Earlier this week, a unanimous 11-member panel of the U.S. Court of Appeals for the District of Columbia Circuit upheld the long-standing ban on federal political contributions by federal government contractors. The Circuit Court, in Wagner v. Federal Election Commission, found the ban supported by the compelling governmental interest in protecting against quid pro quocorruption or its appearance. But the ruling was narrow in scope and left unaddressed questions about the ability of federal contractors to participate in political activities. 

Current federal campaign finance law bars federal contractors from making political contributions during the negotiation for and performance of a contract. A separate section of the law prohibits contributions from all corporations, including incorporated federal contractors. The challenge inWagner was initiated by individuals who had personal services contracts with government agencies. 

The Circuit Court undertook a lengthy review of Congressional efforts dating back to the 1800s to combat corruption in the federal contracting arena and similar legislative efforts in the states, as reflected in the significant expansion of pay-to-play laws. In upholding the contractor contribution ban, the Court found that in the government contracting arena, the risk of quid pro quo corruption and its appearance has not dissipated. Writing for the panel, Chief Judge Garland observed that “the record offers every reason to believe that, if the dam barring contributions were broken, more money in exchange for contracts would flow through the same channels already on display.” Still, the Court underscored the narrowness of its ruling stating that the only issue before it was the application of the ban to contributions to a federal candidate or political party by an individual contractor. 

Narrowness notwithstanding, the anti-corruption rationale of the Wagner decision further bolsters state pay-to-play laws that have been enacted in more than 20 states and hundreds of localities. Federal and state courts have largely upheld these laws when closely tailored, and some of those decisions were cited in Wagner. And, unlike the federal model, corporations are permitted to make contributions in many states. The Wagner decision is sure to be used to fend off future legal challenges to pay-to-play contribution limitations. 

Finally, the Wagner decision did not address one important issue that has been up in the air since the Supreme Court’s Citizen United ruling in 2010 – whether federal contractors can use corporate funds to contribute to Super PACs and other groups that engage in independent political spending. Therefore, as election season gets into full swing, contractors would be wise to consult with counsel before considering the use of corporate dollars for contributions to independent groups.