Know Your Pay-to-Play Limits: Taking Stock of Covered Contributors

2021 has been off to an eventful start politically. Although a lot is happening on the national stage, we cannot forget that 2021 is a big election year in New Jersey. Not only do we have an upcoming gubernatorial election, but all 120 seats in the New Jersey Legislature are up for grabs and hundreds of local candidates will be on the ballot.

Now is a good time for companies that hold government contracts in New Jersey or that are interested in pursuing government contracts in the future to not only take stock of their government contracts, but to also evaluate their organizational structure to determine who within their organization is covered by pay-to-play restrictions.

Did you know that a contribution by the following categories of individuals – even if the contribution is $300 or less – may jeopardize your company’s eligibility for government-contracting opportunities in New Jersey?

• Equity owners (without regard to a certain equity percentage)
• Owners or shareholders with a certain percentage of ownership (often a 10% threshold)
• Officers
• Spouses, civil-union partners and resident children of the above individuals
• Licensed professionals
• Individuals who earn more than $100,000 a year
• Subcontractors
• Consultants

These individuals are generally covered in addition to the vendor business entity and, in some cases, affiliates and subsidiaries of the vendor business entity.

Who is covered by pay-to-play restrictions often depends on whether your company is looking to contract at the state, county, municipal or school-board level of government. You should also keep in mind that this list of covered individuals may change from year-to-year as people leave, come on-board, get promoted or even receive a salary increase.

Compliance Tip: Identify the individuals within your organization who are subject to pay-to-play restrictions, alert them of these restrictions and educate them on your organizational protocols to make sure that nobody makes or approves a contribution that could jeopardize your company’s eligibility for government contracting opportunities.

For more information, please contact Partner and Chair of the Firm's Corporate Political Activity Law Practice Group Rebecca Moll Freed via email here, Senior Associate Avi D. Kelin via email here, or call 973.533.0777.

An earlier version of this post appeared in InsiderNJ.