Four Rules for Tax-Exempt Organizations with Volunteers

Reimburse expenses only according to a written “accountable plan.”

Rule #2: Have Them Sign a Volunteer Agreement

Among other things, the agreement should say that you will not pay them. Other potential provisions discussed below include waivers of liability and the acknowledgment and acceptance of the nonprofit's workplace, data privacy and other applicable policies.

Rule #3: Get Insurance Going Both Ways

Have appropriate volunteer accident and volunteer liability policies, and consider opting into workers compensation insurance for volunteers, if available.

Rule #4: Screen and Supervise

Know who they are, know what they are doing, and provide them with a safe working environment.

Expense Reimbursements Pursuant to a Written
Accountable Plan

Part One of this Article discussed many reasons volunteers and interns should not be paid. Rule #1 not only indicates that volunteers and interns should not be compensated, but recommends that a nonprofit reimburse the expenses of its volunteers only according to a written “accountable plan.” The intent is to avoid having an expense reimbursement characterized as the payment of compensation.

To qualify as an “accountable plan,” a nonprofit's reimbursement or allowance arrangement generally must require: 1) that the expenses have a connection to the business of the nonprofit; 2) adequate accounting for expenses within a reasonable period of time (including documentary evidence of the business expenses, such as receipts); and 3) the return of any excess reimbursement within a reasonable period of time.

Injuries to Volunteers, and Injuries Caused by Volunteers

Nonprofits should consider the level of skill required in the performance of the activities conducted by its volunteers, and the inherent level of risk, e.g., physical activities, driving, caring for others, food preparation, and access to computers or data subject to privacy laws. Consider the potential for sexual harassment, child abuse, intentional or negligent infliction of emotional distress, and be sensible, be safe, and screen and supervise your volunteers. See Rule #4. Consider not only the legal, but the reputational hazards to your organization.

A volunteer agreement could require volunteers to abide by a nondiscrimination policy, an Internet usage policy, data privacy rules and other policies. See Rule #2.

Injuries to Volunteers

The U.S. Bureau of Labor Statistics indicates that there were 287 fatal occupation injuries among volunteers from 2003-2007. Clearly, nonprofits should carry insurance covering injuries to their volunteers, generally known as “volunteer accident insurance.” See Rule #3.

'Workers' Comp'

There appear to be significant differences in how states address workers compensation coverage for volunteers. Workers compensation coverage can limit employer liability for injuries to an employee or, in some cases, a volunteer.

Under California law, for example, a nonprofit can opt into coverage. Volunteers for nonprofit organizations generally are excluded from the definition of “employee” and, therefore, are not covered by the workers compensation and insurance laws. However, “' a person who performs voluntary service without pay for a private, nonprofit organization, as designated and authorized by the board of directors of the organization, shall, when the board of directors of the organization, in its sole discretion, so declares in writing and prior to the injury, be deemed an employee of the organization for purposes of [workers compensation and insurance] while performing such service.” (Cal. Labor Code ' 3363.6(a).) For this purpose, “'voluntary service without pay' shall include the performance of services by a person who receives no remuneration other than meals, transportation, lodging, or reimbursement for incidental expenses.” (Cal. Labor Code ' 3363.6(c).) As an “employee” for this purpose, the volunteer would be entitled to full coverage as an employee.

Nonprofits that decide to opt into workers' compensation coverage for their volunteers may wish to contact their workers' compensation insurer to preempt coverage disputes that may arise after an illness or injury claim is made by a volunteer. Workers' compensation insurance premiums are often based on gross payroll amounts. Because volunteers are not paid, a different allocation could be requested by the insurer to increase premiums accordingly.

A Safe Working Environment

Of course, nonprofits should seek to prevent injury in the first place by providing a safe workspace. At a minimum, while the federal Occupational Safety and Health Act's (OSHA) and California's similar workplace safety rules do not appear to apply to protect volunteers, the federal Occupational Safety and Health Administration has indicated that its coverage provides that any charitable or non-profit organization that employs one or more employees is required to comply with OSHA's requirements and regulations. In any case, the proper supervision of volunteers should include the provision of a safe working environment. See Rule #4.

'Letting Go' of a Volunteer

When relieving a volunteer of his or her duties, nonprofits should treat the occasion like releasing an employee ' as courteously and professionally as possible. A volunteer coordinator should coordinate with the nonprofit's human resources expert in these situations. Claims of defamation may be a risk, so be careful what you say and whom you say it to, when you “release” a volunteer. As with employees, if a volunteer's performance or conduct deficiency is not serious enough for immediate release, a suitable warning or counseling addressing the situation often might be appropriate.

