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Info You Can Use: Legal Tips

A couple weeks ago, Gene Takagi of the Non-Profit Law Blog made a post cautioning lawyers about issues to consider when representing a nonprofit.

As you might imagine, every one of his tips were important for members of a non-profit board and leadership to know as well. Some of his traps and tips are frequent points of conversation in the non-profit arts community: don’t write a mission statement that is too restrictive; be sure you have a viable business plan and don’t assume non-profit status is your only option; boards members should be aware they have a very real governance role; non-profit doesn’t mean tax-exempt or no-profit; all overhead is not bad; get board and directors insurance.

There were also some topics that are less frequently discussed:

Traps
1. Failing to inform the client at the outset of representation that you represent the organization and not any individual directors or officers.

4. Including “non-voting directors” in the organization’s bylaws (under most states’ laws, there is no such thing as a “non-voting director” and, subject to very limited exceptions, each director has the right to vote on all matters before the board).

5. Providing in the bylaws that the board of directors may combine in-person votes at a meeting with email votes to take board actions.

6. Reinforcing the myth that nonprofits should always minimize overhead expenses (even at the expense of building an appropriate foundation on which to build the organization’s operations).

7. Failing to inform the client about the differences among volunteers, independent contractors, and employees, and the risks of misapplying these classifications.

10. Failing to discuss with the client the benefits of having organizational policies that address the legal and management implications of conflicts of interest, proper gift receipts, misuse of social media, expense reimbursements, acceptance of noncash gifts, document retention/destruction, and whistleblowers.

For me, that first one about the lawyer representing the organization and not you always strikes me as worth repeating. I have never had the ill-fortune of being in a situation where there was a even the whiff of legal action. However, when I am reviewing contract clauses that make me uneasy or am faced with a potentially contentious encounter, I will find myself thinking that the legal department will cover me if worse came to worse. Then I have to remind myself that in fact, they won’t necessarily have my back because they serve the interests of the organization, which may not include protecting me.

Point #5 about mixing in-person and email voting is a reference to a prohibition in California law. However, reading the rationale behind the illegality of such action, it seems reasonable to expect other states would have a similar restrictions.

Since I have heavily summarized his post, it is worth taking a look at everything Takagi cautions and advises for the legal health of a non-profit

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Is It Against The Law To Pay Me More?

You may have heard about Dan Palotta’s recent TED Talk about how judging charities on concepts like administrative overhead ratios is hobbling their ability to solve huge problems.

He makes some persuasive points, though some of the concerns I had with his proposals when they appeared on the Harvard Business Review blog three years ago still remain.

Gene Takagi picked up on the talk and addressed legal considerations which would prevent non-profits from operating in the manner Palotta suggests. (Just to be clear, Palotta never suggests charities cleave to non-profit status.)

Takagi notes that charity pay scales are limited by laws governing 501 c 3s and so can’t compete well on salary if supporters show tolerance for doing so to attract the best talent. Expenditures are limited in much the same manner,

“If a for-profit spends 90 cents to make $1, it may be a perfectly acceptable profit margin, but if a charity spends 90 cents to make $1, it would be widely viewed as a terrible waste. As a result, many charities fail to properly report their fundraising expenses, and the IRS has raised the possibility of utilizing the controversial commensurate test, which addresses whether a charity is using its resource in line with its charitable mission…But this can’t be judged strictly on percentages, and charities should be allowed to experiment so if an honest fundraising and mission awareness-raising campaign fails, the charity isn’t slaughtered for it. The problem, however, is not the law, but the misguided public ideology of which Dan spoke.”

Charities are also often limited and discouraged from pursuing new revenue ideas by federal and state laws as well as popular sentiment.

I think the biggest question that this whole discussion raises for me is whether social attitudes are such that a for-profit company raising money for social issues will be tolerated. Given that people will give money to projects via things like Kickstarter without much consideration about whether it is non-profit or not, is the idea that non-profits do things that companies won’t due to lack of profitability and governments can’t/won’t due to lack of political will and expertise, over?

Currently I think there is a capricious element to Kickstarter campaigns that make it an unsuitable model for garnering long term support. However the very existence of such mechanisms may be shifting mindsets to a place where worthiness and overhead ratios are not mutually exclusive.

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Info You Can Use: You Tweeted What About Me?!

So after my post a couple weeks ago about why it is bad in a legal sense to have a restrictive social media policy, I am sure some of you have been wondering under what circumstances you can actually discipline someone for what they post online.

Well thanks to a piece on Forbes website, we have an answer (and hat tip to Gene Takagi)

As I had mentioned in my earlier entry, you can’t forbid, and therefore punish, any attempt to organize employees in a discussion about employment conditions. Under labor law, this is termed “protected concerted activity.” If a person is speaking for a group of employees or attempting to organize a discussion among employees, it is protected.

However, there are some tricky nuances to this and a link on the Forbes article to a National Labor Relations Board report, “Report Concerning Social Media Cases,” delves into the matter and presents specific cases to explain why the employee was or was not protected by the law. As Kashmir Hill, the author of the Forbes article notes, it is actually pretty easy and interesting to read for a government document.

My read is that with the current state of social media it may be fairly difficult to fire someone for complaining about work conditions. Essentially, if other employees chime in either on or off line to agree that an employer is a jerk for making employees work under certain conditions, the speech is protected as representing a group complaint. If other employees just comment that they are sorry to hear a situation upset the poster, then the poster may not be speaking on behalf of other employees.

