A Rookie’s Guide to Federal Lobbying Compliance: Four Key Risks for Companies Contacting Government Officials on COVID-19 Matters

A Rookie’s Guide to Federal Lobbying Compliance: Four Key Risks for Companies Contacting Government Officials on COVID-19 Matters

April 30, 2020, Covington Alert

As the impact of the COVID-19 pandemic spreads through every industry, companies that previously steered clear of Washington, D.C. may find themselves contacting the federal government for assistance. From communicating with Members of Congress about potential provisions of the CARES Act to requesting new forms of assistance from federal agencies that oversee their industries, these companies may find themselves subject to federal lobbying disclosure laws for the first time. This alert highlights four key risk areas for companies newly engaged in federal government outreach.

Triggering Lobbying Registration

With a dramatic increase in communications between corporate officers and officials and staff in Congress and the administration, some companies may be unknowingly triggering requirements to register with Congress under the Lobbying Disclosure Act (“LDA”). That law requires a company to register and file regular reports when any individual employee at the company meets the definition of a “lobbyist” under the LDA. The test for determining who qualifies as a lobbyist is two-pronged:

1. Has the employee made two or more federal lobbying contacts during his or her employment by the company? and

2. Has that employee spent 20% or more of his or her work time engaged in federal lobbying activities during any three-month period?

An individual satisfies the two-contact threshold if he or she has two communications (including emails, calls, and in-person meetings) with “covered” government officials on behalf of the company concerning, among other things, any program, policy, or position of the U.S. Government, federal legislation, regulations, contracts, grants, loans, or nominations. Covered officials include Members of Congress and Congressional staff, all officers and employees of the Executive Office of the President, other senior leaders in the executive branch defined in the LDA, senior military officials, and “Schedule C” political appointees. For purposes of calculating the 20% time threshold, the LDA considers time spent making the lobbying contacts and any time spent preparing for or supporting lobbying contacts—including by strategizing with trade associations, outside lobbying firms, and other employees, or researching and drafting materials to be used for a lobbying contact.

Given the intense lobbying taking place around federal bills and regulations governing COVID-19 response efforts and economic recovery, some CEOs and other corporate officers may inadvertently trigger registration even if they are based outside Washington or are not part of a company’s government affairs department. As a result, companies that have never previously registered under the LDA may find themselves subject to its requirements. Companies engaged on these issues should therefore consider implementing an internal tracking and reporting system to monitor the activities of corporate executives, public affairs employees, and others involved in government outreach during this intense period to identify whether LDA registration is required.

Complying with Reporting Requirements

Companies required to register as lobbying organizations under the LDA must also comply with the statute’s regular reporting requirements. On quarterly reports, registrants must disclose, among other information, the names of each company lobbyist, a good faith estimate of the company’s total lobbying expenses, the agencies or Houses of Congress the company lobbied, and the issues on which the company lobbied. The company itself and employees who are registered as lobbyists for the company under the LDA must also file semi-annual reports disclosing their political and politically-related contributions, as well as certifying that they are familiar with and have complied with the House and Senate rules governing gift-giving by registered lobbyists.

Companies registered under the LDA should develop a thorough tracking system to ensure that employees’ time is tracked and accurately reported. This system should ensure, among other things, that all employees engaging in federal lobbying activities—including employees who are not registered as lobbyists but who assist in lobbying-related work—track their time so that their compensation can be included in the lobbying expenses figure. Companies should also consider providing training regarding the LDA’s registration and reporting requirements to those employees who engage in lobbying activities.

Retaining Outside Lobbying Firms

For companies hiring an outside lobbying firm for the first time, due diligence is essential. A company may find itself ensnared in investigations and enforcement matters, and subject to negative press and reputational harm, if the company’s outside lobbying firm is alleged to have engaged in unethical conduct on the company’s behalf.
Companies seeking to retain an outside lobbying firm should carefully vet the firm and its principals for prior compliance issues, with particular attention paid to alleged lobbying, gift rule, campaign finance, or criminal violations. Companies should also include language in their consulting agreements with outside lobbying firms requiring those firms to agree to comply with the LDA’s registration and reporting requirements, as well as rules governing gifts to federal officials.

Giving Gifts to Members of Congress

Companies that retain or employ lobbyists are subject to enhanced restrictions on giving gifts to Members of Congress and their staff. For purposes of these rules, “gifts” include food, beverages, meals, tickets to events, transportation, and any other items of value. If a company is required to register under the LDA due to work on COVID-19 related issues or if a company retains an outside lobbying firm to lobby on these issues, the company should consider adopting policies or training for the relevant employees to ensure compliance with the enhanced rules governing gift giving that may apply.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Election and Political Law practice.