Pay-to-Play for New Jersey Public-Sector Labor Unions?

New Jersey’s pay-to-play laws are perhaps the most stringent in the country, with a web of overlapping laws, executive orders, and ordinances covering procurement contracts and redevelopment agreements with all levels of government. As the law stands now, labor union collective-bargaining agreements are not covered by any of these pay-to-play restrictions. (Governor Christie issued an Executive Order in 2010 that would have expanded existing pay-to-play restrictions to cover labor unions, but this Executive Order was struck down because it didn’t advance any then-existing legislative act or constitutional mandate.)

But there have been renewed calls in recent days to enact Senate Bill 341, which would limit the political contributions of those labor unions that enter into collective negotiations agreements with the State of New Jersey, or with New Jersey counties and municipalities.  Unlike current statewide Executive Branch pay-to-play restrictions, the proposed legislation provides for monetary penalties for violations. This legislation raises the possibility of a future amendment of New Jersey’s current statewide Executive Branch pay-to-play restrictions to provide for monetary penalties in the traditional procurement context as well. If passed, these new union pay-to-play restrictions would represent a profound transformation in New Jersey’s pay-to-play regime and for New Jersey politics as a whole.

2016 Presidential Conventions: What Congress Members and Attendees Need to Know

With the 2016 presidential conventions underway and as the November presidential election draws near, this post is part of a series on what different entities and groups need to know about their political activity as the 2016 election approaches. This post examines congressional gift rules that may be implicated during the conventions.

Congressional gift rules permit Members and staff who are convention delegates to attend convention events that are open to all convention delegates or to all delegates from their state or region.

Generally, Members of the House of Representatives and their staff may accept any gift paid for by the host cities (in this case, Cleveland, Ohio and Philadelphia, Pennsylvania). Additionally, a Member or staff person may accept a non-cash gift valued at less than $50 from any individual who is not a registered federal lobbyist, registered foreign agent, or an entity that employs or retains such individuals.

Impermissible, however, is Member or staff acceptance of a gift, provided by the host city, that was specifically or informally designated by a donor for distribution to Members or staff. The following non-exhaustive list of gifts may not be given to or received by Members of the House of Representatives or their staff:

  • Meals;
  • Entertainment;
  • Transportation;
  • Services; and
  • Anything of monetary value except as provided in the rule.

Staff and Members who are convention delegates may accept invitations to events and other gifts that are offered to all of the convention delegates or to, for example, all of the convention delegates from their state.

Additional general exceptions to the normal prohibition rules may also be relevant during the convention, including the widely-attended-event exception. This exception allows event sponsors to invite Staff and Members to attend an event that is attended by at least twenty-five individuals from outside Congress who are interested in a given issue and which is related to the official duties or representative function of elected officials.

As the 2016 conventions will be attended by many people subject to the congressional gift rules, it is important to keep these restrictions in mind as convention events are held.

Babatunde Odubekun, a summer associate at Genova Burns, assisted in the preparation of this post.

2016 Presidential Conventions: What Delegates and Attendees Need to Know

With the 2016 presidential conventions underway and as the November presidential election draws near, this post is part of a series on what different entities and groups need to know about their political activity as the 2016 election approaches. This post examines the rules governing contributions made to convention delegates under federal law.

Permissible Contributions to Delegates

Events and gifts paid for by the host cities (in this case, Cleveland, Ohio and Philadelphia, Pennsylvania) may be accepted by delegates. It is also permissible for a delegate to accept any gift paid for by any unit of federal, state, or local government. Delegates are also permitted to accept meals, lodging, entertainment, and transportation from a political organization in connection with a campaign or fundraising event that the organization is sponsoring.

Classification of Funds Raised and Spent for Delegate Activity

Funds raised and spent for the purpose of furthering delegate selection are considered contributions and expenditures made for the purpose of influencing a federal election. There are no limitations on the monetary amount of contributions from permissible sources to delegates for the purpose of furthering their own selection as delegates. Once selected, travel and subsistence expenses related to the delegate selection process and the national nominating convention are considered expenditures. Additional considerations may arise when a federal candidate or officeholder attends the convention as a delegate.

Who is Prohibited from Contributing to a Delegate?