It is only when a comment passes a certain threshold where a person is wishing violence upon people or making statements which are maliciously false that protection of representing a group complaint may not apply. However, being called a power-hungry, martinet jackass does not meet the standard for maliciously false. Suggesting a restaurant buys rat dropping to make their ground beef go further probably would.

Complaints that are clearly representative of an individual’s opinion aren’t protected, especially if they do not invite or receive the agreement of other employees. The same with complaints about the job which are not terms and conditions of employment like saying your store gets the ugliest customers in town.

One interesting fact that came up in a number of the NLRB case studies is that you can not have a blanket policy prohibiting people from posting pictures of themselves in company uniform or in connection with the company logo. ”

“…Employer’s logos or photographs of the Employer’s stores would restrain an employee from engaging in protected activity. For example, an employee could not post pictures of employees carrying a picket sign depicting the Employer’s name, peacefully handbill in front of a store, or wear a t-shirt portraying the Employer’s logo in connection with a protest involving terms and conditions of employment.”

The NLRB documents didn’t say it outright, but presumably you could fire someone if they posted a picture of themselves drunk in uniform at a strip club or urinating on your corporate logo. Though I have no idea if a number of employees urinating would be considered a group cause or not.

Another part of the NRLB document I found useful was two case studies starting on page 19 that first discussed a company’s social media policy that they considered to be too broad. In the second case, they found the policy was lawful but the other prohibitions were too broad. Finally, there was a case where a company’s policy restricting employees’ contact with the media was deemed lawful.

I felt all three were very useful because they all contained rules that any of us might include in our policies. In the first two cases, it is good to know what types of language one should keep out of policies. The last case included restrictions on media contact out of a desire to have one voice speak for the organization. Again, a situation for which many organizations strive.

“…we determined that a policy that stated that “the company will respond to the news media in a timely and professional manner only through the designated spokespersons” could not be read as “a blanket prohibition” against all employee contact with the media. Additional language in the rule referring to “crisis situations” and ensuring “timely and professional” response to media inquiries further clarified that the rule was not meant to apply to Section 7 activities.

Similarly, we concluded here that the Employer’s media policy repeatedly stated that the purpose of the policy was to ensure that only one person spoke for the company. Although employees were instructed to answer all media/reporter questions in a particular way, the required responses did not convey the impression that employees could not speak out on their terms and conditions of employment.”

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Info You Can Use: Volunteer Liability

An appreciative nod to the Gene Takagi at Non Profit Law blog for linking to a Charity Lawyer post about a non-profit’s liability in respect to volunteers.

Guest blogger Deanna Rader notes that a non-profit may be liable for the actions of their volunteers under a doctrine known as respondeat superior which holds that an employer can be responsible for the acts an employee commits in the course of executing their duties. Some states have extended this concept to include volunteers.

In this context, Rader suggests that care be taken in selecting and training volunteers.

* How will volunteers be utilized? The risk of liability increases as the volunteer is given more responsibility and independence. Carefully choose the responsibilities that will be given to volunteers. Also, there should be a clear delineation between the tasks performed by employees and those performed by volunteers.

* What selection criteria should be used? You should use care to ensure that the volunteers selected are fit to serve in the positions at your agency. Your selection criteria may differ based on the responsibilities given to different volunteers. If you are using volunteers to serve children, disabled individuals, or other vulnerable populations, your selection criteria may include a background investigation and criminal history check. If your volunteers sort food for a food bank serving adults, however, a background investigation may not be required.

* What training is necessary? Before putting volunteers to work, they need to be trained to perform the assigned tasks. Otherwise, you could be held liable for their negligent performance of those tasks if it causes injury to others. Also, the nonprofit organization could be held liable if a volunteer who is not properly trained injures himself or herself because of inadequate training.

* How will the volunteers be supervised? Volunteers should have appropriate supervision based on the tasks assigned. A warehouse volunteer who is performing physical labor may not need close supervision, whereas volunteers dealing with vulnerable populations may need to be closely monitored.

* How will problems be addressed? Although good volunteers provide invaluable assistance, bad volunteers can expose you to substantial liability. Do not be afraid to address problems head-on and terminate the volunteer relationship if a volunteer exhibits inappropriate behavior.

Rader also address injury that a volunteer might take in the course of the service to the non-profit. Employees are covered under worker’s compensation laws while volunteers are not. However, it is important to clearly delineate between the two categories of workers. In addition, employers have a responsibility to provide a safe work environment to everyone who may enter their premises, regardless of employment status.

“An employer also has a duty to maintain safe working premises for an employee. Many states have applied this doctrine expressly to nonprofit organizations, requiring them to maintain a safe place for volunteers to work or finding them to be negligent in failing to provide a safe place for a volunteer to deliver services. This duty can apply even if the volunteer is working off premises while providing services for the nonprofit organization, making the nonprofit corporation liable for the actions or inactions of a third party.”

Among the steps Rader recommends taking are having volunteers sign a general waiver and release that informs them about the possible hazards they may face. She also mentions having volunteers work with a buddy or a team so they are never alone.

All this seems very valuable for the performing arts. I have worked in places where volunteers have done everything from ushering to construction to driving farm tractors. There has been ample opportunity for them to injure themselves or each others. We rent our facility out to groups and have had other people’s volunteers damage equipment on a number of occasions for which we held the renter liable.

On the flip side, performance groups often don’t have their own facilities and have their volunteers meet them at an unfamiliar place like my theatre to help them put up a show. In such a situation, you are dependent on the performance facility’s maintenance program and good practices to keep your volunteers safe.

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