Association PACs will benefit from new FEC rule

By G. Phillip Shuler

In the March 2004 issue of Louisiana Contractor, we reviewed the laws regarding corporate behavior in federal elections, chiefly the Federal Election Campaign Act of 1971.

Among other things, we noted that the act prohibited all corporate financial contributions in connection with federal elections except through Political Action Committees (PACs) regulated by the Federal Election Commission (FEC).

We further noted that a corporation may invite a candidate to appear at a corporate facility or function to address employees and that the candidate may solicit contributions but the corporation could not indicate a preference for a candidate or party or encourage employees to suggest a particular candidate or solicit contributions for a candidate.

We also noted that a corporation may communicate with a restricted class composed of its shareholders, executives, administrators and their families. A corporation may invite a candidate to corporate facilities or a corporate function to address the restricted class and may endorse the candidate and advocate their support.

Corporations may also solicit, but not facilitate, contributions from the restricted class but the contributions should be delivered directly to the candidate. A company that has its own corporate PAC has long been able to deduct PAC contributions from the paychecks of such restricted class employees who volunteer to contribute but then would have to allow for deductions by rank in file employees to contribute to a union PAC in the same manner.

FEC rules previously precluded corporations from using payroll deductions to gather contributions to trade association PACs.

A significant change has occurred by virtue of a new rule approved July 14 by the FEC. The restriction on payroll deductions to a trade association PAC has now been eliminated. Now, if a corporation belongs to more than one association, the company will be allowed to use payroll deductions to facilitate contributions only to a single association PAC.

Associations are now free, under the new FEC rule, to ask their member companies to encourage employees to contribute to the association PAC through a payroll deduction. Associations will now have easier access to employees of large companies but typically such companies want to stay in control of their own money but smaller and midsize companies may want to maximize their clout by giving to an association PAC.

The only condition for allowing a company to use payroll deductions to contribute to an association PAC is that the company must also allow such deductions from rank and file employees wishing to contribute to the PAC of any union that represents employees of the company, although the union could be made responsible for the company's reasonable costs of administration.

The new rule, however, does not permit payroll deductions to a corporate PAC for rank in file employees thereby retaining the restriction limiting such deductions to eligible management and administrative restricted class employees who volunteer to contribute.

Child labor. The Department of Labor (DOL) has drafted legislation that would increase civil penalties for child labor violations that cause the death or serious injury of a young worker.

Deputy Secretary of Labor Steven J. Law sent a letter July 29, along with a draft bill and an explanatory statement to Vice President Richard Cheney, as president of the Senate, asking Congress to consider the administration's proposed "Child Labor Protection Act of 2005."

The draft legislation would amend the Fair Labor Standards Act (FLSA) by increasing the maximum civil monetary penalty from $11,000 to $50,000 for each violation of child labor law that causes the death or serious injury of any employee under the age of 18. Rather than being mandatory, the assessment of the maximum penalty would be based on statutory and regulatory guidelines and the facts of each case.

An explanation of the proposed bill said that a penalty of $50,000 would be imposed if a 14-year old were seriously injured or killed when a forklift truck tipped over on the child while he or she was operating it in a retail store because employees under the age of 18 are prohibited from operating a forklift.

However, a $100,000 penalty could be assessed if that same minor were operating a forklift in a warehouse because a second violation occurred - no worker under 16 years old may be employed in a warehouse.

The bill also would raise to $100,000 the maximum penalty per willful or repeat violation that causes the death or serious injury of a child employed in violation of child labor standards in the FLSA.

In his letter to Cheney, Law wrote that enactment of the proposed legislation would provide the DOL with a "much needed tool to address the most serious child labor violations and further strengthen its vigorous enforcement of laws that protect the most vulnerable workers."

According to Law, in Fiscal Year 2004 the DOL's Wage and Hour Division found 5,840 children employed in violation of federal child labor rules, including 1,087 in hazardous occupations.

Law also said that, on average, 68 young workers are killed on the job each year and the total number of youth injured on the job may exceed 200,000.

Editor's Note: G. Phillip Shuler is a partner in the New Orleans office of Chaffe, McCall, Phillips, Toler & Sarpy.