The start of September marks the end of summer, a return to school, and a renewed focus on politics. While readers of this publication know that politics is a year-round endeavor, the average person tunes in to the show for only the two months preceding a presidential election.

This occasional focus highlights the need for every business to adopt a political-activity policy as part of its larger HR handbook to ensure compliance with the law. Just because a business isn’t directly participating in the political process doesn’t mean that its employees take the same approach. It is often the people who are not usually involved in the political process that can cause concerns when they start making political contributions or otherwise interacting with political candidates or elected officials.

The specifics of the policy can and should be adjusted depending on the size and nature of the business, but there are a number of common policy elements that are appropriate for all companies.

Corporate Political Activity

Corporations may make political contributions in certain jurisdictions (for example, New Jersey and New York State) while corporate contributions are prohibited in other jurisdictions (Pennsylvania, New York City and federal elections). These laws apply not only to direct contributions of money but the use of any corporate resources—such as conference rooms, support staff and communication services—to support a political recipient.

In those jurisdictions where corporate contributions are prohibited, this should be spelled out in a policy document.

In contrast, in a state like New Jersey, where corporations may make political contributions, the business entity needs to implement policies and procedures for such activity. Does the CEO need to approve all corporate political contributions? What is the role of Government Affairs? The answer will depend on the specifics of the business. But failure to put policies in place may result in unauthorized corporate political activity that exceeds limits and undermines the business objectives of the company.

Individual Political Activity

While a company’s employees can generally support the candidates and parties of their choice, a business has a right to ensure that an individual’s political activity does not interfere with the employee’s work responsibilities. A political-activity policy should therefore address and articulate the company’s reasonable expectations for employee political activity. This may include guidelines on the use of corporate resources for individual political activity, restrictions on engaging in political activity on behalf of or in the name of the company, and policies on the appropriate separation between individual political activity and work responsibilities.

It is also important that any policy regarding individual political activity be applied in a fair and neutral manner. A company that lets employees engage in political activity during a lunch hour for candidates of one party but not another may be courting legal liability and may even be making prohibited political contributions.

Pay-to-Play Compliance

Many states, including New Jersey, have adopted laws that impose reduced contribution limits and heightened disclosure requirements on businesses that hold or seek government contracts. It is directly in a company’s business interests to ensure that the contributions made by its covered individuals do not jeopardize eligibility for government contracts. Contributions made by the business entity and by its shareholders or partners, officers, and directors are often subject to these reduced limits.

Failure to comply with these pay-to-play laws can cause significant implications. In 2017, a New Jersey paving company was rendered ineligible for New Jersey Department of Transportation contracts worth in excess of $7 million because the company had made a $500 contribution to a county political party committee, which was in excess of the applicable pay-to-play limits at the time.

Ethical Interactions with Government Officials

There has been an increased focus in recent years on the application and enforcement of government-ethics and gift rules. Companies are advised to have a policy in place to provide guidance on these and related matters.

The laws regarding gifts to public officials can be complex and vary on the federal, state and local level. The giving or receiving of gifts or entertainment must never be done with the intent to influence the official duties of the recipient. Similarly, any gift that might create the appearance of an attempt to influence the official duties of the recipient is also prohibited under applicable law.

Compliance Tip: When it comes to political activity, what a business doesn’t know can hurt it. The time to prepare a political-activity policy is now, to ensure that your business is protected during the heated course of the 2024 presidential election, and in preparation for the 2025 gubernatorial race.

Avi D. Kelin is a founding partner of PEM Law LLP, and chairs the firm’s Political Law and Non-Profit Law practices. He helps businesses, organizations, individuals, and political organizations to influence policy while complying with the law.

This column is for educational and informational purposes only and is not intended and should not be construed as legal advice. It is recommended that readers not rely on this column, but that professional advice be sought for individual matters.