Pay-to-Play for Labor Unions

Governor Christie’s Executive Order No. 7 modifies prior executive orders (implicitly Executive Orders 117 and 118 signed by Governor Corzine in 2008) by amending the term “business entity” to include labor unions and labor organizations, and political committees formed by such organizations. The Governor explained that EO 7 would bring unions within the “pay-to-play” regulatory regime in order “to level the playing field.”

It remains to be seen how the Order will be implemented. Initially, several issues merit attention.

It is unclear how EO 7 affects the scope of EO 117 and 118, both of which limit the definition of “business entity” to for-profit entities. Since labor unions typically are tax exempt under IRC 501(c)(5), and thus are not for-profit entities, unions would either become the only not for-profit entities subject to EO 117 and 118 or otherwise remain exempt from coverage. And, if covered, would the pay-to-play contribution limitation extend to officers of the union, their spouses, civil union partners, and resident children?

The inclusion of political committees “formed” by labor organizations may be a relatively significant change in the coverage of political committees. Previous executive orders have covered political committees “directly or indirectly controlled” by the business entity.

Another open issue is whether the Order is meant to cover collective negotiations agreements with the State. This issue appears to depend on the scope of contracts and agreements covered by the state pay-to-play legislation, Chapter 51 (which codified and superseded the original Executive Order on pay-to-play, No. 134 issued by Governor McGreevey in 2004).

Similarly, Executive Order 7 states it applies to labor organizations which enter into contracts with the State, its instrumentalities “or with other New Jersey public entities.” Is EO 7 intended to cover contracts with county and municipal government entities? Neither Chapter 51 nor the prior executive orders on pay-to-play reached beyond State government contracts.

Finally, EO 7 states that prior executive orders are modified to include legislative leadership committees in the list of covered recipients. But legislative leadership committees were already covered by Executive Orders 117 and 118.

Executive Order 7 takes effect immediately.