Waiver of Liability

Finally, nonprofits should consider incorporating a release and waiver of liability into their volunteer agreements, as appropriate under the circumstances. See Rule #2. For example, Habitat for Humanity sends accountants and lawyers onto rooftops with hammers in hand. As you might expect, a fairly comprehensive release and waiver of liability is a prerequisite.

Harm Caused by Volunteers

An organization may be held vicariously liable for the acts of its volunteers. As a result, nonprofit organizations should consider insuring themselves against liability from injuries or other harm caused by its volunteers. These “volunteer liability policies” are often packaged with volunteer accident insurance.

The volunteers themselves may also want to understand the extent of their potential personal liability for acts performed in the course of their volunteer service. For charitable organizations, there are numerous statutory limitations on the liability of volunteer directors, and in some cases for volunteer officers. California law includes the rationale for these liability limitations:

The Legislature finds and declares that the services of directors and officers of nonprofit corporations who serve without compensation are critical to the efficient conduct and management of the public service and charitable affairs of the people of California. The willingness of volunteers to offer their services has been deterred by a perception that their personal assets are at risk for these activities. The unavailability and unaffordability of appropriate liability insurance makes it difficult for these corporations to protect the personal assets of their volunteer decisionmakers with adequate insurance. It is the public policy of this state to provide incentive and protection to the individuals who perform these important functions. (Cal. Corp. Code ' 5047.5.)

Volunteers who are not directors or officers likewise are often “critical to the efficient conduct and management of the public service and charitable affairs of the people of California.” Nonetheless, there do not appear to be similar statutory protections for them in California's Nonprofit Corporation Law. On the other hand, general Good Samaritan laws may be applicable, depending on the circumstances.

The federal Volunteer Protection Act of 1997 (the Act) is not limited to volunteer officers and directors. Note, however, that the Act limits the liability of volunteers themselves, but specifically does not limit the liability of any nonprofit organization with respect to harm caused by any person. Similarly, the Act does not limit civil actions brought by nonprofits against their own volunteers. The Act was established:

to promote the interests of social service program beneficiaries and taxpayers and to sustain the availability of programs, nonprofit organizations, and governmental entities that depend on volunteer contributions by reforming the laws to provide certain protections from liability abuses related to volunteers serving nonprofit organizations and governmental entities. (42 U.S.C. ' 14501(b).)

Pursuant to the Act, subject to certain exceptions, “no volunteer of a nonprofit organization or governmental entity shall be liable for harm caused by an act or omission of the volunteer on behalf of the organization or entity if '

(1) the volunteer was acting within the scope of the volunteer's responsibilities in the nonprofit organization or governmental entity at the time of the act or omission;

(2) if appropriate or required, the volunteer was properly licensed, certified, or authorized by the appropriate authorities for the activities or practice in the State in which the harm occurred, where the activities were or practice was undertaken within the scope of the volunteer's responsibilities in the nonprofit organization or governmental entity;

(3) the harm was not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer; and

(4) the harm was not caused by the volunteer operating a motor vehicle, vessel, aircraft, or other vehicle for which the State requires the operator or the owner of the vehicle, craft, or vessel to ' (A) possess an operator's license; or (B) maintain insurance.” (42 U.S.C. ' 14503(a).)

Presumably, should the organization become liable to a third party as a result of a volunteer's actions, the volunteer could be liable to the nonprofit organization itself, and nonprofits may wish to indicate this in their volunteer agreements. See Rule #2.

Conclusion

The use of volunteers and interns by nonprofits comes with legal risks. As suggested above, nonprofits may wish to consider carefully the various legal implications of the use of volunteers and interns, and how to best implement these four basic rules.

Ofer Lion is a tax-exempt organizations attorney in the Los Angeles office of Hunton & Williams LLP. He can be reached at [email protected] author wishes to thank Steven Schneider for his helpful comments to an earlier draft of this article, which represents the views of the author only, and does not necessarily represent the views of Hunton & Williams LLP. Phone: 213-532-2167.

As discussed last month, the use of volunteers and interns by nonprofit corporations comes with legal risks, particularly from potentially applicable wage and hour laws and from harms caused by or happened upon the volunteers and interns, risks that may be reduced by following four basic rules, enumerated in last month's article and repeated here for continuity. Those nonprofits fortunate enough to have people willing to serve without compensation should consider carefully the possible legal implications. This article discusses both federal and California state law; Part One focused on wage and hour laws. Part Two herein focuses on injuries to volunteers, injuries caused by volunteers, and reimbursing the expenses of volunteers.

