Volunteer Legal Handbook, 9th Edition
Handbook > Legal Landscape

Chapter 1 - The Legal Landscape of Risk Management

There really isn’t any question about it: there are legal risks associated with being a volunteer; you can’t avoid them completely, you can only educate yourself about those risks and ways of managing them.

At the risk of scaring you, here are some all too common examples:
  • The auto accident. You volunteer to drive a group of little league baseball players to a baseball game. You are involved in an auto accident and some of your little league passengers are hurt. Are you liable for their injuries? If so, will your insurance cover the claim?

  • The embezzling employee. You serve as a director and the treasurer of a nonprofit corporation. You are advised that your executive director has embezzled monies that were supposed to have been paid to the IRS as withholding taxes. Now the IRS has demanded that you pay it the embezzled monies. Are you liable?

  • The fired volunteer. You are an unpaid supervisor of a group of volunteers. One of the volunteers has failed to perform adequately, and you have terminated his volunteer status with the organization. Now the former volunteer has sued you and the organization for slander, libel and wrongful dismissal. Are you liable?

  • Sexual misconduct. One of your organization’s volunteer coaches has been arrested and charged with child sexual abuse. Now several of the parents are threatening to sue you and the organization. Are you liable?

  • The overpaid executive director. When you were on the board of the organization, you voted for a bonus for the executive director. Now the IRS says you are personally liable for a penalty equal to 10% of the bonus paid. Are you liable?
To understand these questions, let alone find the answers, you need a little knowledge about the law and a larger amount of knowledge about risk management. This manual approaches both of those subjects. At the end of the Handbook, we’ll revisit these questions.
Remember the purpose of this manual is to help you understand and apply the principles of risk management. While Part II of the Handbook talks about it in more detail, the fundamental concept of risk management is the identification and management of risk areas. Through a variety of techniques, you can control known risks and plan against unknown risks. The most important risk management technique is education. And education starts with knowing a little law.
But don’t fool yourself. There is no such thing as a risk-free activity. Everything we do in life involves risks; after all, there are risks associated with not volunteering. Risk management techniques will help you be aware of and identify risks, and minimize those risks, but those techniques cannot eliminate risk entirely.

Volunteer Legal Handbook, 9th Edition
Handbook > Law > Intro


This part of the Handbook gives you a very brief overview of the law, and especially the law as it relates to issues that commonly arise in being a volunteer. You may be a service-providing volunteer, or a volunteer officer or director of a nonprofit corporation, or a manager of volunteers. We’ll try to address some of the more common ways volunteers can be impacted by the law.

This manual is not going to answer any of your legal questions. This manual is not legal advice, and is no substitute for the work of your attorney or your organization’s attorney. At most, this Handbook is intended to help you use your attorney in a cost-effective way. You should not rely on this manual for anything but background information and concepts. If you don’t understand this, you should re-read the Disclaimer on the first page.

Remember that the rules and concepts discussed in this manual reflect Alaska law, and then only at the time the manual was written. You should not regard this manual as helpful in any way in understanding the law of any other state.

Broadly speaking, liability for damages can arise in three ways: (1) for breach of a duty imposed by common law (a tort); (2) for breach of a duty imposed by agreement (a contract); (3) or for breach of a duty imposed by statute (a crime or civil offense). The introduction to law set out in this Handbook is generally organized around those three broad sorts of grounds for liability. Because those distinctions aren’t all that sharp, there is considerable overlap.

Like any other specialized area of knowledge, the law has its own terms and language. This manual attempts to avoid legal jargon, but some special terms have to be used. Wherever possible, those terms are linked when used for the first time, and are defined in a Glossary at the end of this manual. There’s also a Table of Abbreviations.

A special note on terminology here. A director is a member of the board of directors of a nonprofit corporation and is almost always a volunteer. An executive director or chief professional officer is the nonprofit equivalent of a chief executive officer, and is generally a paid staff person, and therefore not a volunteer. In these materials, a director means a member of the board of directors; an executive director means a paid staff person who manages the day-to-day affairs of a nonprofit corporation.

The law, even just those aspects of the law that affect volunteers, has become staggeringly complex. Most people, even lawyers, would likely agree that it has become too complex. But however complex, it is part of the environment in which you as a volunteer and your volunteer agency must function. You must have some working knowledge to avoid the pitfalls and problems which you otherwise might not even know were there.

Part of the complexity of the law results from the concept that different standards of conduct apply to different kinds of persons. Consider the following kinds of "volunteers."

All of these persons are to some extent "volunteers," but you can see that perhaps the same legal standards should not apply to all of them. Just the sheer variety of volunteers illustrates how the different situations confronting the courts and lawmakers make the law more complex.

A second reason the law is so complex is because it changes all the time. Non-lawyers tend to regard the law as something that is immutable and unchanging. It is not; it changes with our society. Indeed, much of the controversy about the law today involves those areas that are changing and evolving.

