5 Reasons Why Your Volunteer-Only Nonprofit Needs Employment Practices Liability

volunteer nonprofits and employment practices liability

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Nonprofit management liability insurance usually includes two coverages:

  1. Directors and officers liability (D&O)
  2. Employment practices liability (EPLI)

Many small nonprofits are volunteer-led or use only 1099 contracted employees to do their work.

Consequently, I have had this conversation often (or some version of it):

Nonprofit: We don’t have employees. We don’t need employment practices liability insurance. Take it off of our D&O quote. 

Me: Do you have 1099s? 

NP: Yes, but they aren’t employees. (or “No”, then…)

Me: Do you have clients, customers, donors, volunteers, any other human person that you serve or who helps you serve others or get the work done? 

NP: Yes.

Me: Are all people unpredictable and generally emotional? 

NP: Yes. 

Me: Is it possible that something discriminatory, sexual, or otherwise randomly said, written, or implied could come from anybody relating to your organization that could hurt any other human person?

NP: (this one can come down on either side of the fence) – yes… maybe…. I doubt it.

Me: Is it possible that someone could make a claim that such a thing was said, even if it weren’t said or written or implied? 

NP: I suppose so… but still, probably  not. 

When I present a D&O quote to a potential client, I always include the employment practices liability coverage part.

2 for (almost) the Price of 1

For nonprofits, the employment practices liability coverage extends to your nonprofit’s handling of 1099s, volunteers, clients, customers, donors, or, as one carrier’s policy puts it, ‘other natural person(s)’.  That includes pretty much everybody.

Management liability policies for nonprofits are geared to help defend your organization against discrimination and sexual harassment charges, in addition to defending your organization around poor management. This defense includes protecting your organization from an offhanded comment by a volunteer to a client or student, or a 1099’s unwanted advances toward a summer volunteer intern, or a director’s statement about a protected class or race.

5 Good Reasons to Maintain Employment Practices Liability (even if you don’t have employees)

Let me bullet point this to make it clear why your volunteer or 1099 only nonprofit should make sure to keep the employment practices liability part of your management liability quote (if the carrier even gives you the option):

  1. Volunteers are usually considered ‘insureds’ on your policy
  2. Interns, independent contractors, and others who help are often ‘insureds’ on your policy
  3. EPLI normally address ‘third party’ claims, i.e. claims brought NOT by employees, but by volunteers, clients, or any other person someone from your organization could possibly offend.
  4. EPLI claims far outweigh D&O claims according to nonprofit management liability insurers. EPLI addresses the human and emotional side of managing an organization. It’s easier to make a poor human decision than a poor business management decision.
  5. Federal and state laws are at stake: If you violate the rights or sensibilities of a protected class, then there is a greater chance a case mounts against you or the volunteer who said something unwise.

To Sum It Up…

Your volunteer only nonprofit needs employment practices liability because you have people who do work for you who need protection or defense, and you have clients and customers and others who are affected by your organization’s operations.

The coverage, if the premium is separated out, is usually quite inexpensive.

D&O/EPLI coverages vary by carrier. Please make sure to review the offer your agent is giving you to make sure the policy addresses your needs. The information here is illustrative, but might not hold true for every policy proposal or insurance carrier. 

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What questions do you have about nonprofit D&O or EPLI?  Please drop them in the comments or reach out via social media.

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