The Rules

Rule #1: Do Not Pay Volunteers in Cash or in Kind

Reimburse expenses only according to a written “accountable plan.”

Rule #2: Have Them Sign a Volunteer Agreement

Among other things, the agreement should say that you will not pay them. Other potential provisions discussed below include waivers of liability and the acknowledgment and acceptance of the nonprofit's workplace, data privacy and other applicable policies.

Rule #3: Get Insurance Going Both Ways

Have appropriate volunteer accident and volunteer liability policies, and consider opting into workers compensation insurance for volunteers, if available.

Rule #4: Screen and Supervise

Know who they are, know what they are doing, and provide them with a safe working environment.

Expense Reimbursements Pursuant to a Written
Accountable Plan

Part One of this Article discussed many reasons volunteers and interns should not be paid. Rule #1 not only indicates that volunteers and interns should not be compensated, but recommends that a nonprofit reimburse the expenses of its volunteers only according to a written “accountable plan.” The intent is to avoid having an expense reimbursement characterized as the payment of compensation.

To qualify as an “accountable plan,” a nonprofit's reimbursement or allowance arrangement generally must require: 1) that the expenses have a connection to the business of the nonprofit; 2) adequate accounting for expenses within a reasonable period of time (including documentary evidence of the business expenses, such as receipts); and 3) the return of any excess reimbursement within a reasonable period of time.

Injuries to Volunteers, and Injuries Caused by Volunteers

Nonprofits should consider the level of skill required in the performance of the activities conducted by its volunteers, and the inherent level of risk, e.g., physical activities, driving, caring for others, food preparation, and access to computers or data subject to privacy laws. Consider the potential for sexual harassment, child abuse, intentional or negligent infliction of emotional distress, and be sensible, be safe, and screen and supervise your volunteers. See Rule #4. Consider not only the legal, but the reputational hazards to your organization.

A volunteer agreement could require volunteers to abide by a nondiscrimination policy, an Internet usage policy, data privacy rules and other policies. See Rule #2.

Injuries to Volunteers

The U.S. Bureau of Labor Statistics indicates that there were 287 fatal occupation injuries among volunteers from 2003-2007. Clearly, nonprofits should carry insurance covering injuries to their volunteers, generally known as “volunteer accident insurance.” See Rule #3.

'Workers' Comp'

There appear to be significant differences in how states address workers compensation coverage for volunteers. Workers compensation coverage can limit employer liability for injuries to an employee or, in some cases, a volunteer.

Under California law, for example, a nonprofit can opt into coverage. Volunteers for nonprofit organizations generally are excluded from the definition of “employee” and, therefore, are not covered by the workers compensation and insurance laws. However, “' a person who performs voluntary service without pay for a private, nonprofit organization, as designated and authorized by the board of directors of the organization, shall, when the board of directors of the organization, in its sole discretion, so declares in writing and prior to the injury, be deemed an employee of the organization for purposes of [workers compensation and insurance] while performing such service.” (Cal. Labor Code ' 3363.6(a).) For this purpose, “'voluntary service without pay' shall include the performance of services by a person who receives no remuneration other than meals, transportation, lodging, or reimbursement for incidental expenses.” (Cal. Labor Code ' 3363.6(c).) As an “employee” for this purpose, the volunteer would be entitled to full coverage as an employee.

Nonprofits that decide to opt into workers' compensation coverage for their volunteers may wish to contact their workers' compensation insurer to preempt coverage disputes that may arise after an illness or injury claim is made by a volunteer. Workers' compensation insurance premiums are often based on gross payroll amounts. Because volunteers are not paid, a different allocation could be requested by the insurer to increase premiums accordingly.

A Safe Working Environment

Of course, nonprofits should seek to prevent injury in the first place by providing a safe workspace. At a minimum, while the federal Occupational Safety and Health Act's (OSHA) and California's similar workplace safety rules do not appear to apply to protect volunteers, the federal Occupational Safety and Health Administration has indicated that its coverage provides that any charitable or non-profit organization that employs one or more employees is required to comply with OSHA's requirements and regulations. In any case, the proper supervision of volunteers should include the provision of a safe working environment. See Rule #4.

