Explainer: Nonprofits and Workers’ Compensation

Individuals that volunteer their services for not-for-profits are not eligible for workers’ compensation benefits, so the not-for-profit entity using volunteers is not required to obtain a workers’ compensation insurance policy.

Not-for-profits that are paying individuals for their services are required to obtain a workers’ compensation insurance except for:

  • Paid clergy and members of religious orders are exempt from mandatory coverage (but can be covered voluntarily). To be exempt the clergy and members of religious orders must be performing only religious duties.
  • Members of supervised amateur athletic activities operated on a nonprofit basis, provided that such members are not otherwise engaged or employed by any person, firm, or corporation participating in such athletic activity (like Little League Coaches).
  • Paid individuals teaching for a religious, charitable or educational institution (Section 501(c)(3) under the IRS tax code) are also exempt from mandatory coverage (but can also be covered voluntarily). To be exempt, the teachers must only be performing teaching duties.
  • Paid individuals working in a non-manual capacity for a religious, charitable or educational institution (Section 501(c)(3) under the IRS tax code) are also exempt from mandatory coverage. Manual labor includes filing; carrying materials such as pamphlets, binders, or books; cleaning; playing musical instruments; moving furniture; shoveling snow; and mowing lawns.
  • Persons receiving charitable aid from a religious or charitable institution (Section 501(c)(3) under the IRS tax code) who perform work in return for such aid (such as a sheltered workshop for handicaps).

​A nonprofit’s unpaid executive officers are generally excluded from the requirement of coverage. A not-for-profit entity that is not compensating individuals (including executive officers) for their services is not required to obtain a workers’ compensation insurance policy. All compensated executive officers of a not-for-profit corporation or unincorporated association that is not classified as religious, charitable or educational (Section 501(c)(3) under the IRS tax code) must be covered by a workers’ compensation insurance policy.

Greg Lois is the managing partner of LOIS LLC, a 21-attorney law firm dedicated to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 & 2017 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@lois-llc.com