The 1997 Federal Volunteer Protection Act: Limited Protection For Volunteers

By Thomas L. Frenn

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Congress recently adopted The Federal Volunteer Protection Act of 1997.¹ This act partially immunizes individual volunteer workers for nonprofit organizations and governmental entities from liability for acts of ordinary negligence (with some exceptions) committed in the course of their volunteer work. It also limits punitive damages and noneconomic damages for volunteers who are in fact held liable for their actions. The Act does not affect the liability of nonprofit organizations or governmental entities to the person making the claim. The Act specifically preempts the laws of individual states, and significantly changes and expands the protections for volunteers under Wisconsin law.

Congress stated that the purpose of the Volunteer Protection Act is to promote the interest of social service programs, beneficiaries, and governmental entities, and to sustain the availability of such programs for the nonprofit organizations and the governmental agencies that depend upon volunteers contributing to society. The Act reforms laws to provide certain protections from liability relating to volunteers serving the nonprofit organizations and governmental entities.

Congress, as part of the actual Act, made the following findings, which summarize the need for the Volunteer Protection Act of 1997: 1) the willingness of volunteers to work for nonprofit organizations is being limited by liability concerns and it has become harder for nonprofit organizations to find volunteers; 2) the contributions of nonprofit organizations in society are being reduced by the loss of volunteers; 3) the nonprofit organizations must provide insurance for their volunteers and the cost of said insurance materially affects the ability of nonprofit organizations to offer their programs.

Organizations the Act covers

The 1997 Federal Volunteer Protection Act takes great strides forward in protecting volunteers of nonprofit organizations and governmental entities from liability.

The Act protects two different types of organizations. One is the nonprofit organization described in 501(c)(3) of the Internal Revenue Code of 1986, which is exempt from taxation and does not practice any action that constitutes a hate crime.² This type of organization includes most nonstock corporations that have a tax exempt status under 501(c)(3) IRC, such as nonprofit hospitals, nonprofit nursing homes, and various charities formally organized as a nonprofit nonstock corporation.

Significantly, the Act applies to the other type of organization, which is any not-for-profit organization that is organized and conducted for public benefit primarily for charitable, civic, educational, religious, welfare, or health purposes and which does not practice any action that constitutes a hate crime.

Therefore, an unincorporated nonprofit association or a corporation which has not obtained tax exempt status from the IRS, but which meets the public benefit requirement and operates primarily for charitable purposes, is provided protection under this Act. The Judiciary Committee's comments also indicate that the above definitions are intended to include trade and professional associations and other business-league-type organizations that are exempt from taxation under 501(c)(6) of the Internal Revenue Code in 1986. Examples of this type of organization are industry trade groups, neighborhood organizations, service groups that are not incorporated, and groups that meet to raise money for an injured individual. The language of the Act makes it very clear that the intention is to expand, not limit the coverage.³

Definition of a "volunteer"

The Act defines a "volunteer" as an individual performing services for a nonprofit organization or governmental entity who does not receive compensation for his or her services other than reasonable reimbursement for expenses actually incurred, or any other thing of value in lieu of compensation in excess of $500 per year. This includes voluntary service as a director, officer, trustee, or direct service volunteer.

The Act's definition expands the definition of a volunteer set forth in Chapters 181 and 187 of the Wisconsin Statutes.⁴ These Wisconsin Statutes do not provide for the $500 value in lieu of compensation as a maximum safe harbor. If the volunteer receives anything of value, he or she would lose protection as a volunteer under Wisconsin Law.⁵

Exceptions to federal preemption

The Volunteer Protection Act does not preempt four specific types of state law. They are:

1) state law requiring a nonprofit organization or governmental entity to adhere to risk management procedures, including mandatory training of volunteers. This author is not aware of any such requirements in Wisconsin.

2) a state law that makes the organization or agency/entity liable for acts or omissions of its volunteers to the same extent as an employer is liable for the acts or omissions of its employees. Wisconsin does not have any statutory provisions containing this type of limitation. However, the case of Arsand v. City of Franklin⁶ holds that a volunteer, in this case an airplane pilot, could be considered a servant for the purposes of respondeat superior. Although the term "state law" is not defined in the Act, under the holding in Arsand, Wisconsin organizations probably are liable for acts or omissions of their volunteers engaged in particular acts such as flying airplanes or driving cars in the course of volunteering for the organization.

