In this Issue:
- Email Voting: What’s the Deal Under Maine Law?
- Revised Overtime Wage Threshold
- Most Blatant Nonprofit Abuse I’ve Ever Seen: How Not to Run an Organization
- E-Bulletin Information
Email Voting: What’s the Deal Under Maine Law?
One question that comes up rather often in my practice is whether Board Directors or members can vote by email or some other electronic means. In general, the answer is yes, but let’s break things down in detail.
First off, electronic voting by members or Directors should not become the norm for nonprofit organizations dealing with complex issues. Rather, email voting should be used only for time-sensitive, noncontroversial matters. For any issue where an exchange of ideas would inform the decision, votes should be taken at a meeting (which can be partially or fully held by conference call or video chat). If there’s any doubt about whether an issue may be controversial or benefit from live discussion, I would err on the side of caution and not proceed with an email vote.
With this caveat in mind, let’s take a closer look at what Maine law has to say on the topic.
Membership Votes – This one’s easy: Under the recently enacted 2019 P.L. Ch. 200 (L.D. 894), membership votes can occur by email or other electronic means if allowed in the Bylaws or by the Board of Directors (ideally, by a simple Board resolution approved in advance of the email vote).
Board or Committee Votes – Email voting by Directors (as opposed to members) is not explicitly authorized or prohibited by the Maine Nonprofit Corporations Act. That said, there are two different provisions that implicitly allow email voting.
First, Section 707 of the Act allows decisions that would typically require a Board or committee meeting and vote to occur by unanimous signed written consent of the Directors or committee members. And Maine’s Electronic Transaction Act allows an electronic signature to qualify as a signed writing. Thus, an email that includes the sender’s name (either as a signature image or simply typed in a signature line) constitutes a signed writing. If obtaining every Director’s email approval is easily accomplished, then you can ask for unanimous written consent via this process.
The problem is, quite often one or more Directors fails to respond to an email request for any number of reasons – in the hospital, surfing in the Azores, practicing digital minimalism. So obtaining unanimity can be very difficult. That’s where the second provision comes in. Section 708 of the Act authorizes “informal” or “irregular” actions that are taken outside of meetings, a category that presumably includes email voting. The wording of Section 708 is rather convoluted, but it implicitly allows for email voting so long as all of the Directors are provided notice and no Director objects to the process. If the corporation has members, then the members either have to be informed of the specific action and no member objects to the process, or else the process must be according to a custom known generally to its members. One obvious way of making a custom generally known to its members is to include it in the Bylaws.
Are you still with me? Here’s a recap: Board or committee email voting is implicitly allowed, and organizations can and should include a specific Bylaws provision to flesh out the details. Putting all of these pieces together, when I draft Bylaws for Maine nonprofits, I include the following language:
- Board or Committee Action Without a Meeting. Any action that might be taken at a meeting of the Board of Directors or of a committee may also be taken without a meeting if (a) all Directors or committee members are notified in writing of the proposed action, (b) at least three quarters (75%) of the total number of Directors or of the committee members send written consents to the action to be taken, at any time before or after the intended effective date of such action, and (c) the Secretary, committee chair, or his/her designee, receives no written objection to such action from a Director or committee member within forty-eight (48) hours of the notification to the Directors or committee members. Such notifications, consents, and objections shall be filed with the minutes of next Directors’ meeting or committee meeting, and shall have the same effect as a meeting vote. For the purposes of this section, notifications, consents, and objections may be communicated by regular mail, personal delivery, fax, or electronic mail. [If the corporation has members, I add this sentence here at the end: The provisions of this section shall be deemed a “custom of the Corporation known generally to its members.”]
I like a 75% supermajority because it demonstrates widespread agreement without requiring unanimity. In addition, a Director can object to the email voting process within 48 hours, which is a reasonable time frame to hold open an email vote.
Revised Overtime Wage Threshold
The federal Department of Labor recently issued a final rule that raises the salary threshold below which an employee is automatically entitled to overtime if she/he/they works over 40 hours in a work week. The new rule takes effect January 1, 2020, and because Maine’s overtime law is tied to the federal law, it affects all Maine employers, including nonprofits.
The new rule raises this threshold from the current $455 per week (equivalent to $23,660 per year for a full-year worker) to $684 per week (equivalent to $35,568 per year). In other words, any employees earning below this level will be entitled to overtime, even if they might otherwise qualify for an exemption (e.g., the executive, administrative, or professional exemptions).
For more details, including a few other minor changes to the overtime rules, see here.
Most Blatant Nonprofit Abuse I’ve Ever Seen: How Not to Run an Organization
The New York Attorney General’s recently settled enforcement action against the Trump Foundation offers invaluable governance lessons for nonprofits. The AG had charged the Foundation with a variety of abuses and violations of federal and state laws regarding tax-exempt organizations, including self-dealing and breach of fiduciary duties. After a state court declined to dismiss the charges, the Foundation saw the writing on the wall and settled the case in November. Under the terms of the settlement, the Foundation agreed to dissolve itself and to pay $2 million in damages. Furthermore, Trump’s children were ordered to take a nonprofit board training session, and President Trump agreed to restrictions against serving on other New York nonprofit boards. In my view, these harsh results are entirely appropriate, as the Foundation’s misdeeds are the most blatant that I have seen in my 17 years of practice in the nonprofit arena. For more on the settlement, see here.
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