Individual delegates may not accept contributions from sources prohibited from making contributions in connection with federal elections. These sources include:

  • Corporations (including banks, trade associations, and non-profit corporations);
  • Labor organizations;
  • Foreign nationals or businesses (except lawful permanent residents); and
  • Federal government contractors, such as partnerships and sole proprietors with federal contracts.

With the Republican National Convention underway and the Democratic National Convention is only a few days away, it is not too late for delegates and their potential supporters to be aware of the rules.

Babatunde Odubekun, a summer associate at Genova Burns, assisted in the preparation of this post.

New York State Issues Guidance on Prohibited Coordination with Super PACs

After Citizens United and its progeny paved the way for independent expenditure activity and unlimited contributions to Independent Expenditure Only committees (better known as Super PACs), one key question in campaign-finance law has become how to determine whether Super PACs are coordinating their activities with candidates, party committees, and their agents.

Although the FEC has issued guidance on what constitutes prohibited coordination under federal law, many states have yet to offer their own interpretation of the types of coordination that would be prohibited for Super PACs active in state or local elections. It is under this backdrop that the State of New York has defined for the first time what types of activities will give rise to a finding of prohibited coordination.

These factors include (but are not limited to):

  • Whether a candidate formed an entity that later makes expenditures benefitting the candidate;
  • Whether a candidate raised funds on behalf of an entity that later makes expenditures benefitting the candidate;
  • Whether an entity making expenditures benefitting a candidate is operated by former staffers or immediate family members of the candidate;
  • Whether a communication reproduces material prepared by a candidate’s campaign, such as b-roll footage;
  • Whether an entity making expenditures benefitting a candidate engages in strategic discussions with the candidate’s campaign regarding the campaign’s strategy;
  • Whether an entity making expenditures benefitting a candidate shares vendors or space with the candidate’s campaign; and
  • Whether a donor to a candidate also provides a material portion of total funding to an entity making expenditures benefitting the candidate.

As Citizens United develops from a new phenomenon to established law, it is likely that additional individual states will offer their own guidance on the definition of coordination. The state of New York is one of the first to establish factors for regulators to consider. New Jersey, through several bills currently under consideration in the Assembly, may be attempting to do the same. These types of definitions and the role that Super PACs may play will be felt in the 2016 presidential election, New Jersey’s 2017 gubernatorial election, and beyond.

Allison Benz, a summer associate at Genova Burns, assisted in the preparation of this post.

Independence, Coordination & Super PACs in the 2016 Presidential Election

Yesterday we celebrated Independence Day. In the next three weeks, the Nation will focus on the Republican and Democratic National Conventions. We cannot turn on the television without catching a political ad. Some ads will be run by the candidates themselves. Based on recent reports filed with the Federal Election Commission (“FEC”), there is a good chance that many ads will be run by Super PACs.

Although Super PACs are required to disclose their donors, it is not always clear who is behind a Super PAC ad and whether a Super PAC is truly independent from a candidate, a party or their agents. The FEC has, therefore, adopted a three-prong test to determine whether a Super PAC is acting independently and is, therefore, entitled to receive unlimited contributions.

Under the FEC’s coordination test, when an election-related communication (content prong) has been paid for by a third-party (payment prong), the FEC will ask the following questions (conduct prong) to determine whether the ad was coordinated:

  • Was the communication created, produced or distributed at the request or suggestion of the candidate, party or their agents?
  • Was the candidate, party committee or their agents materially involved in decisions related to the ad’s content, intended audience, mode of communications, etc.?
  • Were there substantial discussions between the Super PAC and the candidate, party or their agents?
  • Does the Super PAC share a common vendor with the candidate, party or their agents?
  • Does the Super PAC employ an employee or independent contractor who worked for the candidate or party committee during the previous 120 days?

Because proving an ad was not coordinated, isn’t always as easy as 1-2-3, it is not too late for Super PACs involved in the 2016 presidential election to develop policies, procedures and protocols to help protect against potential allegations of coordination.

New York State Announces Broad Set of Ethics and Campaign-Finance Reforms

Late last week, New York Governor Andrew Cuomo and State legislative leaders announced agreement on a broad set of ethics and campaign-finance reforms focused on increased disclosure, transparency, and public trust.

