Compensation of board members.

Can someone shed some light on this topic: Director Compensation: 720.303(12)
Directors, officers and committee members are generally prohibited from being compensated for their service unless:
The payment is reimbursement for out-of-pocket expenses.
The payment is made for the recovery of insurance proceeds.
The compensation is allowed by the governing documents.
The compensation is authorized by membership.
We have a very small community of 33 homeowners and I have been on the board for many years, sometime as the only board member. We have a hard time getting people to serve and most are generally not interested in coming to meetings or even voting. If the membership does not object to paying for labor,ie. Painting signs, fixing curbing and sign posts, mowing etc… by someone who just happens to be on the board, because no one else will volunteer, is it permitted by this statute? Over the years I have been paid a total of 245.00 for labor I performed with the approval of the then board members and the majority of the homeownwes. I have never been paid for duties in relation to serving on the board as Treasurer, Secretary, and President. We would like to continue this practice in out community but with so few members willing to be board members, and the ones who are, are generally the ones willing to perform labor does this statue make it illegal? Since it says “generally” Im assuming there are exceptions. Thanks for any info you can provide!

Regards
DarcyC

Darcy, you should make sure that you are being paid for a very specific tasks that the association would have to hire someone to fulfill anyway. Also make sure that this is documented in your meeting minutes. There is nothing wrong with compensating someone for work they do as long as it's transparent and clear.

Document the approval of the membership (which appears to me the only way around the statute) and be sure you have the appropriate licensing and insurance to indemnify yourself for any possible complications from your actions. These are the same stipulations applied to any other contractor.

Contractors should have appropriate licensing and insurance for the services rendered. As much for their protection as that of the association whom they are working for.

The Fl statutes list the exceptions to BoD compensation, she should make sure here exceptions are documented.

Darcy:

away from all the rhetoric on here what you have done is not against the law in my opinion. Make sure what you are being paid is comparable or lower than what you would pay someone outside the community to do.

It's best to avoid compensating board members and/or officers for anything except out-of-pocket expenses (previously authorized by the board) unless your documents and state law allows for it. Even compensating board members for services performed, unless they are actually in that business, has dangers you may not even have considered. This is an issue our board has wrestled with.

If someone performs services for you, they fall into one of three categories: volunteer, employee, or independent contractor. State wage and labor laws typically define the types of organizations that are permitted to use the services of volunteers. If you are not one of those organizations (and HOAs generally are not), then the individuals performing services must be independent contractors, or employees. If they are (statutorily) employees, they must be paid at least the minimum wage, you must withhold federal income, social security, medicare, and possibly state income taxes, and you must provide worker's compensation insurance. Failure to do any of this could put you in violation of wage and labor laws.

If an individual is a private contractor, that individual must pay self-employment taxes (to replace the social security and medicare taxes), and likely federal and possibly state estimated income tax, usually paid quarterly. They also need to provide their own liability insurance and insurance to cover job-related sickness and injury. (I've owned a business before, so I've been through all of this.)

Then, there is the risk of injury. Suppose a person performing services is injured while performing them (someone cleaning gutters on the clubhouse falls off a ladder). Suppose the injury is serious enough to require medical treatment and possibly hospitalization. What happens? Let's suppose this person is employed and has medical coverage through his/her employer. Who pays? If it's obvious that the injury is the result of an accident, the first thing the employer's insurance carrier wants to know is are other parties responsible for paying? (Remember, insurance companies want to get out of paying if they can.) If the injury happened at work, then the employer's worker's comp insurance is responsible for paying. If it is learned that the injury happened while performing work for the HOA, then the HOA's insurance is responsible for paying. Now, read your policy. It likely doesn't cover injuries sustained by your employees; you're supposed to carry worker's comp insurance for that, but you don't have any because you don't think you have any employees, but, statutorily, you do. Uh oh.

The HOA's liability policy likely doesn't cover injuries sustained by private contractors, either. They're supposed to carry their own. This is why HOAs should only hire licensed and insured contractors. (Our CCRs also require that all homeowners hire only licensed and insured contractors to perform work on their homes).

