Nonprofit organizations need to give careful thought to how they protect themselves against liability for workplace injuries. California law requires all employers with one or more employees to carry workers’ compensation insurance. Cal. Labor Code §3700. Although workers’ compensation can be expensive, noncompliance is a far more expensive route.
The benefits of workers’ compensation
From a public policy perspective, workers’ compensation insurance can be understood as a bargain among employers, employees, and the government. In exchange for requiring employers to insure their employees for injuries they suffer at work, the government shields employers against being sued by employees for most types of injury. This shield against civil liability is the chief benefit of this form of insurance for nonprofits.
Workers’ compensation is often described as a “no fault” form of insurance. So long as an injury is work-related, coverage will apply regardless of who is to blame for the injury. The insurer may investigate the cause of the injury to determine if it was in fact work-related and not caused by something else (such as an employee trying to work after spraining her knee at home), but the analysis cannot consider whether the employer or employee was negligent (i.e., at fault) in causing the injury. The insurance covers medical costs, lost wages, and other financial damages arising from the injury.
Failing to provide workers’ compensation insurance when it is required has two major consequences for an employer. First, doing so is a criminal offense, punishable by jail time and a fine. Cal. Labor Code § 3700.5. It also leaves the employer exposed to civil liability for an employee’s injury. Quite often the two go hand-in-hand, when an employee is injured and discovers that the employer hasn’t complied with the law.
Consider insuring against injuries to volunteers
Organizations that are supported by volunteer workers will need to give special consideration to whether it makes sense to include them within the organization’s workers’ compensation insurance coverage. California’s workers’ compensation law gives nonprofits the flexibility to not cover volunteers at all by defining them as non-employees. Cal. Labor Code § 3352(i). Instead, a nonprofit’s board of directors must take affirmative steps before a volunteer is injured to treat the volunteer as an employee. Cal. Labor Code § 3363.6(a). Although leaving volunteers outside the scope of coverage will result in lower premiums, it also frees them from the civil liability shield that workers’ compensation provides to employers.
Nonprofits should explore all of their insurance options before concluding that extending workers’ compensation insurance to volunteers is the right choice. Chances are that a general liability policy will not provide sufficient coverage to protect the organization from catastrophic injuries to a volunteer. Insurers offer specialized coverage for volunteer labor that may be less expensive relative to the coverage it provides.
A nonprofit attorney can help you evaluate your risk
The Church Law Center of California works with religious and secular nonprofits to develop comprehensive operating strategies that will comply with the law and manage risk. To find out how we can help your organization, call us today at (949) 689-0437 or reach out to us through our contact page.