Pursuant to this reform package:

  1. Super PACs (also known as Independent Expenditure Committees) may make and receive unlimited contributions so long as they do not coordinate with a political candidate. New York’s agreement expands the definition of coordination in this context to include the retention of a common vendor, the employment of a candidate’s former staffers, and the sharing or rental of common space. This agreement also increases disclosure requirements for Super PACs.
  2. Any public officer convicted of corruption is precluded from collecting a public pension.
  3. New disclosure requirements will be put in place for political consultants who represent both political officeholders or candidates and also private-sector clients with government business.
  4. Various reporting thresholds have been lowered under the State’s lobbying laws, including a reduction from $50,000 to $15,000 of the reporting threshold for organizations that lobby on their own behalf.
  5. 501(c)(4) social-welfare organizations are permitted to engage in political activities so long as political activity does not become the primary purpose of the organization. In contrast, 501(c)(3) charitable organizations are strictly prohibited from engaging in any political activity. Under New York’s agreement, 501(c)(4)s will be required to disclose funding and support received from 501(c)(3)s.  Additionally, a 501(c)(4) will be required to disclose its funding sources if they engage in political activities.

Corporate Political Activity, Reputational Risk Management and the 2016 Federal Election

As the 2016 presidential primary season concludes, we are quickly approaching the summer conventions and the November presidential election. With the political contests becoming more heated, this post is part of a new series on what different entities and groups need to know about their political activity as the 2016 election approaches.

The 2016 presidential election poses unique challenges for companies and organizations. As we discussed here and here, both for-profit and not-for-profit corporations need to be mindful of their involvement in the electoral process. Corporations also need to make sure that their employees are not improperly using corporate resources for individual political activity. While it is easy to develop a policy prohibiting employees from using copy machines, conference rooms and other organizational resources in connection with federal political activity, it is not as easy to measure the potential reputational risk associated with their activity.

What if the CEO of the company decides to hold a political fundraiser for one candidate over the other?

The CEO of Intel “took heat” over an event that he was planning to host for Donald Trump. The event ultimately got canceled because customers were questioning whether the event signaled that Intel supported Donald Trump.

What if your organization decides to support one candidate over another by participating in independent expenditure activity?

Target faced backlash in 2011 when it supported an organization that in turn supported a candidate that many considered a bigot. The support drew criticism from customers, celebrities with products in Target stores and shareholders alike.

What if your connected federal PAC fails to get shareholder approval before making political contributions?

Corporations need to determine whether their company will suffer negative consequences if their connected federal PAC makes contributions to candidates that do not support the corporation’s overall goals and mission.

Many of these consequences are difficult to predict – it is not always clear at the outset how a decision to participate in an election as an individual, through independent expenditures or through a connected  corporate PAC will ultimately impact your organization and its reputation. Although hindsight is always 20/20, corporations need to be forward thinking so they do not find themselves at the center of political controversy.

New Jersey’s 2016 Primary: Potential Pitfalls of Per Election & Pay-to-Play Limits

New Jersey held its 2016 primary election on Tuesday, June 7, 2016. While most of the focus has been on the presidential primary, individuals and entities that contribute in connection with New Jersey state and local elections need to keep the following in mind:

  • New Jersey campaign finance law sets “per election” limits for contributions to candidate committees; however, the limit does not automatically reset the day after the primary election. Rather, the 2016 primary election cycle remains open until Friday, June 24, 2016 (candidates are required to file a 20-day post-election report with ELEC on Monday, June 27, 2016). So, any contribution made between the primary election and June 24, 2016 will count toward the 2016 primary and not the 2016 general. This is an important consideration if a contributor is concerned with pay-to-play compliance and wants to limit contributions to a particular candidate to no more than $300 per election.
    • If a contributor wants a contribution to count toward the 2016 primary, the contributor should make sure that the check arrives before June 24, 2016 and that the recipient committee will report the contribution in connection with the 2016 primary.
    • If a contributor wants a contribution to count toward the 2016 general, the contributor should wait to send the check after the June 24 “cut off” date to avoid any confusion (and the possibility of exceeding a pay-to-play limit).
  • New Jersey campaign finance law sets “per calendar” year limits for contributions to party committees, PACs and legislative leadership committees. So, if a contributor is concerned with pay-to-play compliance and wants to limit contributions to $300 or less, the limit does not re-set now that the primary is over.
  • Some New Jersey pay-to-play ordinances set “per calendar year,” “per contract” or “per election cycle” limits for contributions to candidates. Some even prohibit contributions in any amount during certain periods of time. So, if your company does business with a particular county or municipality or wishes to remain eligible for future contracts with a particular county or municipality, do not assume that because the 2016 primary election is over, it is now safe to write another check.

