New Jersey Pay-to-Play

Annual disclosure reports meeting New Jersey’s strict pay-to-play law requirements are due on March 30, 2017. All contractors performing governmental work in the state need to be fully aware of these compliance requirements, or else face significant fines and possible disqualification from government contracts for up to four years.

New Jersey’s pay-to-play law is designed to promote a fair and transparent process for awarding government contracts to qualified companies with no appearance of corruption or political influence. The law mandates the following two disclosure requirements:

1)    Pre-Contract Disclosure – Prior to entering into a governmental contract with an anticipated value exceeding $17,500, the contractor must disclose to the governmental entity any political contributions greater than $300 made during the prior 12 months and certify that no reportable contributions will be made over the life of the contract.
2)    Annual Disclosure (due March 30) – Any business entity that received an aggregate of $50,000 or more of government contracts during the calendar year is required to file an annual disclosure report on the N.J. Election Law Enforcement Commission (ELEC) website by the following March 30. This report discloses contracts received and political contributions made and is required even if the business entity made no contributions during the prior year. A list of all business entities that file an annual disclosure report will be listed on ELEC’s website.

Prohibited Contributions
Under the state’s pay-to-play law, governmental agencies are prohibited from entering into a contract exceeding $17,500 with an individual or entity that made contributions greater than $300 per calendar year or per election (i.e. if made to a candidate committee). This rule takes effect when the contributor (individual or entity) has an interest of more than 10% in the contracting entity, or is the spouse of an individual with an interest of more than 10% in the entity.

Exclusions
The N.J. Pay-to-Play law applies once a business entity has been awarded a contract with a N.J. government entity. It does not include federal and out-of-state contracts and contributions made to federal and out-of-state candidates.

Best Practices
Whether you currently contract with the state or have plans to do so in the future, there are proactive steps you can take to position yourself and your company for compliance with the pay-to-play law:

  • Identify other entities, individuals and family members who are covered under the pay-to-play law and alert them to the restricted contributions and required disclosures. Track and review their contributions throughout the year, and request a refund immediately for any inadvertent prohibited contribution.
  • When making a contribution, include a cover letter that contains protective language, alerting the recipient that the contributor is subject to “pay-to-play” rules.
  • Implement a company policy regulating political contributions and distribute to all officers, members, directors, stockholders and employees.
  • Municipalities and counties may adopt their own local pay-to-play policies, as long as they are consistent with state disclosure requirements. Consult the contracting government entity for any disqualification information and additional disclosure obligations that will be in effect during the term of the contract.

New Jersey has some of the toughest and most effective pay-to-play laws in the country. Fortunately, with the right understanding of the requirements and proactive planning and monitoring in place, the process of complying is fairly straightforward.  Contact a Sax Construction Industry team member for advice on protecting your company and preparing for a long and rewarding relationship with New Jersey governmental entities.

Read more about the New Jersey pay-to-play laws and the contribution restrictions in other states here.