It can be easy to forget when you look at the news, but there is a lot of good being done in the world—and in Illinois in particular. Much of the hard work of making good things happen is being done by non-profit organizations, big and small. These groups focused on the welfare of others and improving our communities represent the very best that Illinois has to offer. As a leading non-profit attorney in the Chicago area, James C. Provenza has been helping Illinois nonprofit organizations achieve their goals for the past 20 years.
Even though many non-profits begin as one or two person shops wanting to make a difference, they often grow and become more complicated. That is a good thing—you can’t keep a good idea down! However, as they grow, many nonprofits experience the same growing pains and regulatory hassles that their for-profit cousins experience. Once a non-profit begins to hire employees, things can become very complicated indeed.
James C. Provenza & Associates, P.C. has the experience to help Illinois nonprofit organizations navigate the complicated employee/employer relationship. Here are some issues that non-profit leaders need to consider when taking on a paid staff:
1. Does your nonprofit even have employees?
The definition of an “employee” is deceptively complicated. Many nonprofit organizations rely on a network of volunteers to achieve their goals. Since they are not receiving compensation for their time, volunteers are not employees under the law. If you are paying workers to perform specific functions, they may be employees, or they might be considered independent contractors. The difference between them comes down to who sets the work schedule, the amount of direct control the non-profit exercises over the worker’s activities, who provides the equipment to perform the task, the level of skill required, among other factors.
Whether a worker is a full employee or is an independent contractor seems like a subtle distinction, but it determines which employment laws the nonprofit will have to follow. That is why it is essential to engage the services of an experienced Illinois non-profit attorney like James C. Provenza, P.C. The IRS has a helpful guide to employ classifications to get you started on their website.
2. Complying with Illinois and federal laws
Once you’ve determined that your Illinois non-profit has employees, there is a slew of regulations with which you’ll need to comply. Non-profits need to concern themselves with anti-discrimination laws, minimum wage and overtime requirements, employee health and safety, and federal and state taxes. Which rules apply, and to what degree, often depends on the size of the non-profit’s employee force. That is why, before you consider hiring employees or increasing the size of your non-profit workforce, you should check with an experienced Illinois non-profit attorney.
Managing employee issues can distract a non-profit from their core mission, and a good lawyer like James C. Provenza can help them avoid potential pitfalls. As a general rule, non-profits should assume that all of the laws apply to them unless an attorney tells them otherwise. For more information on the what the State of Illinois expects from employers, check out the Illinois Department of Labor (IDOL) and Illinois Department of Employment Security (IDES) websites.
3. Staying on top of document filing requirements
Illinois employers, including many nonprofits, are required to file a number of documents with the state and federal governments. It is essential that these documents be submitted to the appropriate agencies as soon as an employee is hired. Included in the list of required papers to be filed are:
· IRS Form W4: This form helps the IRS and the non-profit determine the proper amount of federal tax to withhold from an employee’s pay.
· ICE Form I-9: This form, which the non-profit must retain in its files, establishes the employee’s legal right to work in the U.S.
· IDES New Hire Form: This form informs IDES that the employee was hired.
Additionally, when a non-profit decides to begin hiring employees, they must register as an employer with IDES with a UI-1 form.
4. Ensuring compliance with the FSLA and IMWL
There are two sets of regulations—one federal and the other particular to Illinois—that govern the compensation that must be paid to the employees of a non-profit. Under the Fair Labor Standards Act of 1938 (FSLA), hourly employees must be paid a minimum wage and at least 1.5 times their hourly wage for overtime work. The Illinois Minimum Wage Law (IMWL) has provisions that are similar to the FSLA but may stipulate a higher wage in some cases. The general takeaway is this: A non-profit will generally have to pay the higher of the FSLA or IMWL mandated wage. The non-profit organization will also have to comply with specific FSLA and IMWL recordkeeping requirements that include information about the employees, job descriptions, and the wages paid over the last three years.
There may be some non-profits that are exempt from specific FSLA provisions, and salaried executive, administrative, professional, and outside sales staffers may be exempt from the wage provisions. These rules are complicated, so it is best to get the advice of a leading non-profit attorney like John C. Provenza & Associates, P.C.
5. Staying on top of withholdings
Just because a non-profit is tax exempt, that doesn’t mean its employees are too. The non-profit has to withhold taxes from their employees pay and submit those funds to the IRS and Illinois Department of Revenue just like any other business. A non-profit must report their employee withholdings to the IRS and the Illinois Department of Revenue every quarter and send those funds to the respective governments throughout the year—the schedule depends on the amount of taxes owed. If state and federal tax withholding requirements are not met, the board of directors of the non-profit can be held personally liable.
This article only begins to scratch the surface of what is required of non-profits who hire employees in the State of Illinois. There are plenty of other issues that a non-profit will need to consider: workers’ compensation, whistleblower policies, and unemployment insurance, just to name a few. No one article can cover all of the complexities of nonprofit employment law, so we always suggest that you discuss your particular case with a top non-profit attorney. At John C. Provenza & Associates, P.C., we have a passion for helping the organizations doing good in Illinois do even better. Contact us online or give us a call at (847) 729-3939.