Giving And Receiving: Insuring Company-Sponsored Volunteerism?

This is the time of year when we are reminded of the importance of giving. Many companies not only donate generously to nonprofits and community programs, but also support the volunteer efforts of their employees through matching donations; sponsoring community activities, such as organizing and staffing a community clean-up day; hosting a major fundraising event for a local nonprofit; or allowing employees time off during work hours to volunteer at a sponsored school or local community center. Volunteerism has benefits to both employers and employees. Employees who engage in employer-sponsored volunteer efforts report improved leadership and communication skills, show greater loyalty to their employer, and assist the employer in maintaining a positive image in the community for its products and services.1 Volunteerism builds cooperation and a sense of unity among co-workers and promotes teamwork within the company.2 An employer that actively promotes or sponsors volunteerism improves employee recruitment and retention.3

If sponsoring volunteerism has rewards, like any business activity, it also comes with its attendant risks. The last thing any well-meaning company wants to do is turn holiday cheer into a New Year liability hangover. A company that sponsors volunteer activities will want to assure that its employee-volunteers are protected from injuries that may occur while volunteering and that it is protected against claims that may arise from volunteer activities. This can be achieved through the use of insurance and other means of risk transfer, such as: (1) covering employee-volunteers under the employer's or volunteer organization's workers compensation insurance; (2) requiring the volunteer organization to carry adequate limits of liability insurance that covers injuries or damages caused by a volunteer's negligent or reckless conduct; (3) procuring special event or sponsorship liability insurance for one-time fundraising or similar events, including liquor liability coverage when appropriate; (4) entering into indemnity agreements; and (5) using waivers of liability, particularly when sponsoring events that include activities having a risk of injury, such as races or walkathons. We discuss each of these below.

1. Workers Compensation Insurance

   It may not seem obvious, but workers compensation insurance may cover volunteer activities. Employees who volunteer at employer-sponsored events (the "employee-volunteer") or for nonprofits or charitable organizations sponsored by the employer (the "volunteer organization") may assume they are protected by their employer's workers compensation insurance in case they are injured—much as they would be if such injuries occurred while they were at work. Workers compensation is the sole and exclusive remedy of an injured employee against an employer where injury arises out of and in the course of employment.4 Most states' workers compensation programs, however, exclude injuries that arise out of voluntary participation in off-duty recreational, social or athletic activities. But some states recognize an exception for voluntary activities that are "a reasonable expectancy of, or are expressly or impliedly required by, the employment."5 If an injured employee-volunteer is not covered by workers compensation, the alternative is that he may assert claims for compensation directly against the employer and/or the volunteer organization.

   Whether workers compensation insurance will cover a volunteer, however, is a question of fact, and depends on a variety of factors.6 These include whether (a) the employee is pressured or coerced either directly or indirectly to participate in the volunteer activity; (b) the activity is officially sponsored or subsidized by the employer; (c) the employee's performance evaluation is dependent on participation in the volunteer activity; and (d) the activity substantially benefits the employer "'beyond the intangible value of improvement in employee health and morale that is common to all kinds of recreation and social life.'"7 Thus, an employee-volunteer is more likely to be covered in the event she is injured when she volunteers for an employer-sponsored event, is permitted time off to perform volunteer work for an employer-sponsored organization, or if the employer requires the employee (whether directly or indirectly) to participate in the volunteer activity. If an employer would like its employees to be covered by its workers compensation...