Volunteer Agreement Review: Common Issues For Small Businesses

Small businesses and nonprofits often depend on volunteers to achieve their goals, whether for special events, ongoing programs, or community outreach. However, many founders and operators overlook the importance of a clear volunteer agreement. Without one, organizations risk confusion over duties, legal liability, and even wage claims. Common mistakes include using informal arrangements, failing to distinguish volunteers from employees, or ignoring state-specific requirements. This guide explains what a volunteer agreement is, why it matters, and how to draft one that fits your needs. We cover essential terms, legal risks, compliance issues, and practical checklists, so you can avoid costly errors and create a positive volunteer experience.

What Is a Volunteer Agreement?

A volunteer agreement is a written document that outlines the relationship between an organization and its volunteers. Unlike employment contracts, volunteer agreements clarify that the role is unpaid and voluntary. They set out expectations, responsibilities, and boundaries for both parties. While federal law does not require a volunteer agreement, having one is a best practice for risk management and compliance.

The IRS and state agencies focus on the substance of the relationship, not just the title. If a volunteer is treated like an employee, such as being required to work set hours, receiving compensation, or performing core business tasks, the organization could face wage claims, tax penalties, or workers compensation issues. A clear, written agreement helps demonstrate the intent to create a volunteer relationship, not employment.

Volunteer agreements are especially important for nonprofits and tax-exempt organizations. The IRS expects exempt organizations to maintain clear records and avoid providing private benefit or inurement to insiders. State laws may also require disclosures or registration for organizations using volunteers, particularly in charitable fundraising or youth programs.

Key points a volunteer agreement should address include:

• The volunteer's role and specific duties
• Confirmation that the position is unpaid and voluntary
• Confidentiality and privacy expectations
• Intellectual property ownership (if applicable)
• Liability waivers or insurance information
• How the volunteer relationship can be ended

Some organizations use informal or verbal agreements, but a written document provides clarity and helps manage risk. For example, a community food pantry that relies on volunteers to distribute food should have each volunteer sign an agreement outlining their duties, confidentiality obligations, and a liability waiver. This not only protects the organization, but also helps volunteers understand their role and responsibilities.

Key Terms to Include in a Volunteer Agreement

Drafting a volunteer agreement is more than a formality, it is about setting clear expectations and protecting everyone involved. Here are the main terms to consider, with practical examples and state-law caveats:

• Role and Responsibilities: Clearly describe what the volunteer will do. For instance, "The volunteer will assist with event setup, registration, and cleanup at the annual fundraiser on May 15." Include expected hours, locations, and any training or supervision provided.
• Unpaid Status: State that the volunteer will not receive wages, benefits, or compensation. This is crucial for distinguishing the relationship from employment. For example, "The volunteer understands that this position is unpaid and that no compensation or benefits will be provided."
• Duration and Schedule: Specify whether the volunteer role is ongoing, for a specific event, or seasonal. Include start and end dates if relevant. For example, "This agreement covers volunteer service from June 1 to August 31, 2024, for the summer reading program."
• Confidentiality: If volunteers will have access to sensitive information, include a confidentiality clause. For example, "The volunteer agrees to keep all donor and client information confidential and not disclose it outside the organization." This is especially important in states with strict privacy laws, such as California.
• Intellectual Property: If the volunteer will create materials, content, or inventions, clarify who owns the rights. For example, "All materials created by the volunteer in connection with their role are owned by the organization." This avoids disputes if a volunteer designs a logo or writes content for your website.
• Liability Waiver: Many organizations include a waiver stating that the volunteer assumes the risk of injury and releases the organization from certain liabilities, except for gross negligence or willful misconduct. Note that state laws vary on the enforceability of these waivers. For instance, some states do not allow waivers to cover gross negligence or intentional harm.
• Termination: Explain how either party can end the volunteer relationship. For example, "Either the volunteer or the organization may terminate this agreement at any time, with or without cause, by providing written notice." This helps avoid misunderstandings if things do not work out.
• Code of Conduct: Reference any policies or codes of conduct that volunteers are expected to follow, such as anti-harassment, safety, or social media policies. For example, "The volunteer agrees to comply with the organization's code of conduct and safety policies."
• Background Checks: If required, state that the volunteer must pass a background check before starting. This is especially important for roles involving children or vulnerable populations. Some states, such as Pennsylvania and Texas, have specific background check requirements for volunteers in certain settings.

