Nonprofit Report - May 2016

Date: May 23, 2016

Nonprofit Communication in the Cellphone Age: Know the Rules and Risks
By: Stacey L. Pine, Esq.

Originally published by ASAE

The proliferation of cellphones means that nonprofits can communicate with their members and donors anywhere, anytime. But the law protects consumers from unwanted "robocalls" and text messages on their mobile phones. Nonprofits need to know the rules before they implement a cellphone communication strategy.

Today, many Americans do not have residential landlines and have opted to use cellphones as their sole means of making and receiving calls. As a result, many businesses, including tax-exempt nonprofit organizations, now place calls and send text messages to cellular phones for fundraising and other purposes. While such strategies offer a cost-effective means of communicating with members, donors, and target audiences, there are a number of legal issues to consider.

In recent years, the Federal Communications Commission (FCC) has increased enforcement of the Telephone Consumer Protection Act (TCPA), which protects consumers' privacy. There has also been a significant rise in class action lawsuits alleging TCPA violations, many of which involve calls and text messages to cellular phones. Due to the risks of federal penalties and legal liability, nonprofits should proceed with care when implementing a cellphone communication strategy.

Do Not Call Registry

The Do Not Call Registry, which allows consumers to register their residential and cellular phone numbers with a national database to prevent unwanted calls, is probably the most well-known component of the TCPA. Generally, telemarketing calls cannot be made to numbers listed on the registry without the prior written consent of the person to whom the number belongs.

While charitable-solicitation calls by nonprofit organizations meet the definition of telemarketing calls, a 2003 FCC order relieved nonprofits from complying with the Do Not Call Registry provisions of the TCPA. Although nonprofits are not prohibited from calling numbers that appear on the registry, there are several reasons why they should maintain their own do-not-call lists of people who have opted out of receiving calls from them.

First, various states require nonprofit organizations to maintain opt-out lists and comply with opt-out requests. Next, maintaining an opt-out list is an especially good idea if the nonprofit uses an outside vendor to solicit charitable contributions on its behalf. Under the Telemarketing Sales Rule (TSR) implemented by the Federal Trade Commission, for-profit vendors that solicit charitable contributions on behalf of nonprofit organizations must refrain from calling consumers who have previously stated that they do not wish to receive such calls. Vendors are also required to maintain opt-out lists for calls made on behalf of their nonprofit clients.

Since vendors that violate the TSR are subject to a fine of up to $16,000 per violation, vendors that contract with nonprofit organizations to make charitable-solicitation calls often include a provision requiring the organization to warrant that none of the people on its call list has asked to be removed. If the nonprofit does not maintain its own opt-out list, it could be subject to a breach-of-contract claim by the vendor and, depending on the contract language, may be responsible for paying the vendor's legal expenses if a consumer files a claim alleging illegal calls.

Conversely, if a vendor receives an opt-out request, the nonprofit organization may be held liable for the vendor's failure to honor it. Charitable-solicitation contracts should specify that the vendor will comply with all applicable laws and will indemnify the nonprofit for any violations.

"Robocalls" and Text Messages

Autodialed and prerecorded telemarketing calls and text messaging have become quick and cost-effective ways for nonprofit organizations to communicate with members, donors, and the general public. The FCC has, however, expressed significant concern about these methods because the customer bears the cost.

For this reason, the use of telemarketing calls to cellular phones placed using an automatic telephone dialing system (or autodialer) and the use of robocalls—calls that use an artificial voice or a prerecorded message—are now restricted.

Generally, all telemarketing text messages, robocalls, and calls using autodialers made to cellular phones are prohibited unless the consumer has given prior written consent to receive them. The rule is slightly different for nonprofit organizations, however. While nonprofits must obtain express consent before sending telemarketing text messages, written consent is not required, and the consent may be obtained orally. Similarly, nonprofits that wish to make informational, survey, or research calls or send informational text messages to a cellular phone must obtain prior express consent.

The problem with oral consent is that it can be difficult to prove that the consumer actually gave it. In cases involving for-profit entities, the FCC has stated that when a consumer asserts that he or she has not provided written consent to receive autodialed calls, robocalls, or text messages, the commission assumes that the consumer did not give consent, and the telemarketer bears the burden of proving that consent was given. Presumably, the FCC would make the same assumption and apply the same burden in cases involving nonprofit organizations. To minimize legal liability, nonprofits should consider obtaining express written consent to use autodialers or robocalls or to send text messages to cellular phones.