3) a state law that makes the limitation of liability inapplicable if a civil action was brought by an officer of state or local government, pursuant to state or local law. This is similar to Wis. Stat. section 181.297(3)(1) and certain provisions in Chapter 187 of the Wisconsin Statutes.⁷

4) a state law that makes the limitation of liability applicable only if the nonprofit organization or governmental entity provides a financially secure source of recovery for individuals who suffer harm as a result of actions taken by the volunteer on behalf of the association or governmental entity. There appears to be no Wisconsin law that applies to this restriction.

In addition a state may "opt out" of specific provisions of the Act. As of the writing of this article Wisconsin has not chosen to "opt out" of any provisions of the Act.

Scope of immunity

Section 4(a) of the Act provides immunity for volunteers of nonprofit organizations or governmental entities who are acting within the scope of their responsibilities, provided that, if appropriate or required, the volunteers are properly licensed, certified, or authorized by the appropriate authorities of the organization to do the acts and the volunteer work they are doing. Immunity is limited to the volunteers' acts of ordinary negligence and does not include willful or criminal conduct, gross negligence, reckless misconduct, or conscious flagrant indifference to the rights or safety of the individuals harmed by the volunteers.

In addition, the Act does not protect a volunteer from liability where the damage resulted from the volunteer's operation of a motor vehicle, vessel, aircraft, or other vehicle for which the state requires the operator of the vehicle, craft, or vessel to possess an operator's license or maintain insurance.⁸

The Act's limitation of liability does not extend to the nonprofit organization or governmental entity. The organization or entity may be held vicariously liable for the ordinary negligence of its volunteers, even if its volunteers are immune from liability under the Act. Under Arsand,⁹ if a volunteer is considered to be a servant of the organization, the organization can be held liable for the volunteer's negligence under the principles of respondeat superior. There also are certain situations in which an organization can be held liable for the negligent acts of its volunteers acting as the organization's agent in the course of their volunteer duties.¹⁰ However, nonprofit organizations and governmental entities will continue to benefit from any other liability limitations provided by state and federal law. For example, the organization itself can still sue a volunteer for damages arising from the volunteer's misconduct.

Limitations on the Act's protections

The Act does not operate to protect an individual volunteer whose misconduct:¹¹

1) constitutes "crime" or "violence," as those terms are defined in 19 U.S.C. 16, or "active international terrorism," as defined in Title 18 section 2331, for which the defendant has been convicted in court;

2) constitutes a hate crime, as that term is used in the Hate-Crime Statistics Act, 28 U.S.C. 534;

3) involves a sexual offense as defined in applicable state law for which the defendant has been convicted in court;

4) involves misconduct for which the defendant has been found to have violated a federal or state civil rights law; and

5) where, at the time of the misconduct, the defendant was under the influence of intoxicating alcohol or any drug.

Note that the Act's restrictions differ from current Wisconsin law. Since the federal act specifically preempts state law the federal law will control unless the state law provides more protection than federal law.¹²

Limitations on damages

Under the Act, punitive damages may not be awarded against a volunteer in an action seeking damages resulting from an act by a volunteer who was acting within the scope of his or her volunteer responsibilities, unless the claimant establishes by clear and convincing evidence that the damage was proximately caused by an action of a volunteer that constitutes willful or criminal misconduct or conscious, flagrant indifference to the rights or safety of the individual harmed.

The Act further states that it does not create a cause of action for punitive damages, and it does not preempt or supersede any federal or state law to the extent that such a law would further limit an award of punitive damages. In other words, even if a person would commit criminal misconduct, the claimant would have to establish under a law other than the Act that he or she has a right to punitive damages. The Act severely limits damages against volunteers available under Wisconsin law.¹³

Limitation of liability for noneconomic loss

Section 5 of the Act limits the liability of a volunteer for damages resulting from an act or omission by a volunteer who was acting within the scope of his or her volunteer responsibilities. Under the Act, a volunteer's liability for noneconomic loss shall be limited to the percentage of the volunteer's cause of the loss. In other words, there is no joint or several liability of volunteers for harm caused by other volunteers of the organization or entity. If there is a court case, the trier of fact would have to determine the percentage of responsibility of each volunteer for the claimant's loss. ¹⁴

Changes from prior Wisconsin law

Currently, Wisconsin law grants limited liability to volunteers of nonstock corporations organized under Chapter 181. ¹⁵ This limited liability also applies to officers and directors of nonstock corporations; however, the test for limitation of liability for officers and directors follows the limitations as set forth in Chapter 180, the Business Corporation Law, and is different than limited liability of volunteers. ¹⁶ Volunteers of religious associations and corporations also are protected from liability under Chapter 187 of the Wisconsin Statutes. ¹⁷There also are a variety of other Wisconsin statutes that provide some limited protection for volunteers. ¹⁸