Checklist: What to Include in Your Volunteer Agreement

• Volunteer name and contact information
• Organization name and contact information
• Role description and duties
• Unpaid status statement
• Duration and schedule
• Confidentiality clause
• Intellectual property clause (if relevant)
• Liability waiver (state law permitting)
• Termination process
• Reference to code of conduct and policies
• Background check requirement (if applicable)
• Signature and date

Templates can be a good starting point, but they should be tailored to your specific needs and state requirements. For example, a nonprofit in New York should check state charity bureau guidance on volunteer waivers, while a Texas youth sports league should help support compliance with state background check laws.

Common Legal Risks and Pitfalls

Even with the best intentions, organizations can run into legal trouble if they mishandle volunteer relationships. Here are some of the most common risks, with practical examples and state-law caveats:

• Misclassification: If a volunteer is treated like an employee, such as being required to work set hours, managed like staff, or given pay or benefits, the IRS or state labor agencies may reclassify them as an employee. This can lead to back wages, taxes, and penalties. For example, a for-profit business that uses "volunteers" to staff its retail store could face wage claims under state labor law.
• Wage and Hour Claims: Volunteers must not perform work that would normally be done by paid employees, especially in for-profit businesses. Nonprofits have more flexibility, but must still avoid using volunteers in place of regular staff for core operations. For example, a nonprofit hospital using volunteers to replace paid nurses could face wage claims under federal or state law.
• Injury and Liability: Volunteers are generally not covered by workers compensation. If a volunteer is injured, the organization could face liability unless it has appropriate waivers or insurance. Some states, such as California, allow nonprofits to opt into workers compensation coverage for volunteers, while others do not. Always check your state rules and insurance policies.
• Confidentiality Breaches: Volunteers may have access to sensitive information, such as donor lists or client records. Without clear confidentiality terms, there is a risk of data leaks or misuse of information. For example, a volunteer at a domestic violence shelter who shares client information could expose the organization to liability under state privacy laws.
• Intellectual Property Disputes: If volunteers create content, software, or inventions, unclear ownership can lead to disputes later. For example, a volunteer who designs a new logo or writes a fundraising manual may later claim ownership if the agreement is silent on IP rights.
• State-Specific Rules: Some states require charitable organizations to register before soliciting donations or using volunteers for fundraising. Youth volunteers may trigger additional requirements, such as parental consent or background checks. For example, Illinois requires registration for most charities, and Pennsylvania requires background checks for volunteers working with minors.

Common Mistakes to Avoid

• Using the same agreement for all states without checking local requirements
• Failing to update agreements as laws or organizational needs change
• Not keeping signed copies of agreements and waivers
• Allowing volunteers to perform high-risk tasks without proper training or insurance
• Not clarifying the process for ending the volunteer relationship

To reduce these risks, keep clear records of volunteer roles, hours, and agreements. Review your insurance coverage to see if it extends to volunteers. When in doubt, consult a legal professional familiar with nonprofit and employment law in your state.

Federal and State Compliance Considerations

At the federal level, the Fair Labor Standards Act (FLSA) sets the baseline for distinguishing volunteers from employees. The FLSA generally allows individuals to volunteer for nonprofit organizations, religious groups, and government agencies, but not for for-profit businesses. Volunteers must offer their services freely, without coercion or expectation of compensation.

The IRS provides additional guidance for tax-exempt organizations. To maintain tax-exempt status, nonprofits must avoid providing excessive private benefit or compensation to insiders, including volunteers. The IRS may review volunteer arrangements as part of its oversight of exempt organizations. For example, if a volunteer board member receives significant perks or payments, the IRS may question the organization's exempt status.

State laws can add further requirements. For example:

• Some states require background checks for volunteers working with children, the elderly, or vulnerable populations. Pennsylvania, Texas, and California have specific statutes on this issue.
• Charitable registration laws may require organizations to disclose volunteer use in annual filings. Illinois, New York, and Florida have detailed charity registration requirements.
• States like California and New York have specific rules on volunteer liability waivers and insurance. In California, certain waivers must be written in plain language and cannot waive liability for gross negligence.
• Youth volunteers may need parental consent forms or be restricted from certain activities. For example, in Massachusetts, minors under 18 may not volunteer for hazardous tasks without parental consent and additional safeguards.

Industry-specific rules may also apply. For example, healthcare organizations, schools, and food banks may have additional requirements for volunteer screening, training, or supervision. A food bank in Texas may need to comply with state health and safety regulations for volunteers handling food.

Checklist: Compliance Steps for Volunteer Programs

• Check state charitable registration and labor department resources for relevant rules
• Maintain clear records of volunteer agreements and hours
• Review insurance policies for volunteer coverage
• Update agreements and policies as laws or organizational needs change
• Document all training and safety procedures provided to volunteers

Consulting with an attorney can help ensure your volunteer agreements and practices comply with both federal and state law. For example, a nonprofit expanding into a new state should review local rules before recruiting volunteers there.