Nonprofits using robocalls should also be aware that such calls must clearly identify the sponsoring organization at the beginning of the call, must include the organization's telephone number or address in the message, and must provide a means of opting out of receiving future calls.

Legal Remedies for TCPA Violations

Organizations that violate TCPA provisions are subject to legal action by various parties, including the FCC and state attorneys general. The FCC regularly exercises its authority and assesses substantial penalties for violations. For instance, in 2014, the commission fined Dialing Services, LLC, more than $2.9 million for allegedly making 184 robocalls to cellular phones.

The TCPA also grants consumers private rights of action, which carry penalties of $500 per violation (the penalty may increase to $1,500 if the court finds the violation to be willful or knowing). Plaintiffs' attorneys have realized that the statutory language makes class action suits especially lucrative since a class action allows multiple claims to be aggregated into a single suit, which exposes defendants to liability that may total millions or even billions of dollars.

Given the penalties for TCPA violations, nonprofit organizations must ensure that a telemarketing campaign involving cellular phones complies with the law and that all charitable-solicitation vendor contracts contain provisions that insulate the nonprofit from liability for any wrongdoing by the vendor.

New Department of Labor Overtime Regulations
By: Steven E. Bers, Esq.

Effective December 1, 2016, the US Department of Labor regulations defining overtime-exemption eligibility requirements will change, with the impact upon employers being that fewer employees may be eligible for payment on a level salary basis for all hours worked – that is, employers may lose their overtime exemption.  The new requirements will have a direct impact upon any current salaried employee being paid a salary of less than $913 per week.

As background, the Federal Fair Labor Standards Act, the Federal law controlling wages, hours and overtime, requires that all employees who work more than forty hours in a single work week be paid time-and-one-half for all hours worked over forty hours.  The requirement is universally applicable to every employee, unless the employee qualifies for one of the many overtime exemptions which allows the employer to pay the employee on a level salary basis each week, regardless of the number of hours worked in the week. 

The new regulations issued on May 18, 2016, address eligibility requirements to qualify for three of the most commonly used exemptions, often called the “white collar exemptions”: (1) the Executive Exemption, (2) the Administrative Exemption, and (3) the Professional Exemption.  These are the exemptions most frequently used by employers to pay managers, supervisors and department heads on a level salary basis. The first two of these three exemptions, very broadly speaking, require that the individual exercise judgment and discretion as their primary function relating to either the management and supervision of other employees (the “Executive Exemption”) or with the direction of a particular function within the employer’s business or of the management of a function in another business (the “Administrative Exemption”).  As applied to the employment setting, the Executive Exemptions might apply to the marketing department supervisor or the programs manager, by reason of their employee supervisory responsibilities.  The Administrative Exemption might apply to jobs where other employees are not supervised, but the function is vital to the business direction, such as the company controller.

The change announced on May 18, 2016, increases the salary level that must be guaranteed, in each week (not subject to fluctuation each week based upon hours worked), to qualify for a white collar exemption, currently set at $455/week ($23,660/year).  Effective December 1, 2016, the white collar exemptions will only be available to employees if there is a guaranteed salary of $913/week ($47,476/year).

Thus, the impact of the change falls upon any employee who currently makes between $455/week and $913/week, and is currently being claimed to be overtime-exempt, as that person will become disqualified for the exemption on December 1, 2016, unless the salary is increased to meet the new exemption qualification threshold.  Alternatively, if the salary is not raised, the individual’s pay methodology may be changed to hourly, with overtime paid for weekly hours over forty.1

The new regulation includes two other additional provisions.  First, in satisfying the new $913/week threshold, non-discretionary bonuses and incentive payments such as commissions, can be used to satisfy up to 10% (i.e., $91.30) of the $913/week salary requirement.  As this is a brand new concept to the definition of “salary,” it is too early to say exactly how this will be administered, except that one implication seems clear – the 10% allowance cannot be from a wholly discretionary program – it must be a matter of compensation right based upon some established criteria.    It is questionable if this provision will see much use, as the economic result of use is non-existent. 

Finally the regulation raises the annual salary threshold from $100,000/year to $134,004/year for individuals qualifying for the white collar exemptions under the so-called “highly compensated test” (“HCA”) – the test that allows an exemption almost automatically as the mere payment at the HCA test level is presumed to be proof of qualifying job functions.

1. Note, if the individual never works more than 40 hours in a week, the applicability of an overtime exemption becomes moot, and the employee may be paid a flat salary at any level, so long as the salary exceeds the applicable minimum wage for the hours worked.