Wisconsin law has no similar provisions applicable to volunteers of unincorporated nonprofit associations. The Uniform Unincorporated Nonprofit Association Act (UUNA), ¹⁹ limits the liability of a member or an officer of such an association for contract and tort damages based upon that individual's status as a member or officer of the association. The UUNA does not grant immunity to volunteers for their own actions. The Federal Volunteer Protection Act, however, specifically applies to unincorporated nonprofit organizations. ²⁰

It should be noted that the volunteer provisions in both Chapters 181 and 187 of the Wisconsin Statutes state that protection from liability does not apply to a volunteer who is licensed, certified, permitted, or registered under state law where liability is based upon the volunteer's act or omission within the scope of practice under the volunteer's license, certificate, permit, or registration. ²¹ The Act, however, contains no such exception, and provides protection from malpractice claims to a professional who volunteers his or her services to a nonprofit organization without compensation. ²²

Insurance requirements

The Act does not protect the organization itself from liability for the acts of a volunteer. Thus, an organization will have to carry liability insurance to protect the organization's assets from claims based upon the negligent acts of its volunteers.

In addition, there is the problem of the use of automobiles not owned by the organization. If such an automobile is driven by a volunteer in the course of his or her volunteer activities on behalf of the organization, under Arsand the organization can be held liable for damages caused by the volunteer's negligent driving under the theory of respondeat superior . ²³

Another very important factor nonprofit organizations need to consider is defense costs. The Act, while providing the volunteer an affirmative defense to a lawsuit, does not protect the organization against legal fees incurred in defending a lawsuit based upon a volunteer's negligence. In addition, the organization and its assets are not protected from such a lawsuit, so there still is a need for liability insurance.

Nonprofit organizations should contact their insurance carriers regarding the Federal Volunteer Protection Act and inquire whether the insurance company will use the Act as a basis to reduce their liability insurance premiums. In addition, as the Act may be an unknown factor for some insurance carriers, nonprofit organizations should comparison shop for their insurance because there may be a wide disparity in the treatment of the Act by insurance companies.

The Act only applies to acts occurring after Sept. 16, 1997. The Act has no retroactive effect. Most liability insurance policies are being written on a claims-made basis, meaning that the claim must be made during the term of the policy. Thus, volunteers still may be subject to liability for claims arising out of acts occurring before Sept. 16, 1997.

In addition, as in all areas of tort reform, there may be constitutional challenges to the Act.

Applying the Act in the real world

As of the writing of this article this author found no case law that applies the Act. There is only one Wisconsin case that deals with the Wisconsin Statute on Limitation of liability for volunteers. ²⁴ The following examples have been created by the author who takes sole responsibility for them.

• A church organization sponsors a summer camp and a child is injured swimming; the volunteer counselor cannot be held liable for failure to properly supervise the child. But, the church organization itself might be sued for not providing a trained lifeguard.
  
  
• A volunteer nurse screens persons for high blood pressure for a nonprofit organization. She negligently misreads the high blood pressure. Under current Wisconsin law prior to Jan. 1, 1999, the nurse who is licensed could be held liable for negligence. However, under the Act the nurse would not be personally liable. ²⁵
  
  
• A volunteer for the local Little League, while driving the players to a game, runs a stop sign and hits another car. The volunteer does not have immunity under either the Act or state law. ²⁶
  
  
• A volunteer at a nonprofit fund raiser failed to check an ID and sells beer to a minor who, while he is intoxicated, is in an auto accident and injures the passenger in another car. There probably is no immunity because the sale was in violation of law and an argument can be made that this is willful misconduct. The organization itself also is liable for the sale of the intoxicant to the minor.

Conclusion

The Federal Volunteer Protection Act of 1997 takes great strides forward in protecting volunteers of nonprofit organizations and governmental entities from liability. In addition, the Act can be a risk management tool for nonprofit organizations to help limit liability and encourage volunteers to continue to work for such organizations. This is especially true for professional volunteers who now have a new layer of liability protection when they volunteer their professional services to a nonprofit organization. However, the Act does not absolve the nonprofit organization from carrying insurance or taking other proper risk management steps to ensure that the organization is performing services well and does not necessarily incur liability for unsupervised or other improper acts by its volunteers.

Thomas L. Frenn, Marquette 1976, is a shareholder at Petrie & Stocking S.C., Milwaukee. He concentrates his practice in small business law, real estate, nonprofit organizations, bankruptcy, estate planning, and probate. He is chair of the State Bar Business Law Section Nonprofit Organizations Committee, and the Business Law Section's secretary/treasurer.

