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Avoiding Conflicts Of Interest In The Workplace

avoiding-conflicts-of-inter.jpg(Originally published in the November 2018 issue of The National Notary magazine.)

Most Notaries learn early on that notarizing their own signature is a conflict of interest. So, too, is notarizing someone else’s signature on a document that names you or gives you a financial or beneficial interest.

Doing any of those things could well lead to the document being challenged or invalidated — and entangle you in legal trouble — because they violate your essential role as an impartial, third-party witness to document signings. But what about notarizing on the job?

Imagine this scenario, which occurs countless times a day across the country: Your boss hands you a stack of documents she has signed. They could be sales agreements, loan papers or legal documents. In any event, they’re the routine business of your employer, the business that generates profits for the company and bonuses for its employees.

While you don’t benefit directly from these documents, your boss determines how big a raise you get and whether you receive that promotion. Is this a conflict of interest?

The question is more than a hypothetical. The NNA estimates that approximately 80 percent of the nation’s 4.4 million Notaries got their commissions to notarize for their employer. These countless daily transactions performed by the nation’s Notary workforce are essential to the smooth functioning of life and law, as well as growth of American commerce and maintaining consumer confidence.

That’s because all parties in a transaction must have absolute trust that the transaction is legal, and the Notary’s work was sound. Maintaining this level of trust is tricky as the lines orbiting around conflicts of interest — often referred to as “disqualifying interest” — can be blurred when you notarize at work.

What if your boss, who pays your salary, is named in the document? Is the signer a client that your company represents in legal or business matters? Can you notarize signatures on ballot petitions if you work for the political action committee that advocates for the issue at hand? These situations can be confusing or risky. And even if you did everything right, just the appearance of a conflict of interest could put a transaction at risk.

The National Notary Association took a close look at five specific scenarios Notaries often ask about, and our experts provided the following guidance:

Is Notarizing For My Employer A Conflict Of Interest?

Notaries call the NNA® Hotline every week asking if notarizing for their employers is a conflict of interest. As the scenario above describes, callers are concerned that they might be receiving a financial or beneficial interest because they are notarizing signatures on business deals for their bosses, staff members or clients and, as a result, they receive a paycheck for their work.

While their concerns are valid, the risks are minimal when notarizing documents for your employer if you take the right precautions. You should not notarize signatures on work-related documents if you are named individually or as a company officer, or for which you receive a commission. These situations are ripe court challenges, but they can easily be remedied by finding another, impartial Notary.

The Notary Public Code of Professional Responsibility posits the following standard: “The Notary who is an employee shall be permitted to notarize for any officer, executive, supervisor, coworker, subordinate, client or customer of the employing organization, as long as the Notary will not gain a commission, bonus or other consideration as a result of the notarial act, other than the regular salary or hourly wage and the statutory notarial fee.”

Several states specifically permit employees to notarize work-related documents with certain restrictions:

Pennsylvania — An employee can notarize signatures on company documents unless they have a direct interest in the notarized transaction, directly benefit from the transaction or receive a fee that is contingent on the completion of the transaction.

West Virginia — According to the state’s Notary Handbook, an employee can notarize signatures on documents prepared by an employer as long as it is part of the Notary’s regular job duties and the Notary receives no extra compensation.

Florida and Hawaii — An employee can notarize for their company provided that the Notary receives no benefits other than his or her salary and the statutory notarization fee. Hawaii specifically follows The Notary Public Code of Professional Responsibility’s Standard II-E-1.

The general rule doesn’t always apply, and Notaries working in specific industries or performing certain types of work need to pay special attention to avoid potential conflicts of interest.

The Murky Waters Of Banks And Finance

Banks and financial institutions across the country employ hundreds of thousands of Notaries to handle millions of notarizations annually.

Conflict of interest issues in banks generally revolve around loans and investments, which account for trillions of dollars in transactions each year. And while these notarizations are mostly legitimate, they can be easily questioned if you don’t take precautions

Many bank executives and loan officers have Notary commissions. And due to lack of training and/or a desire to perform quick, efficient customer service they commonly notarize for their clients. But bank loan officers are often named in these documents, and they receive commissions for their transactions, making these risky transactions a big no-no.

“I had a bank executive call recently asking about this conflict of interest issue, and he said they had been doing it this way for 30 years,” said Lori Hamm, Notary Program Specialist for the Montana Secretary of State’s office. “A bank loan officer with a Notary commission will notarize the customer’s signature, and then the Notary will have their own signature on the document notarized by another person. We told him, and we tell everybody, that you can’t be the loan officer and Notary on the same transaction — end of story.”

Even if the notarization is performed properly, the mere appearance of a conflict can send the transaction into a tailspin and, ultimately, make it voidable. The simple solution in these cases: Don’t act as the Notary if you are named in the document or receive a benefit from the transaction. Just find another Notary in the office.

