Ask Rita: Is it Legal to Require Nonprofit Employees to Donate Gifts?
Nonprofits are always looking for creative ways to raise funds, but requiring employees to make financial donations is unlawful.
Article Highlights:
Requiring your nonprofit’s employees to donate or volunteer is not legal.
Dear Ask Rita in HR:
In order to foster a culture of giving, my nonprofit organization requires employees to give an annual gift each year. While I agree that we should support the work of our organization, I object to the idea that I am forced to donate. It’s gone so far that my supervisor will stand over my desk and ask me to write a check.
Is this legal? What are my options for saying no?
Signed, X
Dear X:
While nonprofits are always looking for creative ways to raise revenue, there is no question that requiring employees to make financial donations is unlawful. As to the legal reasons why, I’ll take you back to the dawn of the industrial revolution, when industry created company towns, where workers were paid in script and were forced to buy their supplies and lodging from the company. In response to these practices, the federal Fair Labor Standards Act, and similar state laws, were adopted which prohibited any type of “kickback” in wages to the employer. The text of the FLSA regulations is very clear on this point:
Whether in cash or in facilities, “wages” cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or “free and clear.” The wage requirements of the Act will not be met where the employee “kicks-back” directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee. This is true whether the “kick-back” is made in cash or in other than cash. 29 C.F.R 531.35
In other words, the law would not only prohibit the employer from requiring employees to donate cash, food for fundraisers or donations for a silent auction would similarly be prohibited.
That said, nothing prohibits voluntary donation of such items. Because of these strict anti-kick-back regulations, employees who want to voluntarily donate cash to their nonprofit should not do it via payroll deduction, but instead be directed to use a standard donation process.
Aside from the legal restrictions, pressuring employees to give or donate things to office events has the potential to create morale problems since not all employees are in the same personal financial condition to make contributions or donations. This could result in employees feeling less valuable compared to other employees. For all these reasons, such requests should come with no pressure from management or singling out employees unable to give.
Similar limitations found in the FLSA prohibit employers from requiring employees to volunteer to work for their own or another nonprofit organization. When an employer directs a non-exempt employee to volunteer, the time is compensable worktime. FLSA2006-4 While there are limited circumstances under which a non-exempt employee can volunteer, to perform work at their own nonprofit, employees can never be performing their regular duties or during their regular working hours. DOL Fact Sheet #14A
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About the Author
Ellen Aldridge, J.D. is an Employment Risk Manager for Nonprofits Insurance Alliance (NIA). Ellen has practiced labor and employment law for over 30 years as a litigator, negotiator, and adviser. Now in her 12th year with NIA, Ellen brings her experience to assist nonprofits in managing employment law risks and implementing best practices to motivate and support employees. Ellen received her B.A. in Government from University of San Francisco and her J.D. from Santa Clara University. On the weekends, you can find her in her garden.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors. They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations. Blue Avocado, its publisher, and affiliated organizations are not liable for website visitors’ use of the content on Blue Avocado nor for visitors’ decisions about using the Blue Avocado website.
I’ve worked for a number of nonprofits. Yes, legally you cannot force anyone to give. That wouldn’t be right morally or ethically, either. As for not using payroll deduction, I think you’re wrong. Plenty of nonprofits, big and small do it without any legal issues what-so-ever.
What I find is that most people’s objections are about their own ego. They feel forced, or have some issue in the workplace that bothers them. Withholding their charitable gift is exercising control in their life, if not simply “getting back” (probably the antithesis of “giving back,” huh?) In a nonprofit where commitment to mission is essential for staff and volunteers alike, this is problematic. It’s all about the people you are serving, not your needs. And no, if you accepted a low wage rate to work at your nonprofit, that’s not your “gift.” You should have taken a job elsewhere.
Sorry for being harsh. I’ve been on this ride before.
When I was a nonprofit CEO we were a United Way agency and United Way encouraged employee contributions. A staff member volunteered to coordinate our workplace effort. I provided the incentive: 100% employee participation and everyone got a day off. Because we were a New Orleans nonprofit the day off was Lundi Gras, the day before Mardi Gras. We always got 100% participation.
I don’t have an issue with a payroll deduction; however it is often done incorrectly. I have seen it deducted pre-tax and then the individual takes a deduction again on their personal tax return; thereby counting it twice. This is wrong.
I’ve worked in and led several nonprofit organizations. I have always been turned off by this practice. The line I’ve heard is that if employees believe in the service our agencies provide, then a donation supports that belief, several organizations even used the rate of employee support as a testament to the quality of services. I think this is wrong. Choosing to work in a nonprofit, with less wage earning potential is a testament to the mission and services. Development efforts should be concentrated towards individuals who support the organization and have additional money to give. I think focusing on staff is a sign of poor development skills. It’s lazy and not worth the potential of impact to morale.
I too have worked with several nonprofits and very much disagree with PhillyReader’s “harsh” response. When stewarding a prospect for a major gift or writing a grant proposal I would much prefer to be able to say that my board of directors all gave significant gifts. I would want HR to know the % of employees who gave. I don’t give to my employer. That’s my choice. Knowing what % of your employees give is valuable information if there is no overt pressure to give. Whether PhillyReader wants to admit it or not every employer does indeed have employees who produce a good return and those who produce a loss. Those who provide a good return are indeed giving above and beyond their contract. The “you should have gotten a job elsewhere..” comment is in poor taste and that mindset is bad business.
I love the idea of incentives for those who give. I have worked in nonprofits where there was pressure to give and it was unappreciated. When staff are pressured to give it becomes devisive and demoralizing. Truly not the culture or spirit in which the nonprofit was founded and not a culture that promotes the goodwill and hard work of employees.