I have the great pleasure of speaking with Syvia Strobel (ACM) and Deborah Vinsel (Thurston Community Television) at the 2013 Alliance for Community Media National Conference on Wednesday, May 29. Our session description follows::
Nuts and Bolts of Nonprofits and Their People
Nonprofit organizations provide critical services, but often do so with limited resources and little time to assess legal risks and obligations. Nonprofit executive must balance their day with managing a board of directors and overseeing staff and volunteers. This workshop will provide an overview of key issues in people management, board governance, UBIT and other timely nonprofit issues. Come hear from seasoned professionals on best practices and areas of risk for our organization.
This post includes resources I'll refer to during our session.
Key Issues in People Management
Independent Contractor vs. Employee: Don't Want to Get This Wrong
Organizations must recognize how to tell whether a worker is an independent contractor or employee. And it's not just a matter of how an organization chooses to classify the worker. There are federal and state laws that inform how a worker must be classified. See Independent Contractor (Self-Employed) or Employee? and IRS Publication 1779: Independent Contractor or Employee; and in California, Independent Contractor or Employee).
Too often I hear that an uninformed employer is hiring independent contractors instead of employees because it can't afford employees. Yet, the hired workers are working full-time, indefinitely, and exclusively for the employer; they are managed on what must be done and how to do it; and they work without negotiated written contracts. In other words, they are legally employees, and the employer may be fined for failing to withhold employment taxes, breaching wage and hour laws (e.g., minimum wage, overtime, breaks), and failing to implement and/or enforce anti-discrimination and retaliation laws that may apply only to employees. In addition, the employer may find themselves unprotected by what might be very expensive workers' compensation claims. See New Crackdown on Using Independent Contractors (and the Ten Consequences of Reclassifying Independent Contractors as Employees hyperlink within the article) by Robert W. Wood (Forbes).
Organizations that may have gotten the classification wrong in the past but want to correctly classify certain independent contractors as employees going forward may be eligible to do so through the IRS Voluntary Classification Settlement Program. Forbes provides a summary of the program in this article about the amnesty program available through June 30, 2013.
Exempt vs. Non-exempt Employee: Why is This Important?
Exempt employees are those exempt from overtime pay. Non-exempt employees must be paid overtime, subject to applicable federal and state laws. Again, it's not up to the employer to classify a particular employee as exempt or non-exempt simply based on what the employer wants. There are federal and state laws that inform how an employee must be classified. See Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA).
See also Classifying Employees Correctly (National Council of Nonprofits)
Volunteer, Intern or Employee?
At first blush, it might seem simple to distinguish between a volunteer and an employee. But such distinction gets much more difficult to make when an organization pays a "stipend" to the volunteer. If the stipend is compensation for services, the paid individual may not be a volunteer and, if the payment is for regularly rendered services, may be an employee. Improper classification can raise many of the same issues described above for improperly classifying an employee as an independent contractor.
It is possible that the payment of a stipend to a volunteer may not convert the volunteer to an employee if the stipend is considered a reimbursement of certain types of expenses, a de minimis fringe benefit, or a nominal fee for service. Note that a Wage and Hour Opinion Letter (FLSA2006-28) expressed that the Department of Labor will presume that a fee paid to a volunteer is nominal as long as the fee does not exceed twenty percent of what an organization would otherwise pay to hire a full-time employee for the same services. However, organizations paying stipends to volunteers should confer with an employment/tax attorney for counsel regarding these issues.
A person receiving payment from a nonprofit may also fall under the classification of intern. Interns are also not employees and not subject to minimum wage and overtime laws under the FLSA if they meet the 6-factor test. See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act and Legalities of Nonprofit Internships (Blue Avocado), which discusses the practical difficulties of meeting factor 4 ("The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded"). A nonprofit may seek to recognize a person receiving a stipend as only an intern as opposed to a volunteer (or volunteer intern) when such person is working in a commercial (unrelated business) activity run by the nonprofit.
- Nonprofit Interns (National Council of Nonprofits)
- Volunteers and Interns (Law For Change)
- Employee or Volunteer: What’s the Difference? (Nonprofit Risk Management Center) - includes a discussion of the issues created by having an employee also volunteer for his or her employer. Note that if the employee ever says he or she was coerced to volunteer (a possibly very significant risk if the employee is ever terminated or disgruntled), the organization may face serious legal troubles.