With recent COVID 19-related mandates, such as the shelter-in-place orders or social distancing requirements, many businesses and cannabis companies have reached out to the governor’s office or other state and local officials with attempts to influence relief legislation or to request an industry-wide exception to a regulation. Did you know these types of activities may be considered lobbying and in some jurisdictions require registration as a lobbyist?
When analyzing whether you or your business may be lobbying, it’s helpful to keep in mind a broad and basic definition of lobbying. Lobbying in a nutshell could be considered any act that attempts to influence a government official or employee regarding a government action or issue. The challenge of lobby laws is that there may be up to three layers – federal, state, and local. Federal lobby laws are covered by The Lobbying Disclosure Act of 1995, however, there is not a universal definition of lobbying on the state and local level, and each state, city, municipality, or another local area may adopt its own definition and registration requirements. Therefore, as a matter of regulatory compliance, cannabis companies should have an awareness of the lobby laws where they operate and do business.
Lobby laws are disclosure laws that often require some type of registration and periodic reporting. Prior to engaging in a direct or indirect activity to influence a decision or issue at any government level, it is prudent for a cannabis company to consider whether it should register under state and local lobby laws. Each state has its own version of a lobby law, but many major cities and counties such as Boston, Chicago, Dallas, Los Angeles, Miami-Dade, and New York City also have their own lobby requirements. For a general overview and comparison of lobby laws, the National Conference of State Legislature (www.ncsl.org) has several resources including a 50 state lobby law survey. A jurisdiction will typically post resources such as a lobby law guide or handbook featuring FAQs and detailed explanations on its website.
Oftentimes, it is common or unassuming business activities that may constitute lobbying. Throughout the COVID-19 pandemic, many cannabis companies reached out to governmental agencies attempting to influence some sort of action in regards to recent regulations, legislation, orders, and guidelines. These attempts to influence the government may be considered lobbying depending on the laws of the jurisdiction. An important distinction to note is that interacting with the government to influence, likely qualifies as lobbying. However, on the other hand, requests for clarification, responding to the government’s specific request, or asking for information is not lobbying because there is no influence element for those activities. A few common cannabis-related examples of lobbying-type activity are as follows: (i) providing unsolicited educational materials to the government if the underlying motive is to sway the government to act a certain way; (ii) attempts to influence the government indirectly by engaging in communications that urge the public to take a specific action related to a legislative or administrative matter; and (iii) attempts to influence a regulatory exception for your business or the cannabis industry.
Each lobby law’s definition will provide parameters regarding the recipient of the lobbying, whether a government branch or covered official. The government branches may be classified into the following four categories for purposes of lobbying, (i) executive or administrative; (ii) legislative; (iii) quasi-judicial; (iv) a combination of (i)-(iii). While reviewing a lobby law, it’s helpful to first identify the category or categories of government and government employees impacted by the law. For example, Massachusetts has a statutory definition of legislative and administrative lobbying, Montana, Nebraska, Nevada, North Dakota, and South Dakota merely require registration and reporting exclusively for legislative lobbying, and Arizona and New York regulate quasi-judicial interactions such as attempts to influence a permit or license.
Registration requirements also vary widely by state and local jurisdiction. Registrations may be tied to registering after a threshold or trigger is met. These triggers and thresholds may be derived from the amount of money spent lobbying, time spent lobbying, or the number of contacts a lobbyist has with the government official. Some jurisdictions require registration prior to engaging in any lobbying activity, so one should note those laws carefully. Outside of the individual lobbyist, other entities or individuals may also have to register, such as the lobbyist’s employer or person or entity providing compensation to the lobbyist. Registrations frequently carry periodic reporting obligations, that may include disclosure such as the names of employees or contractors lobbying, fees paid for lobbying, total time spent lobbying, gift amounts, capital contributions, and other lobby-related expenses.
Lobby registrations may also impose restrictions and limitations on the registrants such as a prohibition on fees based on the outcome of the administrative or legislative action and campaign contribution and gift limitations. Gifts such as branded items and meals frequently surround lobby activity and may be restricted or require disclosure under the applicable law. Gifts are broadly considered as any conveyance of a benefit or value to a public official or government employee. Similar to lobby laws, gift laws vary by state and jurisdiction and it’s prudent for businesses to be aware of gift-giving implications.
While lobby laws are layered and diverse, we do not deter advocacy efforts or influential attempts. However, we believe that it is best practice for cannabis companies to have an awareness of lobby laws. We encourage cannabis companies to reach out to a trusted attorney to explore if its actions or contemplated actions, may trigger registration requirements under a state or local law.