RAQs: Recently Asked Questions

Topic: Charging Research or Consulting Fees - 4/4/2019
My library has long been in the practice of charging what we often refer to as a "research fe...
Posted: Thursday, April 4, 2019 Permalink

MEMBER QUESTION

My library has long been in the practice of charging what we often refer to as a "research fee" or "consulting fee." I am familiar with some libraries who have a similar practice, but wonder if it's legal for us to charge an hourly rate for work done by volunteers? The workflow has always been as follows: a reference request is received by the Librarian, a determination of whether the question is appropriate for our collection is made, then the work is delegated to a volunteer. In general, we've never taken on a job of over 2 hours, and most questions relate to our genealogy collections / searching vital records.

WNYLRC ATTORNEY'S RESPONSE

It is well established that a not-for-profit organization can benefit from volunteer labor.  This is true even when the labor brings the organization tangible benefits, like the money from a bake sale, or as in this case, a research fee. 

But when using volunteer services and charging a fee, a library (or any chartered not-for-profit) in New York must engage in a systematic analysis to ensure the arrangement is in step with numerous laws and regulations.  How can a library, museum, or archives do this? 

Follow the three-step process below.

 

STEP ONE

First, identify the services the institution would like to provide through volunteer labor. 

This is rather like writing a job description or hire letter.  An example based on the member’s scenario could look like this:

Research Volunteer

Under the general oversight of [paid position] in [department], the Research Volunteer performs specific research tasks related to personal requests by [institution] members and other users. These tasks are not to routine operations of [department], but benefit the public and [institution] by serving members and others in a way directly related to [institution]’s mission to [insert mission], as well as raising revenue in support of that mission. 

Your hours and participation as a Research Volunteer are voluntary, but we do ask that you work with [person] to coordinate your time; this will enable us to support your work, and keep things organized.  This work is a valuable service [institution] can only provide through the services of volunteers, and we thank you for your dedication and hard work!

The essential elements of this first step are:

  • clarifying who is supervising/helping the volunteer;
  • clarifying the tasks of the volunteer;
  • specifying that the tasks are not routine duties of paid staff;
  • confirming that the work is voluntary; and
  • documenting that the work is directly related to the institution’s mission.

You’ll see why these are important in the Steps Two and Three!

 

STEP TWO

Next, check your organization’s founding laws, charter, founding documents[1], bylaws and plan of service (I call these “core rules”) for any terms that apply to the service you defined in Step One. 

Look at the laws and documents.  Is there something preventing the institution from charging a fee for this specific service?  Is there any cap on that fee?

This exercise will vary greatly from institution to institution, since many variables can impact what’s in the “core rules.”  Here are just a few examples:

A public library could never charge a member to borrow a book or to use the internet, because Education Law Section 262 requires that public libraries be free (to cardholders).

For a private library, its charter could contain an express rule that certain services must remain free—a restriction that might not be found in the law, but could be just as enforceable.  A similar condition could be in its bylaws, or a donation document.

And if an institution is a 501(c)(3), care must be taken to make sure the revenue generated by the service is “substantially related” to the institution’s not-for-profit mission, or the institution could risk having to pay “unrelated business income tax.”  The service should also be reviewed to ensure it is not an “excess benefit transaction” or a non-disregarded membership benefit.[2]  A mis-step on any one of these could have serious tax consequences.

When doing the “Step Two” analysis, it is ideal to confirm your conclusions with a lawyer. 

 

STEP THREE

Once an institution uses Step Two to confirm it can charge for a service, it is time to return to your description from Step One and make it official, by putting the scope of work and details in a “Volunteer Letter.” 

Why so formal?  Because in recent years, the State of New York has cracked down on enforcement of quasi-volunteer, or just plain muddy, instances of volunteer labor at not-for-profit institutions.  This has even included examining perks and partial payments to volunteers!

Why is that?  While not-for-profit volunteering is unequivocally allowed, like anything, the system can be abused.  To avoid that, and to create clarity in these critical relationships, the New York Department of Labor has issued some pretty strict guidelines, such as:

Unpaid volunteers at not-for-profits may not:

  • replace or augment paid staff to do the work of paid staff
  • do anything but tasks traditionally reserved for volunteers
  • be required to work certain hours
  • be required to perform duties involuntarily
  • be under any contract of hire by any other person or business express or implied
  • be paid for their services, except for expense reimbursement

Sound familiar? This is where the work you did in Step One pays off!  By identifying the work as part of a “Volunteer Program,” clarifying that the service is offered through the hard work of volunteers (and never paid staff), and that there is no compensation to the volunteer, your documentation will be ready to show compliance in the event the Department of Labor audits your institution (which, from time to time, they do).