A couple of states — California and Kansas, for example — allow a loan officer who has a direct interest in the transaction to also act as the Notary for the transaction. But even here, it is still a recommended standard of practice to have another Notary step in.

Health Care Notaries Face Unique Issues
 

So far, we’ve focused on potential conflicts solely involving financial transactions and interests. When it comes to the health care industry, for example, financial matters intersect with decisions about a person’s health, well-being and quality of life. Potential conflicts of interest revolve around powers of attorney, advance directives, consents for treatment and asset transfers.

Whether you’re dealing with end-of-life situations, long-term care or routine medical treatment, people are signing documents revolving around their care, wishes, ability to make decisions and the financing of all of it. They can involve entire families in which loved ones often disagree over a host of issues. It gets even more complicated if some family members are cut out of the decision-making. And the patient’s age, illness, mental state or medication can affect their ability to communicate or understand documents. These matters alone make health-related notarizations more vulnerable, so avoiding conflicts of interest is vital.

It’s fairly common, for example, for seniors moving into a nursing home or managed care facility to sign over assets to buy their space and pay for their care. It’s also common for residents of these facilities to sign health care directives, medical powers of attorney and other documents related to their well-being.

A notarization that even hints at the possibility of a conflict of interest could be challenged. If you are a Notary working in a hospital or medical office, your best bet would be to call a mobile Notary to handle these types of transactions instead of someone on staff.

Many states also have laws or elder abuse regulations concerning health care documents — and these rules aren’t always explicit. For example, California Probate Code stipulates that if a patient in a skilled nursing facility executes a written health care directive, the document isn’t valid unless a patient advocate or ombudsman is present as a witness in addition to the Notary.

San Diego attorney and Notary Mike Phillips, who serves as a patient advocate for residents of mental health facilities, recommends that Notaries working in the health care field be vigilant for signs of conflict of interest when a patient’s document involves a large financial transaction.

“The general public assumes that health care providers are all about the best interests of the patient, and they often are, but the patient has the right to push back if they disagree regarding care,” he said. “A Notary is not expected to be an advocate, but one more check and balance certainly doesn’t hurt.”

The Conundrum Of Attorneys Notarizing For Clients


Attorneys handle a wide variety of legal issues and, of course, act as their client’s advocates. In fact, they often handle their clients’ most important affairs, such as estate planning, wills, trusts, powers of attorney, prenuptial agreements, contracts, affidavits and plea forms, just to name a few. But is it a conflict for an attorney to notarize their clients’ signatures on documents they've prepared?

As trained and licensed legal professionals, attorneys are often granted notarial powers or can apply to become a Notary. But the rules for them may be different. Many states exempt lawyers and certain other professional agents from Notary related conflict of interest rules. For example, in California, a Notary who is an attorney may notarize for a client if they have no direct financial or beneficial interest in the client’s transaction. But those rules are not absolute in every state, and there could be serious legal ramifications if an attorney notarizes the signature on a document in which they are named — even if no impropriety was intended.

According to attorney and Notary law scholar Michael Closen, Notary lawyers rarely undergo in-depth training in Notary rules and procedures. That makes it easy for them to make mistakes. One alternative to help avoid problems is having a legal secretary or paralegal notarize signatures for clients instead of the attorney. For attorneys who are practicing on their own or in small firms without a staff, it’s a good idea to keep the contact information of several mobile Notaries.

May A Worker For A Political Advocacy Group Notarize Campaign Documents?

Few lines of work are fraught with more challenges to notarizations than politics. Faulty notarizations on election forms and petitions can, and often do, lead to election results being challenged in court.

In this polarized political environment, factions increasingly are looking for reasons to challenge a voter initiative or candidate’s place on the ballot, and a faulty notarization is low hanging fruit. In 2012, for example, an incumbent South Dakota state representative almost lost his place on the ballot because his challenger discovered that the representative had notarized his own nomination petition.

If you notarize for a political organization, even the appearance of bias can pose a problem. A politically active Notary might want to sign a ballot petition for a cause they strongly support. However, the petition with the Notary’s signature could be rejected if the Notary also notarizes the signature of the person circulating the petition. Earlier this year, Maine enacted a law prohibiting any Notary employed by petition organizations from notarizing signatures on or certifying election petitions.

Although each of these fields poses distinct challenges for Notaries, the common rule to follow is to obey your state’s Notary laws regarding conflict of interest. And if you aren’t sure if there’s a conflict, stop the notarization until you can get help from a qualified source like your state Notary office or the NNA Hotline.

David Thun is an Associate Editor at the National Notary Association.

1 Comment

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Cheryl Kaser

07 Jan 2019

Since when does notarization assure anyone that the transaction is LEGAL?

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