'Letting Go' of a Volunteer

When relieving a volunteer of his or her duties, nonprofits should treat the occasion like releasing an employee ' as courteously and professionally as possible. A volunteer coordinator should coordinate with the nonprofit's human resources expert in these situations. Claims of defamation may be a risk, so be careful what you say and whom you say it to, when you “release” a volunteer. As with employees, if a volunteer's performance or conduct deficiency is not serious enough for immediate release, a suitable warning or counseling addressing the situation often might be appropriate.

Waiver of Liability

Finally, nonprofits should consider incorporating a release and waiver of liability into their volunteer agreements, as appropriate under the circumstances. See Rule #2. For example, Habitat for Humanity sends accountants and lawyers onto rooftops with hammers in hand. As you might expect, a fairly comprehensive release and waiver of liability is a prerequisite.

Harm Caused by Volunteers

An organization may be held vicariously liable for the acts of its volunteers. As a result, nonprofit organizations should consider insuring themselves against liability from injuries or other harm caused by its volunteers. These “volunteer liability policies” are often packaged with volunteer accident insurance.

The volunteers themselves may also want to understand the extent of their potential personal liability for acts performed in the course of their volunteer service. For charitable organizations, there are numerous statutory limitations on the liability of volunteer directors, and in some cases for volunteer officers. California law includes the rationale for these liability limitations:

The Legislature finds and declares that the services of directors and officers of nonprofit corporations who serve without compensation are critical to the efficient conduct and management of the public service and charitable affairs of the people of California. The willingness of volunteers to offer their services has been deterred by a perception that their personal assets are at risk for these activities. The unavailability and unaffordability of appropriate liability insurance makes it difficult for these corporations to protect the personal assets of their volunteer decisionmakers with adequate insurance. It is the public policy of this state to provide incentive and protection to the individuals who perform these important functions. (Cal. Corp. Code ' 5047.5.)

Volunteers who are not directors or officers likewise are often “critical to the efficient conduct and management of the public service and charitable affairs of the people of California.” Nonetheless, there do not appear to be similar statutory protections for them in California's Nonprofit Corporation Law. On the other hand, general Good Samaritan laws may be applicable, depending on the circumstances.

The federal Volunteer Protection Act of 1997 (the Act) is not limited to volunteer officers and directors. Note, however, that the Act limits the liability of volunteers themselves, but specifically does not limit the liability of any nonprofit organization with respect to harm caused by any person. Similarly, the Act does not limit civil actions brought by nonprofits against their own volunteers. The Act was established:

to promote the interests of social service program beneficiaries and taxpayers and to sustain the availability of programs, nonprofit organizations, and governmental entities that depend on volunteer contributions by reforming the laws to provide certain protections from liability abuses related to volunteers serving nonprofit organizations and governmental entities. (42 U.S.C. ' 14501(b).)

Pursuant to the Act, subject to certain exceptions, “no volunteer of a nonprofit organization or governmental entity shall be liable for harm caused by an act or omission of the volunteer on behalf of the organization or entity if '

(1) the volunteer was acting within the scope of the volunteer's responsibilities in the nonprofit organization or governmental entity at the time of the act or omission;

(2) if appropriate or required, the volunteer was properly licensed, certified, or authorized by the appropriate authorities for the activities or practice in the State in which the harm occurred, where the activities were or practice was undertaken within the scope of the volunteer's responsibilities in the nonprofit organization or governmental entity;

(3) the harm was not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer; and

(4) the harm was not caused by the volunteer operating a motor vehicle, vessel, aircraft, or other vehicle for which the State requires the operator or the owner of the vehicle, craft, or vessel to ' (A) possess an operator's license; or (B) maintain insurance.” (42 U.S.C. ' 14503(a).)

Presumably, should the organization become liable to a third party as a result of a volunteer's actions, the volunteer could be liable to the nonprofit organization itself, and nonprofits may wish to indicate this in their volunteer agreements. See Rule #2.

Conclusion

The use of volunteers and interns by nonprofits comes with legal risks. As suggested above, nonprofits may wish to consider carefully the various legal implications of the use of volunteers and interns, and how to best implement these four basic rules.

Ofer Lion is a tax-exempt organizations attorney in the Los Angeles office of Hunton & Williams LLP. He can be reached at [email protected] author wishes to thank Steven Schneider for his helpful comments to an earlier draft of this article, which represents the views of the author only, and does not necessarily represent the views of Hunton & Williams LLP. Phone: 213-532-2167.