As federal and state governments grapple with the health and economic implications of the coronavirus pandemic, business leaders are at the center of the discussion. The White House holds frequent roundtables with CEOs and business owners. State governors have formed task forces comprised of business leaders to advise on strategies for reopening businesses in their states. Public-private sector partnerships have been formed to expand coronavirus testing and conduct contact tracing. Daily phone calls occur between business leaders and government officials.
Given the stakes and pace of government action, it can be easy to overlook that these activities can trigger registration and reporting obligations under applicable lobbying laws. While lobbying laws vary considerably, many are quite broad and often cover efforts to influence legislation, executive action, public policy, and even grants and contracts. Failing to comply with lobbying laws can expose a company to civil and criminal penalties. In addition, if lobbying activities are not carefully and accurately described, lobbying reports can result in damaged relationships with shareholders and customers, and harm a company’s brand.
How do you discuss lobbying laws with company executives?
Here are some questions and answers:
1. Do I have to register as a lobbyist?
No senior executive relishes the idea of registering as a lobbyist. Fortunately, in many jurisdictions, there are thresholds for registering that executives will not meet. For instance, under the federal Lobbying Disclosure Act, a corporate executive who spends less than 20 percent of his or her total work hours over three months on “lobbying activities” (i.e., direct communications with covered legislative or executive branch officials plus supporting research, preparation, and planning) is not considered a “lobbyist.”
On the other hand, in some states and municipalities, one email or call can trigger registration, and registration may have to occur before any communications aimed at influencing a public official. As we discussed on our blog, former Obama Administration official, David Plouffe, learned this lesson the hard way when he sent a single email to the Mayor of Chicago requesting help with regulatory issues for his then-employer. The email, which was sent to the mayor’s personal email account, was revealed by an open records lawsuit. The Chicago Board of Ethics fined Plouffe $90,000 for failing to register as a lobbyist.
2. Will information be disclosed about my meetings and compensation?
Even if a senior executive does not qualify as a lobbyist, lobbying reports filed by a company or its registered lobbyists will likely have to disclose information about meetings the executive has with government officials. Under the federal lobbying law, a corporation employing one or more lobbyists must file quarterly reports disclosing the government agencies they have lobbied, as well as whether they lobbied the U.S. House or Senate, but filers do not have to include specific meeting dates or the names of the officials being lobbied. The reports must, however, include the amount spent on lobbying in the calendar quarter, including the amount of compensation correlating to the time spent by non-lobbyist employees on lobbying activities. This amount may be derived by using any good-faith method, such as applying an hourly rate of pay to the approximate number of hours the executive engaged in lobbying activity. The reported expenses must also include payments for hotels, meals, and airfare relating to the lobbying activity. Note that some cities and states require salaries and other expenses to be itemized.
3. Who gets to look at lobbying reports?
The focus of lobbying laws is on making the process of government decision-making more transparent. Lobbying reports are publicly available online and can be read by the press, watchdog groups, competitors, and shareholders. As such, lobbying reports not only fulfill legal obligations but also serve an important public relations function. They should be treated as part of a consistent narrative about the company’s priorities and objectives. In addition, many jurisdictions post information about fines and other sanctions for violating lobbying laws.
4. What about grants and contracts?
Lobbying laws typically do not cover communications made in the context of a formal bidding process. Many states, however, have “procurement lobbying” laws that require registration and reporting for communications outside of the formal bidding process, such as efforts to “talk up” a product or service, open doors for line salespeople, or encourage a state official to issue a request for bids. Violations can result in fines and even disqualification from the procurement at issue, as well as future procurements. The federal lobbying law also applies to efforts outside of formal processes to influence the award of a contract, grant, or loan.
5. Does lobbying registration affect gift rules or political contributions?
Yes, in many jurisdictions it will. For instance, political appointees of the Trump Administration are prohibited from accepting any “gift,” with limited exceptions, from individual lobbyists and the organizations that employ them. In California, lobbyists are prohibited from giving gifts valued at more than $10 a month to government officials. The gift limit on Virginia lobbyists is $100 annually, which applies to companies that have or are seeking contracts with state and local agencies, along with their officers, directors, and owners. In Maryland, lobbyist-employers must file periodic reports disclosing corporate political contributions as well as personal political contributions by officers, directors, and others. An increasing number of states also bar lobbyists and their employers from making or soliciting political contributions during legislative sessions.
6. What if I am only responding to a request for information?
Not every communication with government officials constitutes lobbying. For example, there are 19 types of communications that are not considered “lobbying contacts” under the federal Lobbying Disclosure Act. These include testimony before a committee or subcommittee of Congress, administrative requests, such as a request for a meeting or the status of a matter (so long as the request does not include an attempt to influence a covered official), and communications made to an agency official regarding a civil, criminal, or administrative proceeding. There is also an exception for information provided in response to a request by a covered executive or legislative branch official, but this exception applies only when the response is communicated in writing. This nuance illustrates how these exceptions can be quite specific and are not always intuitive. State and local lobbying laws also contain exceptions, but these vary widely and should be carefully reviewed.
7. Can’t we leave compliance to our registered lobbyists?
What lobbyists do best is lobby. While some individual lobbyists prepare and file their own lobbying reports, reports filed on behalf of a company, particularly reports disclosing activities by business owners and executives, should be handled like any other compliance function. The determination as to whether a company official is a “lobbyist” under applicable law can involve subtle interpretations, both factual and legal. In addition, most reporting regimes require tracking of time and expenses by non-lobbyist employees who work behind-the-scenes to support the registered lobbyists or speak directly with government officials. Finally, lobbying reports are subject to random audits in many jurisdictions and expose the company to fines and reputational risks. When the stakes for companies are high, as they are with the response to the COVID-19 crisis, it is important that they are complete and accurate, and describe activities in a careful manner.
Venable advises companies, trade associations, and other organizations on lobbying law compliance. If you need assistance in complying with these laws, please reach out to Venable’s Political Law Practice.