Like other good citizens, owners, officers and employees of waste collection companies frequently have occasion to interact with government officials and politicians. These interactions run the gamut from the sharing of personal views on public or community issues to communications necessary to deal with the intricacies of government regulation. This article addresses the campaign finance, lobbying and gift laws that should be considered before interacting with elected officials and political candidates. (The law differs in each state and in many localities. The goal of this article is to stimulate thinking about relevant issues; seek legal counsel as to the particular requirements in your jurisdiction.)
When considering whether to make a political contribution, various questions should be asked. First, what office is the candidate seeking? How much is the legal contribution limit? Does it matter if the contribution is for a primary or general election?
Most states (and many localities) have limits on contributions to candidates. Generally, the limit is based on the office sought, with separate limits for primary and general elections. The limits vary widely. For example, for statewide offices, individual limits range from Arizona's $140 for a publicly financed candidate (which covers both primary and general elections) to New York's $37,800 limit for a candidate in a general election to Pennsylvania's no limit whatsoever.
May a political contribution check be written from a business account? It depends. While a sole proprietor may be treated like any other individual, about half the states ban contributions from corporations. The rest allow corporate contributions, although often at different limits than those covering individuals.
Large shareholders should learn whether the contribution limit includes an affiliation or single-source rule, like Los Angeles has, that would subject both the individual's and the corporation's contributions to a single contribution limit. Moreover, a partnership or limited liability company will not necessarily be treated like a corporation.
In January, the U.S. Supreme Court struck down limits on corporate spending in federal elections. That case (Citizens United v. FEC) didn't apply to contribution limits, but rather addressed indirect assistance to candidates — also known as "independent expenditures" — such as paying for radio or TV spots to promote or oppose a candidate. Among the various factors to consider before deciding whether such ads would be in the interest of your business, there's one very large legal consideration. Should the advertising be "coordinated" with a candidate, it will be treated as a contribution, likely subject to contribution limits, and, if so, not protected under the Citizens United ruling.
What about asking employees to make political contributions? This can be quite complicated. If the employee feels coerced, bad feelings may result. Or, worse, these checks could look like bundled contributions or perhaps even be seen as an illegal conduit for avoiding a corporate or individual contribution limit. The press is always looking for scandal, and the company could be burnt if the question arises.
It may be less controversial to simply form a political action committee (PAC). That way, there will be public registration and regular disclosure. However, PACs entail a tremendous amount of paperwork for compliance.
What if the company is seeking a contract to collect waste from state offices? This potentially brings into play a variation on campaign finance regulation, commonly referred to as "pay-to-play" laws. In other words, when might a political contribution disqualify a company from receiving a government contract?
In recent years, a number of states and localities have adopted "pay-to-play" restrictions. Some of these laws disqualify companies from government contract opportunities if certain political contributions are made, or solicited, within certain time periods. For example, a company seeking a state contract in California, Colorado, Connecticut, Hawaii, Illinois, Kentucky, New Jersey, New Mexico, Ohio, South Carolina and West Virginia (and maybe in some other places by now) should take a look at the law, specifically:
- What level of government contracts are covered (state only or also local)?
- What kind of contracts are covered (just request for proposals or also closed bids)?
- Does the law place contract eligibility in jeopardy or just require disclosure?
- Whose contributions are covered (company, shareholder, officer, other employee, spouse, affiliated entities, PACs)?
- Which contribution recipients are covered (only officeholders with authority over the contract or all candidates for specified offices)?
- What are the relevant time periods for covered contributions and ineligibility?
What is lobbying? It's not necessarily just about influencing legislation. About half the states regulate attempts to influence the award of state contracts, also known as "procurement lobbying." Lobbying for municipal contracts is also regulated in various municipalities, such as New York City.
If a communication is treated as lobbying, there are several possible implications. First, there will be a registration requirement. When does that kick in? Before or after the lobbying commences, or only after a threshold level of lobbying related expenses is exceeded? Who registers? Just the individuals making the communication, or should the registration instead name the company as a lobbyist and list the employee engaged in lobbying on its behalf? There also may be a registration fee.
After registration, there will be deadlines for filing periodic public reports. These identify lobbying activities and costs. In some jurisdictions, lobbyists (and also their principals or clients) are prohibited or specially restricted from making campaign contributions or gifts to public officials. Further, the company may not be able to pay a bonus for winning the state contract, as many states prohibit payment of contingency fees to lobbyists. Indeed, in New York, a registered lobbyist may not even communicate with the contracting agency once the RFP is issued because of a "restricted period" during which lobbying communications are prohibited.
What about buying lunch for a government employee? In many instances, the payment is treated as a gift to the official and therefore restricted by an applicable gift law. First, consider whether the gift law covers the recipient in his current government capacity. If so, what are the exceptions? For example, is there an exception for this kind of meal or because the cost falls below a statutory threshold?
Is a regulated gift merely subject to disclosure (and disclosure by whom, the donor or recipient?), or is it prohibited altogether? Does it make a difference that donor and recipient have been friends since childhood? On the other hand, does it make a difference that the donor's company is seeking a government contract or if he is treated as a lobbyist? And, if prohibited, who is the violator: donor, recipient, or both?
There's potentially a lot to digest but here's one key point to take away: The time for learning the law is before the interaction, not after.
Laurence D. Laufer is a partner with the Genova, Burns & Giantomasi law firm in New York. He can be reached at [email protected]. Bonnie B. Fire, an associate with the firm, assisted in the preparation of this article. The two contribute to the firm's blog at www.corporatepoliticalactivitylaw.com.
Want to Know More?
Laurence D. Laufer will speak in further detail on this issue at the "Advocacy Before Government Officials: Learn the Rules" session at WasteExpo on Tuesday, May 4. The session, which is part of the Community Relations Track, will run from 1:45 p.m. to 3 p.m.