Comprehensive risk management is one of the primary responsibilities of nonprofit leaders. You probably regularly consider and act to mitigate risk to your facilities, assets, staffers, and clients. What about your volunteers? Even though the federal Volunteer Protection Act of 1997 provides some protection, volunteers face the real risk of being sued for actions while working for your organization. They also can become subject to tax liabilities.
State by state
The Volunteer Protection Act offers some degree of defense for volunteers acting within the scope of their responsibilities. And many states have passed similar laws to shield volunteers. But liability can vary significantly from state to state, with different limits, conditions and exceptions, such as broad coverage in the absence of willful or wanton misconduct vs. coverage only if the nonprofit expressly assumes liability for claims in its articles of incorporation.
Volunteer protection laws, however, don’t preempt the need for your nonprofit to buy appropriate insurance coverage. Some state laws explicitly require nonprofits to carry insurance to limit volunteer liability.
Insurance coverage
To minimize risk, your organization should carry general liability insurance that specifically covers volunteers and directors and officers liability insurance. If volunteers will operate vehicles for your organization, check whether your auto insurance covers them. Larger organizations might consider amending their bylaws to include a broad indemnification clause for volunteers when the claims against them exceed insurance limits.
Also consider implementing processes and procedures to control the risks of harm or injury caused by volunteers. For instance, devote time upfront to screen and train volunteers appropriately and restrict certain client-facing activities to paid staffers.
Inadvertent taxable income
Another risk is that federal or state taxing authorities might come after your volunteers because of their activities. For example, your nonprofit could inadvertently create taxable income for volunteers if it provides them with benefits such as services or compensation beyond reimbursements for actual out-of-pocket expenses incurred. In fact, reimbursements that exceed actual expenses are taxable.
If your volunteers sometimes need to cover costs with their own money that you subsequently reimburse, inform them beforehand — in writing and verbally — that they must provide receipts of their spending on your organization’s behalf. This may seem burdensome to people just trying to do some good, so explain that it’s for both your and their protection.
Protecting everyone
Volunteer risk varies by nonprofit. But it’s particularly significant with nonprofits that provide medical services or work with vulnerable populations. Even such simple tasks as driving can result in litigation. So make sure your hardworking volunteers aren’t a risk to themselves or to your nonprofit’s important mission. Consult an attorney for any legal advice.
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