Over the past decade, New Yorkers have grown accustomed to the refrain of “sweeping ethics reform” coming from state government officials promising to restore the public trust by reforming ethics and lobbying rules. Historically, these legal measures have come in response to public corruption prosecutions. While little change has occurred in state statutes this year in the aftermath of recent scandals, a significant watershed event has occurred at the regulatory level from the state’s primary agency in charge of policing lobbying activity.
For the first time in the more than 40-year history of state-regulated lobbying, the Joint Commission on Public Ethics (JCOPE) has promulgated expansive regulations. The regulations replace a rickety and patchwork legal landscape that relied on broad statutes, advisory opinions of limited precedential value, and enforcement actions that reflected the tendencies and views of the particular regulators of the time. Three different and reconstituted agencies have regulated lobbying in New York since 2007.
The new regulations are effective on Jan. 1, 2019 and are the product of a two-year effort by JCOPE designed to provide greater clarity for the lobbying industry. The new regulations also strengthen JCOPE’s enforcement hand. The 92 pages of new rules were formally adopted by the JCOPE on April 24, 2018 after several rounds of public comment by the regulated community and hearings on the subject. The impact of these regulations is expected to be significant among lobbyists and clients of lobbyists in New York.
The new regulations clarify prior interpretations and expand upon what has been traditionally considered “lobbying” or “lobbying activity” under the Lobbying Act (Legislative Law Article 1-a). Not all interactions with government officials implicate the Lobbying Act. The conduct must be considered a “lobbying activity” under the law. Lobbying activity is defined at Legislative Law §1-c and includes attempts to influence legislation, regulation, executive orders, and ratemaking, among other covered activities.
Notably, for attorneys, the regulations address the “professional services” exception from the Lobbying Act that would extend to an in-house or retained counsel advising a client on the impact of legislation, but the exception would not extend to cover activities whereby the attorney would personally meet with the public official and advocate on the client’s behalf.
While many of the regulations restate principles articulated over the history of the agency, there are new requirements which depart from prior practice. The following are highlights contained in the new regulations:
“Lobbying” now encompasses “preliminary contact” and “door opening.” Preliminary contact is defined as when a person knows, or has reason to know, their client will attempt to influence a public official (i.e., engage in lobbying activities). Preliminary contact can occur through the scheduling of a meeting or a phone call, introducing a client to a public official, or any other contact with a public official on behalf of a client provided it is a lobbying activity. This rule attempts to capture a class of consultants who have exerted influence with officials through their close relationships without actually engaging in traditional lobbying activities. Simply arranging a meeting or a phone call will now be considered lobbying by JCOPE, as would introducing a client to a public official. The new rule distinguishes matters handled by an administrative assistant whose support is strictly ministerial and would not constitute lobbying.
Grassroots and Direct Lobbying. Previously, the Commission attempted to define “grassroots lobbying” in advisory opinions (see Advisory Opinion Nos. No. 82-1, 00-3, 16-01). The new regulations now distinguish between direct and indirect (“grassroots lobbying”), whereby there is an attempt to influence a public official through another person. A grassroots lobbyist is defined as a person or organization who solicits another—typically, the public—to deliver a message to a public official. To constitute “grassroots lobbying,” a communication must meet three criteria: (1) reference a “lobbying activity” (i.e., legislation or a local ordinance); (2) assert a clear position on that activity (i.e., “ABC Corp. opposes the ordinance”); and (3) solicit others to contact the public official (i.e., a “call to action”). Notably, the audience or recipients of a grassroots communication who voluntarily (and without any compensation) deliver a message to a public official are not considered grassroots lobbyists.
The Use of Social Media. The burgeoning use of social media to influence government officials is a new area that continues to confound lobbying regulators across the country. The parameters for regulating this activity vary dramatically from state to state. In New York, simply tagging a government official’s Twitter or Instagram account may constitute lobbying. The new regulations state that direct lobbying can occur via social media when a communication is sent directly to an account owned or controlled by a public official (aka a direct message), or if tweets advocating for a position tag a public official. A post that does not “tag” a public official, even if the public official “follows” you on social media, would not qualify as direct contact. Expenses concerning social media activity must also be reported (see 19 NYCRR 943.6(c)(4)). Because the use of social media is so widespread and can bear little or no expense, monitoring and enforcement presents a challenge. The cost of social media is de minimus and by itself may fall below the statutory expense thresholds.
The Contractual Client and Beneficial Client. Regulators are taking a harder look at the use of trade associations and their members, including board members’ responsibilities. Policy concerns are generally borne out of a traditional follow-the-money principle and regulators seek to ensure that there is sufficient transparency on attempts to influence government officials, i.e., that the real influencers are identified. The new regulations close a loophole in the source of funding disclosure as to the identity of the “true” client. The regulation now requires that a lobbyist identify both who is paying for their services, and who the services are intended to benefit. Beneficial clients are subject to source of funding reporting, preventing groups from using third-party intermediaries to hire a lobbyist and hide the identity of the source of funding.
Greater Clarity on Lobby Days. The new regulations require that an organization holding a “lobby day” list any employees as individual lobbyists if those persons make direct contact with a public official and speak on behalf of the organization. Unpaid volunteers will not need to be listed on a filing, although the expenses related to accommodating those volunteers must be disclosed (travel expenses, food, etc.)
Reporting Options for Coalitions. What is a Coalition? A group of otherwise unaffiliated entities or members who pool funds for the primary purpose of engaging in lobbying activities on behalf of the members of the Coalition. Coalitions can file lobbying reports as a single entity, or each member can individually file a report disclosing their contributions to the Coalition. If a Coalition spends more than $5,000 per year on lobbying, the Coalition may be required to file a source of funding report.
Industrial Development Agencies. The regulations now explicitly recognize resolutions of an Industrial Development Agency (IDA) as a covered activity under the Lobbying Act. It also defines “Procurement Contracts” as including Payment in Lieu of Taxes (PILOTS). This definition subjects IDA resolutions, negotiations of the terms and conditions of a PILOT agreement and potentially other IDA actions to the requirements of procurement lobbying laws.
Increased Penalties and Fines. Prior to the new regulations, first-time filers were charged a late fee of up to $10 per day and all other filers were charged $25 per day. The amounts have now been increased and range from $75 per day to $1000 per day, depending upon the time period.
Other Changes. Among the new regulations are requirements that all registered lobbyists must complete online training within sixty days of initial registration. Additionally, certain entities who act as their own lobbyist (i.e., internal lobbyists) may not be required to file both Lobbyist Bi-Monthly Reports and Client Semi Annual Reports, thereby streamlining and reducing redundant reporting. Finally, all filers will be required to register and file lobbying reports in the new JCOPE Lobbying Application (LA) program. LA will allow for greater public access and additional search functions.
Expectations are that these new regulations will have a significant impact on the core question of what constitutes regulated lobbying under the Lobbying Act and just who in an organization should be registered with JCOPE. Moreover, armed with newly minted regulations will JCOPE set out to ratchet up enforcement of behavior that runs afoul of these principles? Time will tell as to the future of lobbying oversight in New York. However, businesses, government affairs personnel, and anyone that regularly interacts with state government, should be familiar with the new requirements to avoid noncompliance and a painful misstep.
Karl J. Sleight and Joan P. Sullivan are members of the government compliance and investigations practice group at of Harris Beach. Mr. Sleight is the former Executive Director of the New York State Ethics Commission and Ms. Sullivan was a counsel at both the Ethics Commission and the Commission on Public Integrity.