The Obama administration announced yesterday that it will revise the regulations that define if an individual is an “executive” or “administrative” employee exempt from the overtime pay provisions of the Fair Labor Standards Act (FLSA). This could have an unexpected impact on corporate PACs, potentially shrinking the number of employees eligible to be solicited for PAC contributions or who can receive corporate express advocacy communications. While there is a long fight ahead before any change to the regulations becomes law, companies and trade associations should be aware this fight could impact PAC fundraising.
The federal campaign finance laws (and the laws of some states) permit corporations, trade associations, and unions to solicit contributions from individuals within the “restricted” or “solicitable” class for a “separate segregated fund” or “PAC.” For corporations, the “restricted” class includes executive and administrative personnel, shareholders, and the family members of those individuals. The Federal Election Commission (FEC) regulations’ definition of “executive or administrative personnel” closely follows the Department of Labor’s (DoL) regulations defining those terms. The FEC’s regulations also state that the DoL’s regulations may serve as a guideline in determining whether an employee falls within the definition of “executive or administrative personnel.”
It is too early in the regulatory process to be certain what the final rules will say, and even then, the impact will vary depending on the make-up of a company’s workforce. The DoL may adopt changes that have a minimal effect on most corporate PACs, such as a modest shift in the monetary thresholds to qualify for “executive” or “administrative” personnel from the current level of $455 a week, or it could pursue a more fundamental shift in the “primary duties” test used to determine eligibility. In addition, the FEC holds a wild card in the form of the statutory authority to disregard the DoL’s changes and retain the existing standards, though that could create administrative headaches for companies that use FLSA eligibility as a proxy for a more rigorous analysis of an employee’s duties. Regardless, we will be following this issue closely in the months ahead.