Another source of complexity is the number of sources of the law and the sometimes inconsistent or even contradictory laws that get passed. In Fairbanks, for example, there are four different law-making bodies (the United States, the State of Alaska, the Fairbanks North Star Borough and the City of Fairbanks), each adopting statutes and regulations with only a passing acknowledgement that the other three exist.

An additional complexity arises from the existence of different courts. The different courts do not always follow the decisions that each of them may make, leading to additional confusion and complexity.

A final complexity arises out of the nature of law itself. Some people think the law is all written down someplace, and that all you have to do is look it up to know what it is. While some law is written down, most of the time the important stuff is not. You may not always find clear answers to the questions you have.

One source of law is written: constitutions, statutes, ordinances, and regulations. Statutes and ordinances are adopted by elected officials, Congress or legislatures, or city councils and borough assemblies. But it just isn’t possible to write statutes that fit all possible facts. To some extent, the "holes" in statutes are addressed by regulations, which are rules written by bureaucrats. But ultimately, someone must decide whether a particular rule applies to a given set of facts.

Court decisions, particularly those made by appellate courts, are the other source of law. Case law is precedent, instances where the same facts or similar facts have been applied to a rule (whether constitution, statute or regulation) in the past and clarify the rule to be followed in another case. Case law tends to be more or less stable, or at least not changed without good reason. This is the rule of stare decisis, which allows you to rely upon a previous case decision in deciding the law in a present situation.

A special word about abbreviations: statutes in Alaska are abbreviated "AS" for Alaska Statutes. Regulations in Alaska are abbreviated "AAC" for Alaska Administrative Code. From time to time, these materials will point you to specific statutes and regulations using these abbreviations. For more information on abbreviations and acronyms, please see the Table of Abbreviations.

As mentioned earlier, the law is changing all of the time. But there may not have been a time in the last thirty years when the law of nonprofit organizations has changed faster and more significantly than it is right now. Several factors have come together to create strong pressure for change.

First, Congress and the IRS perceive a great deal of fraud in the area of charitable giving. At a time when deficits are rising, there is a great deal of concern about taxpayers avoiding their legal obligations, including fraud and abuse by donors.
Second, in 2004 the U.S. Senate Finance Committee encouraged the creation of a task force to recommend changes to Congress in nonprofit governance and regulation. The outcome that effort was the Panel on the Nonprofit Sector, which in turn led to the June 2005 Report, Strengthening Transparency, Governance and Accountability of Charitable Organizations. A Supplement to that Report was issued in April 2006. Those reports made a broad range of recommended changes to the federal law of charitable organizations.
Third, in August 2006, Congress passed the Pension Reform Act of 2006. Despite the misleading title, significant portions of the law deal with charitable organizations. Those changes are addressed in more detail in this Handbook under the topic of federal regulation, but broadly fall into several categories:
  1. Increased reporting and scrutiny of in-kind and cash donations, with greater requirements for appraisals and receipts
  2. Increased penalties for self-dealing, excess benefit transactions, fraud and abuse.
  3. Greatly increased regulation and scrutiny of donor-advised funds.
  4. Greatly increased regulation and scrutiny of supporting organizations.
  5. Increased and more detailed reporting requirements in charitable information returns, including Form 990, with reporting requirements extended to more charitable organizations.
  6. Greatly increased information sharing between the IRS and state governments on exempt organizations.
Some of these changes trace to the recommendations of the Panel on the Nonprofit  Sector, but only a small part of the Panel’s recommendations have been enacted into law so far. The Handbook will touch on these important changes where they are relevant to risk management, but the Handbook is not substitute for researching the changes yourself.
Fourth, there is an increased focus on “best practices,” and efforts to self-regulate to avoid the hazards of further governmental regulations. The Panel’s Final and Supplemental Reports both speak to “best practices,” and there is an informal effort in Alaska to develop “best practices” standards for nonprofit organizations. For example, a “best practice” might include a requirement that Form 990s be certified as accurate by the Chief Executive Officer and the Chair of the Board of Directors, as is the case in the for-profit sector for corporations regulated by Sarbanes-Oxley. Model bylaws might be another form of “best practice.”
Fifth, the role of nonprofits in the United States and in Alaska is increasingly important. A recent study by the University of Alaska Anchorage Institute for Social and Economic Research emphasized the economic value of the nonprofit sector. Increased scrutiny is a probable consequence of increased economic importance. Increased scrutiny likely means increased regulation and oversight. Because Alaska has so little law in this area, the practical effect is likely to be significant amounts of new law.

For all of these reasons, nonprofit officers, boards and volunteers can expect to see increased regulation and scrutiny of their organizations over the next few years.

Handbook > Law > Intro

Revised Sat, Dec 26, 2009