves the public interest.” Holmes v. Department of Veterans Affairs, 58 F.3d 628, 634 (Fed. Cir. 1995).

Even OPM wasn’t telling agencies they should do it. In response to those who opposed lifting the ban, OPM stated they weren’t saying agencies should do it, just that they were not prohibited from doing it.

We are simply rescinding a rigid regulation that, upon reflection and further consideration, we deem impracticable, unrealistic, and unhelpful because it absolutely prohibits agencies from altering or removing information about performance or misconduct as a condition to resolve or settle a complaint or challenge to a personnel action, even where doing so furthers the best interests of an effective and efficient Government and the interests, voluntarily expressed, of both parties to personnel litigation. OPM’s rescission does not take a position on whether any particular case should be settled, and does not prohibit settlements, which through lessening a penalty or permitting resignation, may in certain circumstances lessen the risk of outright reversal with its high costs without benefit, or may otherwise adversely affect governmental interests.

Practical effect

I deliver training sessions on conducting effective interviews and reference checks. The course includes a segment on asking applicants direct and pointed questions about their experience and another segment aimed at helping managers ask the same types of questions of past employers.  As a reference, I use the September 2005 MSPB report Reference Checking in Federal Hiring:  Making the Call.  The report focuses on hiring issues stemming from managers not fully or effectively checking out applicants.

[Editor’s note: Contact Dan Gephart at Gephart@FELTG.com to bring Barbara and this course to your agency.]

Interestingly, that report contains a discussion of the problem of getting good information on candidates who have clean record agreements. That report cites the same information from the Federal Circuit that I included earlier in this article.  The Board wrote that in spite of the problems with such agreements, they continue (and likely will begin again in a few days).

Where does that leave the supervisor who is trying to do a good job and fully vet a potential applicant?  Sometimes they run into a brick wall.

The former supervisor will not answer questions about an individual’s performance and/or conduct on the job. Two things can happen then – 1) the hiring supervisor elects not to hire this applicant because they could not verify the information in the resume, or 2) the hiring supervisor decides to take the risk and hires without verification. The hiring manager may regret that decision.

In Pagan, the USPS hiring supervisor declined to hire.  The former supervisor at the VA, Mr. Lopez, took an interesting approach to responding to the USPS questionnaire.  In answering the question about whether the employee would be rehired, Lopez added as asterisk and wrote, “Due to circumstances beyond my control no coment [sic] can be made at this time.”   “Another question asked Lopez to rate Pagan’s attendance, work performance, behavior, and attitude using an excellent to unsatisfactory scale. Lopez crossed out the whole scale without rating Pagan in any of the above categories.” When the Postal Service told Pagan there were no more jobs available, he filed a petition for enforcement with the Board.

The Federal Circuit found fault with the supervisor.  The question about rehiring obviously presented a problem for the supervisor and there was nothing in the agreement that specified what kind of reference would be given.  Lopez could have responded “yes”, which he knew not to be true, or he could have answered “no”, which was an honest response. His option would certainly lead a potential employer to believe there was an issue with Pagan.

Crossing out the entire rating scale might look like a better choice. The Federal Circuit didn’t think so. “Although the agency did not promise to provide a favorable reference, or even any reference at all, it was required to act, in matters relating to Pagan, as if he had a “clean record.” The act of crossing out the portion of the USPS questionnaire asking that Pagan be ranked according to his attendance, work performance, behavior, and attitude, and then returning the form in that condition would have strongly suggested to any recipient of the form that Pagan did not have a “clean record” with the DVA.” Haga@FELTG.com