HR Risks for Corporate Political Action

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Changes in Corporate Political Activity Laws Present HR Risk

Many corporations are not aware of the risks and compliance obligations associated with their government relations and political activities, even as they are enjoying expanded rights to speak in elections, thanks to a recent U.S. Supreme Court ruling. In January 2010, the Court affirmed that the First Amendment restricts Congress? ability to limit speech in elections ? including speech of corporations. While the right to expressly advocate for candidates will doubtless make corporations? advocacy efforts more effective, it must be managed as part of a cohesive policy incorporating other political activity including endorsements, lobbying, fundraising and the political activities of employees. Unmanaged political activity, even employee actions of which decision-makers are unaware, could present compliance obligations and liability risks.

U.S. campaign finance laws set strict limits on political activity, including a prohibition on contributions by corporations to political parties and candidates (except through a highly regulated separate segregated fund). Corporations may make their own independent expenditures for political advertisements; however, any such communication that is ?coordinated? with a candidate or political party results in a prohibited in-kind contribution to the candidate. Campaign activity of employees, furthermore, could result in an ?in-kind? contribution to a candidate by the corporation, which is a violation of federal (and possibly state) campaign laws. This could subject the violator to very serious penalties ? including imprisonment and fines.

The risks are not obvious. An independent expenditure is not merely a check written to pay for a television ad to elect or defeat a candidate. Providing meeting space, opportunities for appearances on corporate property by candidates, paid employee time, use of corporate property such as telephones or office supplies and other activities could potentially result in a prohibited expenditure.

Corporations should have policies in place that clearly restrict political activity on behalf of the corporation to authorized personnel, and track that political activity to avoid violations of campaign finance or lobbying laws. It should be clear that employees cannot use company time, property or equipment for personal political activities without authorization from the company?s compliance officer or legal department. Corporations may be operating in a number of jurisdictions with inconsistent and oftentimes conflicting laws, and employees may not be aware of various registration requirements, reporting requirements and restrictions. Political spending, political contributions, endorsements and even gifts to charitable organizations that involve a public official can create not only legal but also public relations risks for the corporation. An appropriate compliance program can help lessen the risk of a violation and provide a defense to the corporation in the case a mistake is made.

For more information for implementing a political activity compliance program or updating your employee handbooks with policies on political activity, contact the Steptoe & Johnson attorneys listed on this update.

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