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John
John, Employment Lawyer
Category: Employment Law
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Experience:  Exclusively practice labor and employment law.
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Hello. We are in the process of setting up a new business.

Resolved Question:

Hello. We are in the process of setting up a new business. It is currently incorporated as a Delaware LLC but we are going to apply for 501c3 status (which we think might take a little bit of time because we will also have a parallel Benefits Corporation associated with it). However, while that process is underway we will have a number of pro-bono resources working for us in various capacities (marketing, PR, legal help, etc.). My question: is there a typical pro-bono agreement that people usually sign (similar to an employment agreement but specifically for pro-bono workers?). What other legal or administrative actions should we be taking while we have those resources working for us?
Submitted: 1 year ago.
Category: Employment Law
Expert:  John replied 1 year ago.
Hi, My name is XXXXX XXXXX I’m happy to assist you with your question today.

Yes it is important to draft the terms of the volunteers' involvement, non-payment of wage and waiver of employment relationship. Otherwise they could legally challenge that your company owes wage or an employment arrangement was agreed to by the parties. Here is a model agreement that should suffice.

I believe this answers your question. However, if you need clarification or have follow-up questions regarding this matter, I will be happy to continue our conversation – simply reply to this answer. If you are otherwise satisfied with my response, please leave a positive rating as it is the only way I am able to get credit for my answers. Thank you, XXXXX XXXXX wish you all the best with this matter.

John, Employment Lawyer
Category: Employment Law
Satisfied Customers: 2980
Experience: Exclusively practice labor and employment law.
John and 10 other Employment Law Specialists are ready to help you
Customer: replied 1 year ago.

Thanks so much John. Very useful and the link was very useful as well. I have taken this and modified it for our uses. Two quick follow-up questions.


 


1) Because our start-up will be based on technology we will have some volunteers that are actually building and developing code for us. So I have added a clause around invention (basically saying that anything they do for us as a volunteer belongs to us).


 


2) We may be in a position that we can grant stock to some of our Pro-Bono resources if they are willing to provide a certain level of Pro-Bono support over a period of time (say commit to 6 months of volunteer time). Can we grant pro-bono resources stock in exchange for them providing some stated level of support or does that push them into some strange model of employee? If it does, are there any ways that we could gift or grant stock to pro-bono volunteers?


 


 

Expert:  John replied 1 year ago.
Victor, I probably wouldn't advise to do that. You very well may do it and it goes off successfully; no volunteers claim to be employees after the fact or make wage claims. But offering the stock could be used as supporting evidence for a volunteer to claim a profit motive and he/she is an employee and should be owed wage and overtime compensation, which could be quite costly.
Customer: replied 1 year ago.


Interesting. Thanks John. So it sounds like having the clause that covers IP creation, etc. is OK (it's fine to say that the work of volunteer accrues to the company) but adding a compensation layer make is more difficult.


 


Some follow up thoughts:


 


What if those resource, instead of being volunteers, became 1099 contractors where the compensation was paid out in stock vs. cash? Is that possible?


 


Is there any other construct that you could think of that might work?

Expert:  John replied 1 year ago.
There are really only these three ways to have workers - employees, contractors, and volunteers. Being 1099 contractor would be fine but then you run into the issue of employee control etc - see the IRS rules on employee/contractor (mis)classification. Whereas the issue of being a volunteer vs. employee is one of profit motive - i.e. if the employer makes money off of the volunteers work efforts, the DOL may find them to be employees and owed min wage and overtime.

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