PACs Can Solicit Campaign Contributions from Employees

But businesses in Indiana must ensure contributions are voluntary

Many businesses take part in financing campaigns. In recent years, businesses have formed their own PACs (Political Action Committees) to fund the business’s campaign activities. Those corporate PACs are called Separate Segregated Funds (SSFs). They were created to get around the prohibition of corporate campaign contributions, and are a business’s only direct way to contribute to a campaign. Under certain circumstances, federal election law allows these corporations and their connected PACs to solicit campaign contributions from employees.

A campaign contribution is anything of value given, loaned or advanced to influence a federal election. That includes money, but also in-kind contributions, which are goods or services offered free of charge or at less than the usual and normal charge. A request for contributions is a solicitation. However, any communication about the SSF could constitute a solicitation if it publicizes the SSF’s right to accept unsolicited contributions from any lawful contributor, provides information on how to contribute to the SSF, or encourages support for the SSF.

Which employees may be solicited?

An SSF or connected organization may solicit only a restrictive class of persons associated with the connected organization. The restrictive class of a corporation consists of:

  • the corporation’s executive and administrative personnel
  • the stockholders with voting rights

The immediate family members of these two groups are also within the restrictive class. Executive and administrative personnel include employees who are paid on a salary, rather than hourly, basis and who have policymaking, managerial, professional or supervisory responsibilities. Employees outside the restrictive class include:

  • Professional employees represented by a labor union
  • Lawyers, consultants and other personnel employed by firms retained by the corporation and who are not employees of the corporation
  • Members of the board of directors who are not also executive and administrative personnel and who receive no compensation
  • Salaried foremen and others who supervise hourly employees
  • Former or retired personnel

What are the limitations on SSF solicitation?

A corporation or its SSF may solicit its restrictive class at any time. For the expanded class of employees, the business may solicit twice per year. The public may never be solicited by the business for contributions to its PAC.

Employers that solicit contributions from employees for its corporate PAC must ensure the employee feels their contributions are being made voluntarily. Under federal law, contributions may not be secured by the use or threat of physical force, job discrimination or financial reprisal. Employees who believe an employer has violated the law can file a complaint with the Federal Election Commission (FEC), which enforces federal election law and can levy civil penalties.

Certain notices are required on all solicitations, oral or written, and are undertaken by the SSF. Each time the SSF or the connected business solicits individuals for contributions, those individuals must be informed of the SSF’s political purpose. It’s not sufficient for the notice to merely say that a contribution to the SSF is voluntary; the notice must inform the employee of their right to refuse to contribute without reprisal from their employer.

If an SSF or connected organization suggests potential contributors give a specified amount, the solicitation must also say this is only a suggested amount, it is not enforceable, and it will not disadvantage the employee if they refuse to give.

Indiana state law

The rules on SSFs apply to federal elections but the state of Indiana also has its own campaign and voter intimidation laws that regulate campaign solicitation for state election activities. Indiana law forbids employers from exhibiting political messages that inform employees their employer’s business will close, that the employee’s pay might decrease, or in any way is intended to influence the employee’s vote. Also, Indiana law generally prohibits all forms of voter intimidation, and a violation of either is a class 6 felony.

Before your business begins soliciting contributions from employees to its connected PAC, sit down with an experienced Indiana corporate law attorney to ensure no violations of federal or state law. For more information about this area, read our securities and corporate finance law overview.

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