Minimize the risks to your volunteers 

For many volunteers, possible legal and tax liabilities that may result from their service to your organization would never cross their minds. And it’s usually not a big consideration for nonprofit organizations either. But failing to review possible ways your volunteers can become subject to either legal or tax liabilities can put your volunteers and your organization at risk. Let’s take a closer look. 

Legal liabilities

Volunteers face a real risk of being sued for their actions (or inactions) while performing services for your organization. The risk is particularly significant with nonprofits that provide medical services or work with vulnerable populations. But even such simple tasks as driving can result in litigation.

The federal Volunteer Protection Act of 1997 offers some degree of defense for volunteers acting within the scope of their responsibilities. Many states have passed similar laws to shield volunteers. But the liability can vary significantly from state to state, with different limits, conditions and exceptions. For example, Alabama provides broad coverage in the absence of “willful or wanton misconduct.” Michigan, on the other hand, protects volunteer directors and officers only if the nonprofit expressly assumes liability for claims in its articles of incorporation.

Volunteer protection laws, however, don’t preempt the need for appropriate insurance coverage. In fact, some state laws explicitly require nonprofits to carry insurance to limit volunteer liability. 

Reducing risk

To minimize risk, organizations should carry comprehensive general liability insurance that specifically covers volunteers, as well as directors and officers liability insurance. If volunteers will operate vehicles for your organization, check whether your auto insurance covers them. Add them as additional insureds, if necessary. 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, you should devote time upfront to screen and train volunteers appropriately, and restrict certain client-facing activities to employees. 

Tax liabilities

The possibility that federal or state taxing authorities might come after people because of their volunteer activities doesn’t necessarily spring to mind as an obvious risk. But it can happen. For example, you could inadvertently create taxable income for your volunteers if you provide them benefits such as services or compensation beyond reimbursements for actual out-of-pocket expenses incurred. Reimbursements that exceed actual expenses are considered taxable.

If your volunteers sometimes need to cover costs with their own money (such as picking up supplies for an event), inform them beforehand — in writing and verbally — that they must provide receipts of their spending on the organization’s behalf. This may seem burdensome to people just trying to do some good, so explain that it’s for their own protection as well as that of the organization. 

Protect your most valuable assets



Volunteers contribute critical services, freeing up employees to work on other vital matters, and rank among most nonprofits’ most valuable assets. That’s why it’s important to take steps to minimize their risk of tax or legal liabilities. Start by talking with both your legal and insurance advisors to ensure you’re covering your volunteers.