Although nonprofits are distinguishable from for-profit businesses in many regards, the applicability of labor and employment laws is not one of those areas. The most common legal pitfalls faced by nonprofits are those involving violations of labor and employment laws and regulations.
Tovella Dowling brings value to its clients by having the expertise to analyze its client’s labor and employment matters through the lens of a nonprofit practitioner understanding the unique nuances of a nonprofit’s workforce and obligations as an employer.
Worker Classification by Nonprofit Employers
A nonprofit’s workforce is dynamic and can comprise employees, independent contractors, volunteers, or interns.
Although a Tax exempt organization is afforded the beneficial opportunity to utilize volunteers, a critical segment of the workforce not available to for-profit businesses, failure to regard such workers in compliance with applicable labor laws and regulations can result in accrued payroll taxes, interest, penalties, and other liabilities.
Our attorneys regularly counsel its clients on worker classification matters, including evaluation of prospective hires, safe harbor re-classification under the IRS Voluntary Settlement Program, drafting and implementation of volunteer agreements, policies, and procedures, drafting and review of employment offers and agreements, and drafting and review of independent contractor agreements.
Employment Regulatory Compliance for Nonprofit Employers
To ensure our client’s compliance with federal and state workplace laws and regulations, Tovella Dowling delivers solutions that maximize management flexibility and minimize risk exposure.
Our attorneys counsel nonprofit executives on a full range of federal, state, and local workplace laws and regulations, including Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family and Medical Leave Act, Fair Labor Standards Act, Immigration Reform and Control Act, Worker Adjustment and Retraining Notification Act, Civil Rights Act, Equal Pay Act, Uniformed Services Employment and Reemployment Rights Act, and the Employee Retirement Income Security Act.
Additionally, Tovella Dowling frequently assists its clients in establishing employer payroll accounts in those jurisdictions in which it maintains employees and counsels on employer obligations related to withholdings and payroll tax remission, as well as other state-specific employer-mandated reporting obligations.
Workforce Management for Nonprofit Employers
Hiring and management of a nonprofit’s workforce can be overwhelming considering rapidly changing employment laws impacting employer obligations.
Tovella Dowling assists its clients in navigating employment laws and regulations providing strategic employment counsel to foster a sustainable and satisfied workforce.
Our attorneys assist its clients in various capacities, including counsel related to the creation and taxation of employee benefits, drafting and implementation of employment policies, procedures, and handbooks, hiring and retention of employees, volunteers, and contractors, the establishment of fellowship programs, performance improvement plans, employment terminations, drafting and implementation of employment handbooks, policies and procedures, and maintenance and production of personnel files.
Nonprofit Executive Compensation
Determining compensation packages and structures for nonprofit executives is the responsibility of the Board of Directors or those executives to whom the Board of Directors delegates such authority. Nonprofits must ensure that all executive compensation packages are reasonable.
In evaluating the reasonableness of compensation, the common question is whether total compensation exceeds the value of the services provided by the subject employee to the Tax exempt organization. Treas. Reg. § 1.162-7(b)(3) clarifies that reasonable compensation is “the amount that would ordinarily be paid for like services by like organizations in like circumstances.”
Thus, the concept of reasonable compensation infers two prongs – (1) an amount test, focusing on the reasonableness of the total amount paid; and (2) a purpose test, examining the services for which the compensation was paid. Note that these two prongs are not separate issues that examine different facts.
Rather, the various factors in a particular situation taken together will determine whether either or both tests are satisfied.
Tovella Dowling assists its clients in ensuring excess benefit transactions are avoided in the context of nonprofit executive compensation by rendering compensation studies, assisting in compensation structuring, employee benefits packages, and advising on the initial contracts exception and non-fixed bonus arrangements.
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