AC80 Private Consulting Practice (Formerly HR80)
Policy Steward:Vice Provost for Faculty Affairs>
POLICY'S INITIAL DATE: June 27, 1974
THIS VERSION EFFECTIVE: July 1, 2013
To outline the conditions governing private consulting by individuals holding a faculty appointment.
This policy does not apply to University staff or graduate students.
Consulting, private consulting or outside consulting:
An outside activity that is a professional service intended to further the interests of an outside party, regardless of whether such services are provided as an employee of the outside party, an independent contractor, a business owner, or as a director, manager or volunteer. This term does not include teaching engagements at other institutions of higher education. Teaching engagements at other institutions of higher education are governed by Policy AD77 Engaging in Outside Professional Activities (Conflict of Commitment). This term also does not include outside activities outside the faculty's field of expertise. A faculty member's field of expertise shall be as defined by his/her department head or unit head and/or Dean or cognizant Administrative Officer.
Outside consulting or other professional activity or service, paid or unpaid, that is beyond the scope of the individual's University employment responsibilities. Such consulting or other professional activity or service is in the general area of expertise for which the faculty member is employed by the University. Outside commitment involves the use of the employee's expertise, the practice of his or her profession, or any activity that contributes to the employee's professional competence and development.
With prior approval, as outlined below ("Required Prior Approval"), a faculty member may engage in consulting up to an equivalent of four (4) days per month, for a maximum of forty (40) hours per month, during the duration of his/her appointment period. Thus, faculty with a thirty-six (36) week appointment may consult for a maximum of forty (40) hours per month for the nine months of his/her appointment period, but no more than 360 hours total during that nine month period; and, faculty with a forty-eight (48) week appointment may consult for a maximum of forty (40) hours per month for the twelve months of his/her appointment period, but no more than 480 hours total during that twelve month period. Any consulting engaged in by faculty:
- Shall not interfere with the performance of his/her University duties or other contractual obligations to the University (including non-classroom and non-research responsibilities expected of all faculty members).
- Should enhance his/her professional stature or academic proficiency;
- Shall not adversely affect the University's interests or mission or violate University policies or regulations including, but not limited to, policies or regulations related to intellectual property, conflict of interest, private consulting, use of University's name or its resources, etc.; and
- Shall not exceed the maximum monthly time as outlined above. In extraordinary circumstances, if faculty need to exceed the monthly limit of hours (but not exceed the total appointment limit of either 360 or 480 hours), approval of this exception must be obtained as outlined below ("Required Prior Approval").
Additionally, private consulting may create the potential for or perceptions of a conflict of interest between the faculty's financial interests created by the consulting and his/her related Penn State research. In addition to the prior approval process necessary to engage in consulting that is outlined in this Policy, such potential or perceived conflicts may need to be disclosed and properly managed or eliminated prior to consulting, in accordance with Policy RA20, Individual Conflict of Interest.
Certain activities are expected of a faculty member as part of his or her normal scholarly activities and are not regulated by this Policy (even if a faculty member is paid to do them by a person or entity other than the University). These include, but are not limited to:
- Presentations at professional meetings and other similar gatherings
- Peer review of articles and grant proposals
- Leadership positions in professional societies
- Preparation of scholarly publications
- Editorial services for educational or professional organizations
- Service on advisory committees or evaluation panels for governmental funding agencies, nonprofit foundations, or educational organizations
- Service with accreditation agencies (e.g., AAALAC, AAHRPP, etc.)
- Conducting workshops for professional societies
- Musical and other creative performances and exhibitions, if there is an expectation in the faculty member's discipline that he/she will engage in such performances or exhibitions
This Policy does not apply to consulting by staff. Staff must follow all University Human Resource policies concerning time worked and time reporting applicable to staff. Permission to engage in consulting by staff and how those hours are accounted for is at the discretion of his/her supervisor and not subject to this Policy.
This Policy does not apply to consulting by graduate students and post-doctoral scholars or fellows. Consulting by these individuals is at the discretion of his/her supervisor or academic program and must comply with all applicable University policies related to his/her University employment or contractual agreement.
