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socrateaser
socrateaser, Lawyer
Category: Legal
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Experience:  Retired (mostly)
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Is it illegal to raise funds for a nonprofit, i.e. a church

Resolved Question:

Is it illegal to raise funds for a nonprofit, i.e. a church or Redcross, and allow the individual fundraisers to receive a commission based on the money the raised?

For example, a local high school wants to build a pool but can't get the money approved through the town. A passionate parent creates a website that accepts donations. He would like to have the area kids help out by sending a plea to their friends on Facebook and promote the fundraiser on their profile pages. The parent offers the kids a 2% commission on the funds raised through their efforts. Is this activity illegal?
Submitted: 1 year ago.
Category: Legal
Expert:  socrateaser replied 1 year ago.
Hello,

Federal Dept. of Labor regulations (29 C.F.R. 553.101) define a "volunteer," as follows:

 

  • (a) An individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered, is considered to be a volunteer during such hours. Individuals performing hours of service for such a public agency will be considered volunteers for the time so spent and not subject to sections 6, 7, and 11 of the FLSA when such hours of service are performed in accord with sections 3(e)(4) (A) and (B) of the FLSA and the guidelines in this subpart.
  • (b) Congress did not intend to discourage or impede volunteer activities undertaken for civic, charitable, or humanitarian purposes, but expressed its wish to prevent any manipulation or abuse of minimum wage or overtime requirements through coercion or undue pressure upon individuals to “volunteer” their services.
  • (c) Individuals shall be considered volunteers only where their services are offered freely and without pressure or coercion, direct or implied, from an employer.

 

The point of the above, is that by offering a commission to "volunteers," you may be converting them into your employees, which, if true, would subject you to requirements for the collection of payroll taxes (FICA, FUTA, unemployment, workers compensation, etc.), and make you liable for the employee's errors and/or omissions to third parties. You could also be liable for violating various State and Federal wage and hour regulations concerning the employment of minor children.

 

Finally, Massachusetts has strict regulations over "professional fundraisers" -- and your contemplated activities may run afoul of those regulations (see this link).

 

This opinion letter from the U.S. Department of Labor provides a discussion of how a charitable organization can pay a "nominal" fee to fundraisers, and not have them be regarded as employees (scroll down to the section: "Occasional and Sporadic Volunteer Activities"). However, even if you satisfy these requirements, you may nonetheless violate Massachusetts law re professional fundraising.

 

BotXXXXX XXXXXne, you are contemplating a very risky activity. You may be able to mitigate the risk by creating a website that simply charges a fee for marketing a fundraising activity, so that your revenue is not generated by the fundraising itself, and you are not hiring persons to fundraise. Absent that sort of arrangement, you would have to carefully follow all of the various state and federal regulations, and you could still be deemed the employer, because there is no "bright line" test that separates your volunteers from your employees.

 

Please let me know if I can be of further assistance.

socrateaser, Lawyer
Category: Legal
Satisfied Customers: 34394
Experience: Retired (mostly)
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