While employers don’t have the leeway to control their workers’ views on political issues, in some states, they may have the ability to restrict certain political activities, such as making campaign contributions. Steve Brown of StarCompliance looks at the legal risks and compliance issues of workplace political expression, how companies can avoid conflicts of interest and how leaders can maintain corporate ethics.
As the 2024 election cycle heats up, the topic of political donations becomes increasingly significant in workplaces across the country, especially for human resources and compliance leaders. While contributing to political campaigns is a well-established right in democracies, it introduces complex challenges for companies, particularly those navigating regulatory landscapes or managing politically active employees.
Political donations by employees can lead to conflicts of interest and draw scrutiny on issues of compliance and corporate ethics. These can manifest as significant legal risks, potentially resulting in fines or sanctions if contributions are not properly monitored and reported. Additionally, unchecked political contributions might compromise business relationships or customer trust, especially if perceived as aligning the company with specific political agendas. Such alignments can inadvertently affect market position and overall corporate reputation.
Addressing these issues, along with other potential conflicts of interest among employees, involves navigating complex legal and compliance regulations. However, through a careful balance of oversight and respect for personal freedoms, businesses can safeguard both their interests and the democratic values they operate within.
The sticky situation of political donations
While any size donation can lead to compliance issues for businesses, small-dollar donations have the potential to be especially problematic, as they now outpace other contributions. In 2020, small-dollar donations, those less than $200, were the single biggest funding source in the presidential race, accounting for about 36% of all contributions, according to PIRG data.
Smaller contributions, although individually modest, can accumulate rapidly, significantly impacting a political campaign while remaining under the radar in corporate oversight. Furthermore, their frequent and numerous nature makes them easy to overlook in compliance reviews, increasing the risk of unintentional violations of campaign finance laws.
Gifts in kind, also known as non-monetary contributions, are another important aspect of political donations that businesses must manage carefully. These can include services, goods or other non-cash items provided to a campaign, which are subject to the same regulatory scrutiny as monetary donations. For example, a company providing free advertising space or event hosting for a political candidate is making a gift in kind. Like cash donations, these contributions must be carefully documented and reported according to the applicable federal, state and local campaign finance laws. The value of the gift is often assessed at its fair-market value and counts toward the total contribution limit permissible under the law.
Failing to account for an employee’s contributions or those of their family members — no matter the type or size — could result in fines or sanctions, as well as a loss of government contracts, customer trust and market share. Requiring preapproval of personal contributions is often a good place to start when managing political activities within a company. This policy allows businesses to maintain oversight of the political engagement of their employees, ensuring all contributions adhere to legal limits and company guidelines.
Preapproval processes help mitigate the risk of inadvertent legal violations that could arise from employees making donations that exceed regulatory thresholds or that could be seen as conflicting with the company’s interests or values. It’s a much more practical and compliant approach than imposing a ban on political donations altogether, which not only restricts employees’ rights but also runs the risk of violating labor laws in certain states or jurisdictions.
How to navigate political activities in the workplace
No company should fool itself into believing that employees won’t donate to their preferred candidates, or that those actions won’t come up in the office. It isn’t uncommon for employees to ask a colleague for contributions to a candidate or political party. To mitigate the risks associated with such activities and remain ethical, incorporate the following practices into your compliance processes:
Know the laws
Statutes concerning on-duty and off-duty conduct vary from one jurisdiction to the next, as do political expression and donations. Compliance and HR leaders need to understand whether what someone is saying or doing has an actual impact on the business. Be sure to review state and local statutes where your organization is operating, as well as federal guidelines, to help inform decisions around employee conduct.
The Federal Election Commission (FEC), for example, mandates that individual contributions to candidates during federal elections can’t exceed $3,300 per election cycle. This cap is applicable to both primary and general elections individually. On the state and local levels, the limits on contributions can differ significantly. While some states enforce stringent caps, others impose no restrictions at all. Regarding transparency, the FEC requires that any donations exceeding $200 for federal elections be publicly disclosed, typically including details, such as the donor’s name, occupation and address.
While federal laws set a baseline for political donations, state laws add another layer of complexity. Each state has its own set of rules. Here’s a broad overview of what’s legal in most states, along with some notable outliers:
Common legal frameworks
Contribution limits:
- Majority rule: Most states impose limits on the amount individuals and organizations can contribute to political campaigns. These limits are designed to prevent undue influence and promote fairness in the electoral process.
- Typical caps: Common caps range from a few hundred to several thousand dollars per election cycle. For instance, California adjusts its limits biannually based on inflation, ensuring that contribution caps remain effective over time.