A faculty member must request and obtain prior written approval from his/her department head or unit head prior to engaging in private consulting. (For consulting that occurs entirely outside the faculty members' academic appointment period, prior approval is not required. However, all other provisions of this Policy (e.g. Use of Facilities and Resources, Involvement of Students) and all other University policies will still apply.) Such requests are made by completing the Consulting Approval Form and submitting the completed Form to the appropriate department head or unit head. Department heads and unit heads shall review all Consulting Approval Forms submitted for approval to ensure the proposed consulting does not violate this Policy and is appropriate in relation to the performance of the faculty member's regular University duties. Department heads and unit heads may request and require additional information or clarification from the faculty member regarding the proposed consulting if such information or clarification is deemed necessary in order to make a decision to approve or disapprove the consulting request. A written decision regarding the proposed consulting will be recorded on the submitted Consulting Approval Form and the original Form shall be maintained by the department/unit head and a copy shall be returned to the faculty member.
If the request to engage in consulting exceeds the monthly consulting time limits set forth above in this Policy (see "Policy" above), then the proposed consulting and Consulting Approval Form must be approved by both the relevant department/unit head and dean's office or next highest level of authority.
Completed Consulting Approval Forms shall be maintained by department/unit heads for a period of three (3) years from the conclusion of the consulting relationship.
A faculty member may not provide special service to the Commonwealth for additional compensation without prior written approval of the President of the University. Please see Policy HR42 Payment of Personal Compensation by a State Agency or Department of the Commonwealth for more information on this topic.
Reports shall be submitted annually by department heads and chancellors to their deans or vice presidents, who shall in turn submit a summary report to the Provost, concerning the levels and amount of private consulting by those faculty and staff within their administrative authority. The reports shall not identify individuals by name.
Reports from department heads and chancellors to their deans or vice presidents are due by June 1. Summary reports from those officials to the Provost are due by July 1. External Consulting Summary forms for department head use, and Consulting Summary Report forms for submittal to the Provost, are available.
The University assumes no responsibility for private consulting services performed by members of its faculty. The name of the University is not in any way to be connected with the service rendered or the results obtained. The faculty member must make it clear that his or her consulting work is a personal matter. A faculty member shall not accept or retain employment which would bring him or her as an expert or in any other capacity, into conflict or in competition with the interests and purposes of the University or the Commonwealth of Pennsylvania and federal agencies.
Please see Appendix A for important information regarding intellectual property issues that can arise in consulting and for recommendations regarding these, and other related, issues.
Policy FN14 Use of University Tangible Assets, Equipment, Supplies and Services prohibits the use of University facilities and resources including specialized equipment, specialized software, supplies and services for faculty consulting activities. Faculty consultants may access University facilities for consulting in the same manner available to non-University personnel. The utilization of University resources for consulting purposes must be approved by University administrators and documented in a Facility Use Agreement. The Facility Use Agreement clearly identifies the extent and nature of the facilities being utilized and establishes use charges based on the cost to the University of maintaining said facilities. The financial officer of the College or administrative unit should establish the appropriate charge out rate. Faculty consultants may utilize standard office facilities, including internet, local telephone, University-provided computers, etc., if reasonable and if the University incurs no additional incremental cost for said personal use. No administrative approval or Facility Use Agreement is needed for the use of standard office facilities as described above.
The involvement of students and staff in faculty consulting activities should be undertaken with caution. Faculty cannot involve students or staff in consulting activities within the scope of the student's or staff member's University duties. Faculty may hire students or staff to assist with faculty consulting activities outside the scope of the student's or staff member's University duties. Such arrangements require the full knowledge and prior approval of the faculty's department head or unit head and the student's faculty advisor or dean of graduate education or the staff member's direct supervisor. There is a section on the Consulting Approval Form to request and document the required approval related to staff and students. Safeguards must be instituted on a case-by-case basis to ensure that the performance of University duties and the scholarly mission of the University are not compromised. In particular, faculty must avoid even the appearance of directing students into research activities that serve their own personal interests at the expense of scholarly achievement. Such arrangements with students may also require review and approval by the University's Individual Conflict of Interest Committee pursuant to the requirements outlined in Policy RA20, Individual Conflict of Interest.
The University will not comment on or offer input regarding the rate of compensation or the tax consequences associated with faculty consulting activities.
Faculty and staff members cannot serve as consultants for University activities, either directly as private consultants, or through a third-party. In situations where consulting services are required from currently employed faculty and staff, compensation must be as an employee, whether within the scope of their appointment or through supplemental compensation.
AD47 - General Standards of Professional Ethics.
FN14 - Use of University Tangible Assets, Equipment, Supplies and Services
HR35 - Public Service by Members of the Faculty and Staff.
HR42 - Payment of Personal Compensation by a State Agency or Department of the Commonwealth.
HR91 - Conflict of Interest.
