If a nonprofit wants to pay a volunteer, the amount must be nominal.
Nonprofit Volunteers and Stipends – To Pay, or Not to Pay? Nonprofit volunteers should be just that—volunteers of their time without payment or expectation of compensation. Nonprofits that pay volunteers regular and significant amounts, whether described as wages, barters, stipends, allowances, or something else make their volunteer workers look more like employees, even if the payments amount to less than minimum wage. According to the U.S. Department of Labor, a volunteer is “an individual who performs hours of service…for civic, charitable, or humanitarian reasons, without promise, expectation, or receipt of compensation for services rendered.” 29 C.F.R § 553.101[1] Minnesota Statute § 177.23 states that an employee does not include “any individual who renders services gratuitously for a nonprofit organization.”
In addition, there are a few other ways to determine whether a true nonprofit/volunteer relationship exists under federal law[2]:
The worker performs services typically associated with volunteer work;
The worker doesn’t displace any regular employees;
The activity is less than full-time; and
The services are truly voluntary, and not performed as a result of any pressure or coercion (for instance, an employee who is asked to “volunteer” extra time).
The law acknowledges the fact that many nonprofits want to give volunteers stipends, reimbursements for out-of-pocket expenses, or other tokens of appreciation. For this reason, the law allows a volunteer to be paid expenses, reasonable benefits, and/or a nominal fee to perform services.[3] A fee is likely to be considered nominal if it’s not a substitute for compensation or tied to productivity and does not exceed twenty percent (20%) of what an employer would pay to hire a full-time employee for the same services.[4]
Statutory limited liability protections may no longer apply to volunteers who are paid.
The Volunteer Protection Act of 1997 generally protects volunteers from liability in the performance of their volunteer work, if the volunteer:
Performs services;
for a nonprofit organization or government entity; and
either:
-Receives no compensation (although reasonable reimbursement for expenses incurred is allowed); or
-Does not receive anything of value in lieu of compensation in excess of $500 per year.
In addition, under Minnesota Statute § 317A.257, “a person who serves without compensation as a director, officer, trustee, member, or agent of a [nonprofit organization] …is not civilly liable for an act or omission by that person if the act or omission was in good faith, was within the scope of the person’s responsibilities…, and did not constitute willful or reckless misconduct.” Compensation does not include reimbursement for expenses or a per diem amount less than $55 per day of volunteer work.[5]
For this reason, even if law allows for a volunteer to be paid a stipend, problems can still arise. By paying a volunteer (even a nominal amount), a nonprofit may inadvertently risk the volunteer’s statutory limited liability protections under the Volunteer Protections Act of 1997 and Minn. Stat. § 317A.257.
The Bottom Line:
A nonprofit that decides to pay volunteers a stipend should keep the following things in mind[6]:
1. Never pay more than a nominal 20% of what an employer would otherwise pay for the same service
2. Do not offer any benefits that employees receive
3. Make it clear to volunteers receiving a stipend that they may no longer be statutorily protected from liability claims.
[1] See also https://www.nonprofitrisk.org/resources/articles/employee-or-volunteer-whats-the-difference/
[2] https://www.forpurposelaw.com/appreciating-volunteers/
[3] https://www.forpurposelaw.com/appreciating-volunteers/
[4] http://www.ericperkinslaw.com/be-careful-not-to-convert-your-nonprofit-volunteers-into-employees/
[5] Minn. Stat. §§ 317A.257 & 15.059
[6] http://tobijohnson.typepad.com/tobisblog/2013/06/volunteer-stipends.html