 

Final thoughts

Volunteers can be critical contributors to an organization.  If allowed by your organization’s core rules, a not-for-profit can absolutely benefit from the fruits of their labor.  By following the steps outlined above, and setting the relationship up carefully, a not-for-profit (and its volunteers) can reap great rewards.

The essential element of this is clear documentation.  A letter to every volunteer, stating their role, the rules of the position,[3] that it is not replacing or supplementing paid staff, and thanking them for their service, will position an organization to easily demonstrate compliance. 

A quick annual check with the institution’s insurance carrier, to make sure volunteers and their activities are covered by the institution’s insurance, is wise, too.

Thanks for a great question!

 


[1] A trust, endowment, deed, or other founding document that may also impose conditions on the entity.

[2] Per IRS Publication 526, the following 501(c)(3) membership benefits can be “disregarded” (not considered a taxable benefit) if a member gets them in return for an annual payment of $75 or less. These “benefits” can include any rights or privileges that a person can use frequently while you are a member, such as: a. Free or discounted admission to the organization's facilities or events, b. Free or discounted parking, c. Preferred access to goods or services, and d. Discounts on the purchase of goods and services.  [emphasis added]

[3] Since volunteers can be critical contributors to the work environment, they should attend the annual sexual harassment training put on by your library, and be trained along with the employees.

Tags: Policy, Fees and Fines

Year

0

2016 4

2017 24

2018 29

2019 42

2020 44

Topics

501c3 2

Accessibility 3

ADA 6

Association Libraries 1

Branding and Trademarks 1

Broadcasting 1

Budget 1

Circular 21 1

Contact tracing 1

CONTU 1

Copyright 67

COVID-19 28

CPLR 4509 3

Crafting 1

Criminal Activity 1

Data 2

Defamation 1

Derivative Works 3

Digital Access 8

Digital Exhibits 1

Digitization and Copyright 9

Disclaimers 3

Discrimination 1

Dissertations and Theses 1

DMCA 2

Donations 3

E-Books and Audiobooks 1

Ed Law 2-d 1

Elections 2

Emergency Response 27

Employee Rights 6

Ethics 3

Executive Order 3

Fair Use 27

Fan Fiction 1

Fees and Fines 3

FERPA 5

First Sale Doctrine 3

Forgery and Fraud 1

Friends of the Library 1

Fundraising 1

Hiring Practices 1

Historic Markers 1

HRL 1

IRS 1

Labor 3

Laws 18

LibGuides 1

Library Buildings 1

Library Programming and Events 6

Licensing 2

Local Organizations 1

Management 16

Meeting Room Policy 3

Microfilm 1

Movies 5

Municipal Libraries 4

Music 10

Newspapers 3

Omeka 1

Online Programming 10

Open Meetings Law 1

Oral Histories 1

Overdrive 1

Ownership 1

Parodies 1

Personnel Records 1

Photocopies 15

Policy 28

Preservation 2

Privacy 10

Property 3

PTO, Vacation, and Leave 1

Public Domain 7

Public Health 1

Public Libraries 3

Public Records 2

Quarantine Leave 1

Reopening policies 1

Retention 3

Retirement 1

Ripping/burning 1

Safety 2

Salary 2

School Ballots 1

School Libraries 5

Section 108 1

Section 110 1

Section 1201 1

Security Breach 1

Sexual Harassment 2

SHIELD Act 1

Smoking or Vaping 2

Social Media 4

SORA 1

Story time 3

Streaming 12

Swank Movie Licensing 3

Taxes 4

Teachers Pay Teachers 1

Telehealth 1

Textbooks 3

Trustees 2

Umbrella Licensing 2

VHS 4

Voting 1

W3W 1

WAI 1

Yearbooks 2

Zoom 1

The WNYLRC's "Ask the Lawyer" service is available to members of the Western New York Library Resources Council. It is not legal representation of individual members.