Endnotes

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¹ Volunteer Protection Act was signed on June 18, 1997, by President Clinton as PL 104-19. It is also at 42 U.S.C. 14051, 140454. References in this article will be individual sections of PL 104-19. Effective date of the Act was Sept. 16, 1997.

² Hate crimes are described in 28 U.S.C. 534(b)(1).

³ The actual definition of a public nonprofit organization operated primarily for charitable, civic, educational, religious, welfare, or health purposes can be very broad and is not further defined in the Act. See Federal Tax Coordinator, § D4100-4199 for examples of the types of organizations.

⁴See Wis. Stat. §§ 181.297, 187.44, 187.40-44, and 187.30-33. Because the federal law specifically preempts state law, it controls over state law. On April 13, 1998, the Wisconsin Legislature enacted 1997 Wis. Act 79 which revised Chapter 181 Nonstock Corporations effective Jan. 1, 1998. Unless specified otherwise, references are to the old Chapter 181.

⁵ See supra note 3.

⁶ Arsand v. City of Franklin, 83 Wis. 2d 40, 164 N.W.2d 579 (1978).

⁷ See Wis. Stat. §§ 187.35(3)(1) and 187.43(3)(1).

⁸ Act, § 4.

⁹ See, generally, Arsand v. City of Franklin, 83 Wis. 2d 40, 264 N.W.2d 579 (1978); Heims v. Heinke, 5 Wis. 2d 465, 468, 93 N.W.2d 455 (1958).

¹⁰ For an explanation of the expanded liability of a servant versus an agent, see Arsand cited above.

¹¹ Act, § 4(F).

¹² Act, § 3. This article does not provide a detailed analysis of how current Wisconsin law differs from the Act. However, one difference is that a volunteer may receive up to $500 of compensation per year under the federal Act but there is no such limit under Wisconsin law. Another difference is the detail of the exceptions to the volunteers immunity under Wisconsin statutes. Since there is no case law interpreting the Wisconsin statute, words such as "willful misconduct," a detailed comparison would be only this author's opinion. See, IGL-Wisconsin Awning Tent and Trailer Co. Inc. v. Greater Milwaukee Air and Water Show Inc., 185 Wis. 2d 864, 530 N.W.2d 279, 283 (Ct. App. 1994).

¹³ See Ghiardi, Kircher & Wiseman, Punitive Damages, Law and Practice (Callaghan, 1997). The Law of Damages in Wisconsin, ATS-CLE, State Bar of Wisconsin, Chapter 2.

¹⁴ See Act, §§ 6(1) and 6(2).

¹⁵ Wis. Stat. §§ 181.297, 180.0828. See also, new § 181.0855. The new nonstock corporation act does not change the liability of officers and directors of a nonstock corporation.

¹⁶ Wis. Stat. §§ 181.287, 181.297. See supra note 11.

¹⁷ Wis Stat. §§ 187.40-44; 187.30-33.

¹⁸ Wis. Stat. §§ 29.59 Removal of Wild Animals; 146.31(2) Blood or Tissue Transfer Services; 146.37 Health Care Service Review Civil Immunity; 895.44 Exemption from Civil Liability for Furnishing Safety Inspection or Advisory Services; 895.482 Civil Liability Exemption Ski Patrol Members; 895.51 Liability Exemption Food Donation Sale or Distribution; and 895.48 Civil Liability Emergency Care.

¹⁹ 1997 Wis. Act 140, Wis. Stat. Ch. 184.

²⁰ Act, § 6.4(b).

²¹ Wis. Stat. §§ 181.297, 187.40-44, and 187.30-33. See also¸1997 Wis. Act 79 effective Jan. 1, 1999. This act also provides protection for professional volunteers while the old law does not. See new Wis. Stat. § 181.0670.

²²Act, § 4.

²³ See, generally, Arsand v. City of Franklin, 83 Wis. 2d 40, 264 N.W.2d 579 (1978); Heims v. Heinke, 5 Wis. 2d 465, 468, 93 N.W.2d 455 (1958).

²⁴ See supra note 11.

²⁵ Under the new Chapter 181, effective Jan. 1, 1999, the nurse would not be personally liable if she or he was volunteering for a Wisconsin nonstock corporation. However, the result would be different if the nurse was volunteering for an unincorporated nonprofit association. Under the Act, volunteers of both types of organizations have immunity.

²⁶ See, Act 3(a)(4) and Wis. Stat. § 181.297.

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