501(c)(3)s and the 2016 Federal Election: Do You Know What Your Employees Are Doing?

As the 2016 presidential primary season proceeds, we are quickly approaching the summer conventions and the November presidential election. With the political contests becoming more heated, this post is part of a new series on what different entities and groups need to know about their political activity as the 2016 election approaches.

There are many obvious benefits to earning the designation of a 501(c)(3) charitable organization—the organization is exempt from tax and donations are deductible. But the Internal Revenue Code places a key limitation on all 501(c)(3) organizations by prohibiting them from engaging in any political activity. Violation of this prohibition on political activity may lead the IRS to refuse or revoke 501(c)(3) status. A 501(c)(3) therefore must avoid any partisan activity that supports or opposes political candidates or political parties.

A 501(c)(3) generally MAY NOT:

  • Make political contributions (monetary or in-kind).
  • Issue a statement that supports or opposes a candidate (e.g., stand-alone statements, statements in newsletters, or material on a website).
  • Endorse a candidate.
  • Ask a candidate to sign a pledge on any issue.

However, a 501(c)(3) may generally engage in non-partisan activity that is related to the democratic process. Therefore, a 501(c)(3) generally MAY:

  • Engage in non-partisan election-related activities such as get-out-the-vote and voter registration drives.
  • Engage in limited lobbying (related to the mission of the organization), including ballot-measure advocacy.
  • Educate all candidates on issues within the purview of the organization.
  • Conduct non-partisan public-education and training sessions about participation in the political process.
  • Prepare and disseminate non-partisan candidate questionnaires and sample ballots.

However, the officers, directors, and employees of a 501(c)(3) retain the right to personally engage in political activity (just as we described in our recent post on political activity for corporations). A 501(c)(3) must simply be careful to avoid allowing organization resources (from mailing lists to letterhead) to be used for political activity or permitting individuals to engage in political activity that suggests the support or endorsement of the organization.

Corporations and the 2016 Federal Election: Do You Know What Your Employees Are Doing?

As the 2016 presidential primary season proceeds, we are quickly approaching the summer conventions and the November presidential election. With the political contests becoming more heated, this post is part of a new series on what different entities and groups need to know about their political activity as the 2016 election approaches.

One of the key principles of federal campaign-finance law is that corporations are prohibited from making political contributions to federal candidates, political action committees, and party committees. This means not only that corporations are prohibited from writing checks to federal candidates, political action committees, or parties, but that a corporation should not use its resources—or allow its resources to be used—for any federal election purpose (though some exceptions exist for a corporation’s federal connected PAC). This prohibition on the corporation’s activity must be balanced, though, with the individual political activity of a corporation’s employees. Although a corporation may not make federal political contributions, a corporation’s employees have a First Amendment right to engage in the political process.  To maintain this balance, corporations should keep the following guidelines in mind:

Employees MAY:

  • Make individual political contributions with personal funds.
  • Volunteer or work for a political campaign on their own time.
  • Run for political office.

Employees may NOT:

  • Be reimbursed for any political contributions they make.
  • Use any corporate resources (including letterhead, printers, conference rooms, and mailing lists) for federal-election purposes.
  • Provide even individual volunteer services for a federal campaign during normal business hours—the corporation’s time is itself a resource of the corporation.
  • Take even unpaid leave to work or volunteer for a federal campaign if the leave is granted in a way that demonstrates a preference for one candidate or political party.
  • If an employee runs for political office, the corporation may not endorse the candidate or indicate support through such avenues as a newsletter or website.

Because the scope of what is prohibited is so broad, it is important for corporations to adopt and enforce political-activity policies to ensure that employees are not unknowingly making prohibited political contributions by performing work for a political campaign during paid business hours or by using corporate resources for political purposes. Similarly, corporations should have a plan in place to govern how and when employees are entitled to take unpaid leave to work or volunteer for a federal campaign.

Corporations may be faced with navigating these and other challenges in this heated political season. It is therefore important for corporations to begin thinking about how to navigate between the federal prohibition on corporate political contributions and the First Amendment right of a corporation’s employees to engage in the political process.

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