Protections for Board Members – Post 3

Still concerned about volunteering on a nonprofit board?  As a continuation on my series of posts on board member duties and liabilities, I would like to ease your mind with a discussion of the statutory protections that exist for volunteer board members.

In recognition of the invaluable services that volunteer board members provide to nonprofit organizations and the need to limit liability from tort actions for those volunteers in order to ensure their continued participation, in 1997 Congress passed the Volunteer Protection Act.  The Act provides protection from liability for volunteer board members of §501(c)(3) and §501(c)(4) organizations, provided four conditions are met:

1. The volunteer was acting within the scope of their responsibilities in the nonprofit organization or governmental entity at the time of the act or omission that could give rise to liability.
2. If applicable or required, the volunteer was properly licensed, certified or authorized in the state in which the alleged act took place to engage in those activities that were within the scope of their responsibilities for the nonprofit organization.
3. The harm was not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious flagrant indifference to the rights or safety of the individual harmed by the volunteer.
4. The harm was not caused by the volunteer operating a motor vehicle, vessel, aircraft, or other vehicle for which the state requires the operator or owner to possess an operator’s license or maintain insurance.

Exceptions:

1. The act was a crime of violence by the volunteer board member.
2. The act was a hate crime by the volunteer board member.
3. The act involved a sexual offense by the board member.
4. The act involved the violation of a State or Federal civil rights law.
5. The volunteer board member was under the influence at the time of the act.

Organizations should note that the above statute does not limit the liability of the organization itself for the board member’s actions – so an organization should consider insurance coverage that will protect the organization’s assets in the case of a lawsuit.

In addition to the federal statute, the Minnesota Nonprofit Corporation Act also contains protections for volunteer board members.  The Minnesota statute applies to volunteer board members of all exempt organizations (exempt from federal income tax).  It provides that volunteer board members are not civilly liable for an act or omission if the act or omission was in good faith, was within the scope of the person’s responsibilities as a director, officer, trustee, member, agent, or fire chief of the organization, and did not constitute willful or reckless misconduct.

Exceptions:

1. An action brought by the Minnesota Attorney General for a breach of fiduciary duty (care, loyalty, obedience)
2. A cause of action based on federal law
3. A cause of action based on the board member’s express contractual obligation
4. An action based on a breach of public pension plan fiduciary responsibility

As with the federal statute, the volunteer protections apply to the board member, not the organization – so insurance is still strongly encouraged.