For community associations, engaging the use of employees, independent contractors, or volunteers each present their own unique advantages and liabilities. Understanding these differences is essential for managing risk, ensuring smooth operations, achieving desired results, and making informed decisions about your workforce.
Hiring employees gives associations the most control over how and when work is accomplished. Also, employment is “at-will” in most states, meaning an employer can terminate employees at any time for any legal reason, or, for no reason at all. However, when hiring an employee, the association incurs a range of liabilities that cannot be waived through contracting. Not only is the association vicariously liable for the actions of its employees when acting within the scope of their employment, the association must also provide workers’ compensation coverage for an employee’s workplace injuries. Additionally, adverse employment actions, like termination or disciplinary measures, carry risk of discrimination accusations. The association must also provide reasonable accommodations to avoid discrimination claims and protect employees from illegal workplace harassment. Depending on the number of employees you have, you may also be subject to wage and hour laws, COBRA, and other regulatory requirements. Typically, employment relationships should not involve formal contracts, but the board should maintain job descriptions, employee handbooks, and comprehensive employee files to use as evidence if the association is sued for discrimination.
Many liabilities associated with employees can be managed or even eliminated through carefully contracting with independent contractors. For example, associations can often “contract away” liability for injury or damage related to the contractor’s work by including relevant provisions in the contract. Contractors may either be engaged for a specific term or project, and the contract should clearly define these parameters. This arrangement allows associations to lock in services for a set period or until a project is completed, providing flexibility and predictability. The key benefit to the association is the ability to structure the relationship to minimize risk and maximize efficiency. But, the contract must be thorough and tailored to the specific engagement. The most notable downside to using contractors instead of employees is losing direct oversight over how the work is performed.
Volunteers offer another alternative, but they come with their own risks and benefits. We often recommend the board consider requiring a volunteer to sign a waiver before engaging in any volunteer work. Waivers of liability, however, are not foolproof. So, the board should not be permitting volunteers to engage in activities that carry a significant risk of expensive damage or serious injury. Also, associations should utilize volunteer agreements that clarify the volunteer’s role, explicitly state that they are not employees, and include waivers of liability and indemnification requirements. ATLAS, which is available to Kaman & Cusimano, LLC clients, contains a sample volunteer agreement available for downloading.
While the type of contract associations use is not the sole determinant of whether someone is classified as an employee, volunteer, or contractor, courts will take the agreement into consideration, as it outlines the relationship’s structure. Various legal tests are applied by the IRS, Department of Labor, and state agencies to ultimately determine whether a worker is an employee or contractor.
If your association is interested in learning more about our services and how we can help, please click the following link: Request a Proposal and type “Workforce Impacting liability” in the subject field. Any of our K&C clients with questions on how these distinctions might affect your association, should call our office to discuss the association’s options to reduce liability, and potentially restructure your workforce. Our clients also have access to volunteer agreement templates through our ATLAS portal.