AD77 - Engaging in Outside Professional Activities (Conflict of Commitment)
RP02 - Handling Inquiries/Investigations Into Questions of Ethics in Research and in Other Scholarly Activities.
RP06 - Technology Transfer & Entrepreneurial Activity (Faculty Research).
INTELLECTUAL PROPERTY ISSUES:
- All faculty are required to sign the Penn State Intellectual Property Agreement which states that all faculty agree as a condition of employment by the University to abide by the University's Intellectual Property Policies and Procedures.
- Faculty may, within the scope of a consulting agreement, assign rights to intellectual property developed under consulting agreements to organizations engaging their services where the organization has a legitimate prior claim to the technology being developed. Examples include consulting activity leading to the refinement of an organization's existing product or process or to a development for which the organization has background patents or prior art claims.
- It is inappropriate for faculty consultants to assign Penn State intellectual property to organizations engaging their services.
- Consulting agreements should be examined to ensure that the assignment of rights to intellectual property evolving from consulting activities does not conflict with the Penn State Intellectual Property Agreement.
- Faculty consultants must avoid entering into consulting agreements that are in violation of the terms of their employment by the University.
- Faculty members should be cautious that by assigning intellectual property rights to organizations engaging their services faculty consultants may: 1) be prohibited from further activities in that field, 2) limit opportunities to profit from commercial applications or their work, 3) limit opportunities to obtain funding from industry and 4) restrict freedom to publish.
TERMS AND CONDITIONS RECOMMENDED FOR INCLUSION IN FACULTY CONSULTING AGREEMENTS:
- Consulting agreements should recognize that all faculty members have signed the Penn State Intellectual Property Agreement and that Penn State intellectual property cannot be transferred to a company via a consulting agreement. Consulting agreements should also recognize that a faculty member's first duty and first responsibility is to Penn State. The University recommends including the following language:
- "Company agrees and understands that Consultant is an employee of The Pennsylvania State University. Consultant's primary responsibility is to the University. In connection with such employment, Consultant has entered into certain agreements with the University relating to ownership of intellectual property rights, conflicts of interest and other matters, and is subject to certain policy statements of the University (collectively the "Institutional Agreement"). If any provision of this Agreement is hereinafter determined to be in conflict with the Institutional Agreement, then the Institutional Agreement will govern to the extent of such conflict, and the conflicting provisions of this Agreement will not apply. Consultant is not aware of any such conflict."
- Consulting agreements should acknowledge the importance of documenting the nature and scope of the consulting activities and outline a process for preparing a written summary or minutes of the consulting activities. All written information provided by the company to the consultant should be clearly marked "Confidential" or "Proprietary". The University recommends including the following language:
- "The Company shall from time to time prepare a written summary or "minutes" of the consulting activities of Consultant. Consultant shall also record all documentation relative to Consulting Services separate from his/her other work, including work for the University. The parties shall have the right to periodically compare said documentation to ensure both parties have a consistent understanding as to the scope and nature of consulting services provided hereunder."
- Consider including language such that the consultant has the right to refuse to accept company confidential information. The University recommends including the following language:
- "Prior to disclosure of Confidential Information hereunder, Company shall make a non-enabling summary disclosure to Consultant so that Consultant may determine whether to accept disclosure. Said summary shall be sufficient to enable Consultant to determine whether the disclosure involves technology or information already under development in Consultant's University Laboratory, or whether he/she is otherwise bound by confidentiality concerning related information and/or technology."
- "Company will take reasonable precautions to clearly mark information disclosed hereunder as "confidential" or "proprietary." Company will provide to Consultant a written summary of the matters discussed or considered during consulting provided hereunder in a timely manner."
- "The confidentiality restrictions hereunder will not apply where the information was previously known to or developed by Consultant or Consultant's research group, where the information is part of the public domain, or where the information came into the possession of Consultant through no fault or wrongdoing of Consultant."
TERMS AND CONDITIONS TO BE AVOIDED IN FACULTY CONSULTING AGREEMENTS:
- Consultants required to accept "fiduciary" responsibility should be covered by insurance protection provided by the company.
- Consulting activities should be performed in a relatively narrow and well-defined field. Avoid broad definitions such as "Company Business".
- Avoid or use caution in accepting exclusive consulting arrangements. Consider the ramifications of agreeing to consult with only one company in a broad field.
- Carefully consider the term (duration) of the consulting agreement. Is there an exit? Can the faculty member terminate the consulting agreement "without cause"?
- Carefully review any requirements for representations and warranties, especially with regard to intellectual property issues.