Best Practices for Managing Volunteer Agreements

A well-drafted volunteer agreement is only part of the process. Effective management of volunteers and their agreements is key to reducing risk and building a positive experience for everyone involved. Here are some best practices, with practical examples:

• Use Written Agreements: Always use a written agreement, even for short-term or one-off volunteer roles. For example, a nonprofit organizing a one-day park clean-up should still have volunteers sign a basic agreement and waiver.
• Provide Orientation and Training: Give volunteers an orientation to your organization, its mission, and their specific role. Provide training on safety, confidentiality, and any relevant policies. For example, a youth mentoring program should train volunteers on child protection and reporting procedures.
• Keep Accurate Records: Track volunteer hours, roles, and agreements. This is useful for insurance, compliance, and recognition purposes. For example, a small animal shelter should log each volunteer's hours and keep signed agreements on file.
• Review and Update Agreements: Update agreements as your organization grows or as laws change. Review them annually or when you launch new programs. For example, if your state updates its background check laws, revise your agreement and procedures accordingly.
• Communicate Regularly: Check in with volunteers to address any questions or concerns. Clear communication helps prevent misunderstandings. For example, a community theater group should hold regular meetings with volunteers to discuss upcoming events and address issues.
• Recognize and Appreciate Volunteers: Show appreciation through thank-you notes, events, or public recognition. While volunteers are unpaid, recognition helps retain and motivate them. For example, an annual volunteer appreciation dinner can boost morale and encourage continued participation.
• Address Issues Promptly: If a volunteer is not meeting expectations or there is a conflict, address it quickly and respectfully. Refer to the agreement and your organization's policies. For example, if a volunteer repeatedly misses shifts, discuss the issue and, if needed, end the relationship per the agreement.

Sample Volunteer Management Workflow

1. Recruit volunteer and provide role description
2. Send volunteer agreement and request signature
3. Conduct background check (if required)
4. Provide orientation and training
5. Track volunteer hours and tasks
6. Hold regular check-ins and provide feedback
7. Recognize volunteer contributions
8. Update records and agreements as needed

By following these best practices, small businesses and nonprofits can create a positive volunteer experience while minimizing legal and operational risks. For example, a local library that trains volunteers, uses written agreements, and keeps accurate records is less likely to face disputes or compliance issues.

FAQs

Do all organizations need a volunteer agreement?

While not legally required in most cases, a written volunteer agreement is highly recommended for any organization using volunteers. It helps clarify expectations, reduce misunderstandings, and manage legal risks. Some states or industries may require written agreements for certain types of volunteer roles, especially those involving minors or sensitive activities. For example, a youth sports league in Texas must comply with state background check and consent requirements.

Can for-profit businesses use volunteers?

Generally, for-profit businesses cannot use unpaid volunteers for work that benefits the business. The Fair Labor Standards Act restricts volunteer arrangements to nonprofit, religious, and government organizations. Using unpaid "volunteers" in a for-profit business can lead to wage and hour violations and penalties. For example, a for-profit event company cannot use volunteers to staff paid events.

Are volunteers covered by workers compensation?

Volunteers are usually not covered by workers compensation insurance, unless the organization opts in or state law requires it. Some states, such as California and Florida, allow nonprofits to purchase workers compensation coverage for volunteers. Otherwise, organizations should review their general liability insurance to ensure it covers volunteer injuries. Always check your state rules and consult your insurance provider.

What should I do if a volunteer is injured?

If a volunteer is injured, provide appropriate medical attention and document the incident. Notify your insurance provider and review your volunteer agreement and liability waivers. Consult an attorney if there are questions about liability or coverage. For example, if a volunteer is injured during a fundraising event, document the circumstances and follow up with your insurer and legal advisor.

How often should volunteer agreements be updated?

Volunteer agreements should be reviewed and updated at least annually, or whenever there are changes in state law, organizational policies, or the types of volunteer roles offered. For example, if your state enacts new background check rules, update your agreement and procedures promptly.

Key Takeaways

• A volunteer agreement clarifies expectations and reduces legal risks for small businesses and nonprofits.
• Key terms include role description, unpaid status, confidentiality, liability waivers, and termination process.
• Federal law distinguishes volunteers from employees, but state and industry rules may add requirements.
• Common risks include misclassification, wage claims, injury liability, and confidentiality breaches.
• Best practices include using written agreements, providing training, keeping records, and updating policies as needed.

If you need help drafting or reviewing a volunteer agreement for your small business or nonprofit, our team can support your project through the Sprintlaw platform. Contact us at (888) 449-8437 or team@sprintlaw.com to discuss your needs. Where legal services are required, they are delivered by licensed lawyers at trusted US law firms through the Sprintlaw platform.