Source restrictions:
- Corporate contributions: Many states, including Michigan and Pennsylvania, prohibit direct contributions from corporations to candidate campaigns. Instead, corporations often establish political action committees (PAC) to channel donations within legal limits.
- Foreign nationals: Contributions from foreign nationals are generally banned, aligning with federal restrictions aimed at preventing foreign interference in elections.
Disclosure requirements:
- Transparency measures: New York and Florida mandate regular reporting of contributions and expenditures. These disclosures typically include the donor’s name, address, occupation and the amount contributed, ensuring transparency and accountability.
- Thresholds for disclosure: While thresholds for mandatory disclosure can vary across states, a common figure is $200, mirroring federal guidelines.
‘Pay-to-play’ laws:
- Preventing conflicts of interest: To curb the risk of corruption, several states and municipalities have enacted “pay-to-play” laws. These regulations restrict or prohibit contributions from entities seeking or holding government contracts. New Jersey and Illinois are examples where such laws are strictly enforced to maintain the integrity of public procurement processes.
Contribution timing restrictions:
- Cooling-off periods: A number of states, including Alaska and Georgia, have implemented restrictions on when contributions can be made, particularly during legislative sessions, to prevent undue influence on lawmaking.
Notable outliers
No contribution limits:
- Unlike many states, Texas and Utah impose no limits on individual contributions to state candidates. This absence of caps allows for more significant financial influence by individual donors.
Strict corporate restrictions:
- Montana stands out for its stringent restrictions on corporate contributions. The state’s laws are among the toughest, prohibiting corporate donations to candidates altogether, reflecting a commitment to reducing corporate influence in politics.
Comprehensive disclosure and reporting:
- Known for its rigorous campaign finance laws, California requires extensive disclosure of campaign contributions and expenditures. The state’s Fair Political Practices Commission enforces these regulations, ensuring high levels of transparency and public accountability.
Educate employees
Chances are that the majority of your employees haven’t reviewed the company’s policies around political donations and discussions beyond onboarding. Use this year — and every subsequent election cycle — as an opportunity to refresh their memories on what’s acceptable. Provide training sessions on compliance and ethical considerations related to political activities both inside and outside of the organization.
Additionally, it could be useful to develop clear, accessible FAQs or guidelines on political activities that are readily available to employees via the company’s intranet or periodic internal newsletters. This ensures that employees have constant access to the information they need to make informed decisions about their political engagements, thereby reducing potential risks to the organization.
Reevaluate solicitation policies
Depending on the size of your organization, employees may hold vastly different views of the day’s events. Asking for a campaign pledge could elicit an argument if not alienate a portion of the workforce. So, it might be beneficial to require employees to ask permission from the leadership team before asking for donations, even when those donations don’t involve hot-button issues. Additionally, providing specific training or guidance on how exactly to approach donation conversations can be invaluable.
Such training should cover effective communication strategies that emphasize respect for differing opinions and encourage open, constructive conversations. It could also outline the potential repercussions of unsanctioned solicitations, both for individual employees and the company as a whole. By proactively setting these guidelines, organizations can prevent conflicts, reduce the risk of alienation among team members and maintain a harmonious workplace despite differing political beliefs.
Lead by example
Everyone has an opinion. Pretending to be neutral won’t fly with the modern employee. They’ll see through the ruse, often resulting in disengagement and distrust. With just 46% of employees trusting their direct managers, it’s crucial to navigate these discussions delicately and honestly. Lead by example by showing team members how to respectfully disagree with others in the company. Foster an environment where employees feel comfortable expressing their views without fear of reprisal or judgment. This approach not only improves trust but also encourages a culture of open communication.
Your leaders could benefit from training that equips them with skills to facilitate these discussions constructively. Providing tools and resources, such as guidelines for respectful communication and conflict resolution, can help managers lead these conversations more effectively. Regularly scheduled forums or team meetings where diverse opinions can be expressed and discussed in a structured manner might also be helpful. This proactive strategy ensures that discussions are handled with care and contribute to a more inclusive and engaged workplace. Additionally, emphasizing the value of empathy and understanding in leadership can help build stronger connections between employees and their managers, fostering a deeper sense of trust and cooperation across the organization.
As election seasons heighten emotions and tensions in the workplace, it is imperative for compliance and HR leaders to proactively manage the intersection of politics and professional conduct. The complexity of navigating political contributions, discussions and varying opinions requires thoughtful strategies that uphold legal standards while fostering a respectful work environment. By embracing these challenges with informed policies and empathetic leadership, organizations can navigate political landscapes effectively, ensuring both compliance and harmony within their teams.