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Can the Executive Committee determine the ED’s pay?

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Our bylaws state that the Executive Committee has full authority/responsibility to review the CEO’s performance and to set compensation, and that the Board “shall be informed” of the Committee’s decision. Is this OK?

Technically, the answer is yes—assuming that all members of the Executive Committee are, in fact, directors. Even so, the board as a whole still has responsibility for the process and outcome.

That said, it’s generally recommended to have a transparent and fair process for determining the executive director’s salary. While the executive committee certainly may play a role in salary discussions, it’s often advisable to establish a compensation committee or involve the full board in the decision-making process.

Having a broader group involved can bring diverse perspectives and ensure a more objective approach to determining the executive director’s salary. This approach is in line with principles of good governance, accountability, and transparency, which are important for the credibility and effectiveness of nonprofit organizations.

Two things to keep in mind:

  • Although the IRS does not provide specific dollar amounts or an acceptable range of compensation levels, they stipulate that compensation must be reasonable and not excessive.“Reasonable” is defined as the value that would ordinarily be paid for like services by like enterprises under like circumstances.
  • Nonprofits filing IRS Form 990 must describe the process they use to approve executive compensation as part of the nonprofit’s responses on the annual return, IRS Form 990, Part VI, Section B, line 15.

Old Invoices

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Our Board recently received an invoice from someone doing social media and website work for our nonprofit, yet it was for work done over two years ago. How late can people submit invoices and still expect to get paid?

Generally, if your organization engaged a contractor to do work , the work was done, and you accepted it, your organization owes the contractor for the work. Not sending you a timely invoice is a poor business practice but does not cancel your obligation to pay for the services you received.

In California, there is generally a four-year limit for filing a lawsuit to collect a debt based on a written agreement. However, the creditor may still send you collection notices, call you to try to get you to pay, or report your debt to credit reporting companies.

Worker Self-Directed Nonprofits

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Someone recently contacted Spokes to say, “I’m thinking of starting a worker self-directed nonprofit. Can Spokes help me?”

A worker self-directed nonprofit? I’d never heard the term. I know about public benefit nonprofits, mutual benefit nonprofits, and benefit corporations, but this inquiry required some research!

The Sustainable Economies Law Center describes a self-directed nonprofit as a sort of cross between a worker cooperative and a 501(c)3 nonprofit. Specifically, it defines a worker self-directed nonprofit as,

a nonprofit organization in which all workers have the power to influence the programs in which they work, the conditions of their workplace, their own career paths, and the direction of the organization as a whole.

In general, a worker cooperative is “democratically managed business that is owned and controlled by the workers.” California corporation code has specific provisions for the formation of a for-profit worker cooperative. California code also has specific, separate provisions for incorporating as a nonprofit. As far as I have learned, California code does not include explicit provisions for something called a worker self-directed nonprofit.

I have lots more to learn on this subject, but it’s intriguing to think about how one might structure a nonprofit within California’s current code that might mimic or embody key features of a worker cooperative such as election of the board of directors. More to come on this topic, but in the meantime, check out these resources:

Free Human Resources Hotline

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SLO Cal Careers has partnered with the California Employers Association to provide San Luis Obispo County employers with a no-cost human resources hotline. Get advice on:

  • Hiring and firing best practices
  • Paid sick leave laws
  • Wage and hour laws
  • Employee handbook policies
  • HR compliance
  • Accommodations in the workplace
  • And much more!

HR Directors are available for San Luis Obispo County Employers
Monday – Friday from 8 a.m. – 5 p.m. Call 888.710.0905.

This WIOA Title I financially assisted program or activity is an equal opportunity employer/program. Auxiliary aids and services are available upon request to individuals with disabilities. California Relay Service 711 or 1-800-735-2922 (English) 1-800-855-3000 (Spanish).

Can we pay our volunteers?

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We appreciate our volunteers so much. Most of our nonprofits could not begin to provide services without the help of selfless volunteers. It’s natural to want to reward them. But can you pay them something for their hard work?

Frankly, no. California Labor Code has a strict definition of volunteer. It is someone who “performs work for civic, charitable, or humanitarian reasons…without promise, expectation, or receipt of any compensation for work performed.”

It is permissible to reimburse volunteers for necessary expenses incurred in their volunteer work for you. You can certainly have a volunteer appreciation party and treat everyone to some refreshments. Likewise, a token of appreciation such as some flowers, a plaque, or a framed certificate of appreciation is fine.

Just not cash or a check (or even a “cash equivalent” such as a gift card). From the IRS’s point of view, that would be income. From California’s point of view, it could make them your “employee.”

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