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FEC Record : Advisory Opinions

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AO 2011-27 Severance Payment to Candidate Not a Contribution

A candidate for the U.S. House of Representatives may receive a severance payment from his former employer, a non-profit corporation, without the payment being considered an impermissible contribution. The non-profit corporation’s severance payment is not a contribution because the payment is considered to be made “irrespective of the candidacy.”

Background

New Mexico Voices for Children (“NM Voices”) is a non-profit 501(c)(3) organization that currently has 13 employees. Eric Griego worked four years as NM Voices’ Executive Director with an annual salary of $96,400. NM Voices and Mr. Griego did not have a written employment contract. Mr. Griego stopped working at NM Voices on October 17, 2011. He is currently a candidate for the U.S. House of Representatives.

According to NM Voices’ advisory opinion request, Mr. Griego wanted to continue working for NM Voices while he campaigned for Congress by taking a leave of absence or reducing his work schedule. NM Voices’ Board of Directors (“the Board”) thought it would be in the best interest of NM Voices if Mr. Griego resigned so NM Voices could avoid the appearance that it held influence over Mr. Griego’s campaign. Mr. Griego agreed to resign prematurely. The Board agreed to make a severance payment to Mr. Griego amounting to three months of his salary, as long as the Federal Election Commission determined that such a payment would not result in a contribution from NM Voices to Mr. Griego’s campaign.

While NM Voices maintains a written policy manual for its employees, the manual does not address severance packages. The Board has discretion to decide whether an employee leaving NM Voices will receive a severance payment. Before 2007, NM Voices provided severance payments occasionally. Starting in 2007, when Mr. Griego became Executive Director, NM Voices instituted an unwritten policy of providing severance payments to employees who were asked to leave the organization involuntarily because the separation was deemed to be in NM Voices’ best interest. If employees left voluntarily or their positions were terminated because of lost grant funding, NM Voices did not make any severance payments.

Since 2007, 27 employees have left NM Voices, some of their own volition. Of the 27 employees who left, four had their employment terminated because their positions were cut after a reorganization process. These four employees were the only ones to receive severance payments. Three of these four were senior managers who received severance payments equal to three months of pay.

Analysis

Corporations, including non-profits such as NM Voices, are barred from contributing to federal candidates or their authorized committees. 11 CFR 114.2(a) and (b)(1). Contributions include any gift, loan, advance or deposit of money or anything of value made for the purpose of influencing any election for federal office. 11 CFR 100.52(a). Under Commission regulations that prohibit “personal use” of campaign funds, a third party’s payment of a candidate’s expenses that would otherwise be deemed “personal use” is considered a contribution by the third party, unless the payment would have been made “irrespective of the candidacy.” 11 CFR 113.1(g)(6).

Commission regulations provide that employment-related payments are considered to be made “irrespective of the candidacy ” only if the compensation results from bona fide employment that is genuinely independent of the candidacy; is exclusively in consideration of services provided by the employee as part of this employment; and does not exceed the amount of compensation which would be paid to any other similarly qualified person for the same work over the same period of time. 11 CFR 113.1(g)(6)(iii). The Commission found that NM Voices’ proposed severance is based on Mr. Griego’s past “bona fide employment,” would be made “exclusively in consideration of” his past employment, and would be in line with severance packages provided by NM Voices to “similarly qualified employees for the same work over the same period of time.”

Therefore, the proposed severance payment will be made “irrespective of the candidacy” and will not constitute a contribution. The facts of NM Voices’ case are similar to those considered in AO 2004-08 (American Sugar Cane League). In that advisory opinion, the Commission determined that a non-profit corporation’s proposed severance payment to an employee who resigned to seek federal office was not a prohibited contribution.

(Posted 2/7/12; By: Isaac Baker)

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The FEC Record is produced by the Information Division, Office of Communications. Toll free 800-424-9530; Local 202-694-1100; E-mail info@fec.gov. Greg Scott, Director; Amy Kort, Asst. Director; Myles Martin, Editor