Even corporations with careful political law compliance practices can be caught off guard when they learn that an employee is running for public office. The corporation may have a good understanding of what the corporation's obligations and restrictions are in the political arena, but not fully know how to handle the compliance issues stemming from an employee's personal candidacy.

Covington's Election & Political Law Group has helped many corporations navigate this situation involving employees running for federal, state, and local offices. This alert describes three practical steps that corporations should take to ensure they are complying with the relevant campaign finance and ethics rules.

Step 1:  Establish Political Law Compliance Policies

While most corporations have a code of conduct that addresses high level political law issues such as avoiding bribery or other types of public corruption, we recommend establishing detailed, standalone policies on political law issues. Political law compliance policies should, at a minimum, address compliance with lobbying laws, gifts to government officials, and corporate and personal political activities. These focused policies help ensure that employees are made aware of the common traps in this space and when to request approval for specific activities.

With regard to the personal political activities of employees, these policies make it clear that employees are free to engage in political activities in their personal time and use their personal funds. This allows employees maximum freedom in this space without implicating compliance concerns for the corporation. These policies help educate employees on what types of activities implicate laws regulating elections and campaigns and how best to keep personal activity separate from work activity. In crafting a policy, the corporation should be aware that some jurisdictions place restrictions on an employer's interference with or control of an employee's political activities, and therefore the policy should be neutral with regard to the particular political views.

If an employee decides to run for public office, the policies provide a foundation upon which to build a compliance plan for each particular situation. While the laws that apply to an employee's political campaign will change depending on the specific jurisdiction of the office they seek, the policies will help create a consistent treatment of employees by the corporation.

In addition to addressing the activities of an employee running for political office, the policies will help ensure compliance by the employee's coworkers. By restricting certain political activities using corporate resources, or requiring prior approval before engaging in certain political activities, the policies should help avoid inadvertent campaign finance violations by someone who just wants to be helpful and support one of their coworker's campaigns during work time.

Covington has helped write political law policies for a number of corporations and trade associations. If you have questions about implementing a new set of policies, or if you would like a close review of existing policies, you can reach out to a member of our political law team.

Step 2:  Discuss the Ground Rules with the Employee

Recognizing that running for office is a permissible personal decision by employees, it is important that an employee deciding to run understand and avoid the common compliance pitfalls. A discussion with the employee on these general guardrails can help avoid issues for the corporation and for the employee's political campaign. Here are a few talking points to guide this discussion:

• Keep it in your free time. Your activity as a candidate for office or, if elected, an officeholder should be conducted outside of the company's offices and either on vacation time or during non-work hours.
• Don’t reduce your normal level of work for the company. Your candidate/officeholder activities should not reduce the routine level of work you provide to the company.
• Use only your personal devices for your candidate/officeholder activities. You should use your personal laptop, tablet, phone, and email address for communications and other campaign/officeholder work.
• Request time off if your candidate activities become more substantial. If your personal campaign activities reach a level where it reduces the usual level of work you provide to the company, and you are unable to make up this work in a reasonable time, you should talk through options with your supervisor. You could request vacation time, an unpaid leave of absence, or a part-time schedule with corresponding reduction in your compensation based on your reduction in services. The company will be required to treat this situation as it would any request for time off for personal reasons or non-political activities. If a leave of absence or schedule change is granted, in some cases it may be necessary to temporarily reduce or eliminate benefits (such as insurance and retirement benefits). *Note that this point only applies if it would be permissible for company employees in non-political situations.
• Don’t ask your colleagues to help with your candidacy or officeholder duties. You should not task others that you work with, including administrative staff, for help with any of your campaign or officeholder work.
• Don’t seek reimbursement for your candidate/officeholder expenses. You should not submit expense reimbursement requests to the company for your personal campaign or officeholder work.
• Don’t use the company’s supplies or resources for your campaign/officeholder activities. You should not use other resources at the company in connection with your personal campaign or officeholder work (for example, computers, telephones, printers, copy machines, envelopes, postage, etc.).
• If elected, abide by the jurisdiction's rules on conflicts of interest, recusal, and outside income. Most jurisdictions have detailed ethics rules for elected officials that attempt to ensure the integrity of the official decision making process. These may include filing financial disclosure reports indicating your employment with the company, recusing from decisions that may be related to the interests of the company, or limiting outside employment that is substantially related to the business that comes before the particular office. It is important to learn and comply with these rules.
• Raise any questions with the Legal/Compliance Department. If you have questions about any of the items described above, please raise it with a member of the Legal/Compliance Department before engaging in the relevant activity or decision.

The last point is important. Many of these issues are not obviously right or wrong and the answers are likely to be different in different jurisdictions. Creating an atmosphere where the employee is comfortable raising questions when a situation is unclear may help avoid inadvertent mistakes. It will also allow the corporation to raise these issues with outside political law counsel to ensure careful compliance.

Step 3:  Evaluate the Compliance Issues if the Employee Is Elected

As noted in the previous section, if an employee is elected to public office, new rules will apply. The employee will likely be subject to detailed ethics rules that attempt to prevent conflicts of interest in their official decisions or undue influence through gifts from interested parties. It is important to understand these rules even before the employee is elected to prepare for the impact on corporate activities. The employee may be required to recuse from decisions related to the corporation, or that involve work they do for the corporation. If the employee's work involves interactions or engagement with the public entity for which they are running, this could have a significant impact on their job duties for the corporation, the public entity, or both. These rules may apply regardless of whether the employee leaves the corporation for their new public office role or stays with the corporation and acts as a part-time officeholder.

In addition to conflicts of interest and recusal rules, the employee may need to file public financial disclosure reports. These reports can be detailed and often try to capture all financial involvement that an outside entity might have with the public official. The disclosures likely will cover not only salary information, but also certain benefits, such as ongoing retirement plans or stock ownership. In certain situations, the employee may need to divest certain stock holdings or end other financial ties to avoid ongoing conflicts issues. Depending on the employee's benefits package, this disentanglement process can quickly become complex and involve significant economic considerations for the corporation and the employee.

Finally, if the employee is elected to public office, the corporation should carefully evaluate any severance payments, bonuses, or other non-routine benefits offered to the employee—whether they are staying or leaving—to make sure they comply with the jurisdiction's ethics and campaign finance laws. It is common for jurisdictions to regulate or restrict certain payments made to individuals entering or serving in public office to avoid conflicts or the appearance of a loss of impartiality by the official. In fact, even if an employee leaves the company to run for office, such special payments made before or during their campaign could be seen as an improper effort to help fund the employee's campaign. These are usually fact-based evaluations that look at the specific payment offered and whether the corporation provides similar payments to other similarly situated individuals.

For all of the considerations discussed above, it is best to understand the scope and impact of the relevant rules early in the process to avoid unnecessary surprises. Covington has advised a number of clients on how to navigate this situation carefully, and can provide guidance based on the particular office sought by the employee.

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.