United States and California flagsThe Fair Political Practices Commission – the agency responsible for administering and enforcing California’s campaign finance and lobbying laws – has unanimously approved a rule change intended to force more consultants to register as lobbyists and strengthen the agency’s hand in enforcing state lobbying laws. The rule will take effect September 16, 2016.

FPPC chair Jodi Remke has called this the “first step” in cracking down on “shadow lobbying,” and has indicated that the agency intends to focus on lobbying compliance in the coming year.

California lobbying law recognizes two types of lobbyists: in-house lobbyists, who lobby on behalf of their employer, and contract lobbyists, who lobby for a client. This change affects only contract lobbyists.

Who is a contract lobbyist? California requires an individual to register as a lobbyist if he or she receives (or is entitled to receive) $2,000 or more in a calendar month (other than reimbursement for reasonable travel expenses) to communicate directly with any covered official for the purpose of influencing legislative or administrative action, and to prepare for those direct communications.

In practice, a contract lobbyist might engage in a range of activities, only some of which involve direct communication with officials. Prior to the new rule, the FPPC had little recourse when individuals claimed that less than $2,000 of a monthly retainer was devoted to direct communications with officials to influence legislation, with the rest attributable to non-lobbying activities, such as strategic planning, grassroots campaigns, or public relations.

The new rule’s rebuttable presumption. Under the new rule, when an individual receives or is entitled to receive more than $2,000 a month for services that include direct communications with a public official to influence government action, the FPPC will presume that the entire payment was for direct communications with covered officials and therefore requires registration – unless the individual can produce evidence to support a different allocation. Such evidence may include testimony, records, bills, and receipts establishing that less than $2,000 of any monthly payment is allocable to lobbying activity.

For example: An individual received $3,000 from a client for work during a calendar month. He spent 40 hours working on the client’s issues, and he estimates that he spent 10 hours having direct communications with covered officials and preparing for those meetings. He estimates that 25% of his compensation, or $750, is attributed to direct communications and thus determines that he is not required to register. Under the new rule, unless the individual can produce records to substantiate this allocation, the FPPC will presume he is required to register.

As a result of the new lobbying rule, it is important that consultants and others who engage in direct communications with California officials, but who do not meet the $2,000 per month threshold for lobbying registration, maintain records that substantiate their decision not to register.

Once a contract lobbyist registers, his firm is also required to register, and the lobbyist, firm, and employer are required to file quarterly disclosure reports. Lobbyists, lobbying firms, and employers are also subject to strict gift rules and campaign contribution restrictions.

Venable can help clients comply with California’s lobbying laws and create effective systems for recordkeeping and reporting.