You're probably thinking nothing will ever go wrong. People can volunteer, or you can pay them for work performed and you don't have to worry about them being your employee, etc., etc. The risk may be small, but it is not zero. There is a finite risk that something will happen that can get messy. As a private individual you are free to take whatever risk you want. However, as a board member, the risk is not yours alone. The risk is being borne by every homeowner in the association.

My suggestion? Don't let board members, or even homeowners, do work for you, unless they're in the business of doing that kind of work, whether you choose to compensate them or not. It not only avoids issues due to incorrect perceptions, it also avoids issues arising out of potential future complications.

I would like to thank everyone for their advice on this subject. Im just thinking that its really a shame that Insurance and law suits govern our lives to such a degree. I decorate our community for Christmas almost every year. Im assuming if I tripped and fell and injured myself on HOA property I would be covered by our HOA liability ins. Just as if I or someone else were riding a bike on the private road and took a fall because of a pothole or for no reason other than I cant ride a bike.
Im certain we would not agree to hire someone to do Christmas decorations so Im thinking that we are taking a risk by having volunteers from the neighborhood.
As a board member am I covered by the HOA insurance if I get injured doing anything in the community? And what would be the difference if a board member or community member was getting compensated for pulling weeds in the islands or did it as a volunteer as regards insurance.

And what would be the difference if a board member or community member was getting compensated for pulling weeds in the islands or did it as a volunteer as regards insurance. (Darcy)

Darcy,

Do not get discouraged. We have volunteers, as many other organizations do and are covered by various insurance policies. To answer your insurance questions:

A ‘Workers' Compensation Insurance’ provides coverage required by Florida law for injuries to association employees and volunteers that occur on the job. These laws include: disability (loss of income), medical benefits, survivor (death) benefits and rehabilitation benefits.

B. ‘Commercial General Liability’ protects the HOA from a number of other exposures such as ‘slip and fall’ or property damage caused by maintenance of common areas, etc. This insurance can also be extended to cover off-property locations. For instance, if the HOA has a meeting or picnic on the beach, etc.

C. ‘Director's and Officer's Liability Insurance’ covers mismanagement of funds or policies by the HOA's board. It SHOULD also protect officers, employees and any committee members or volunteers.

D. ‘Employee Dishonesty Insurance’ or a fidelity bond, protects the community association for the loss of money, because of fraud, dishonesty, etc. on the part of directors, officers, committee members, employees, board members, volunteers and also a Management Company.

E. ‘Umbrella Liability Insurance’ is tailored to each HOA and the risks covered and usually negotiated. There is no "standard" umbrella policy and every HOA need to work with an insurance agent to get the right policy to close any gaps.

Please review your insurance policies and check if those comply with your covenants. That could be quite important.

The compensation was for work that had to be done anyway and we could not find someone at the time. Everyone in the neighborhood was happy to have it done and have absolutely no problem whatsoever with it or anything the board does. We have had the same board for years. The problem is we have one homeowner that has had a personal vendetta and is always looking for something. When he couldn't prove that money was missing, we had to go back through 5 years of records, and everything was to the penny, he came up with this. Here is a sample of one of his many letters and rants to the President of the Association:

At this time, my invoice is immaterial since this whole issue revolves around FL Statute 720.303 (12) "COMPENSATION PROHIBITED" and we quote "A director, officer, or committee member of the association may not directly receive any salary or compensation from the association for the performance of duties as a director, officer, or committee member and may not in any way benefit financially from service to the association." It is our interpretation that when Darcy Casas paid herself (benefitting financially) for her services to the association, in the capacity as an individual director and officer (Treasurer), she was in direct violation of this Section of the Statute.

Let us remind the Board that they have a legal "Fiduciary Duty" to abide by and enforce FL Statute 720, along with the HOA's Declaration Of Covenants And Restrictions and By-Laws. Accordingly, compensation for services rendered should not have been allowed.

With the Board now knowing the prohibitions of Section 720.303 (12), please explain in detail how the Board can legally allow Darcy to keep the money. If the Board was not aware of Section 720. 303 (12) at the time Darcy was paid, then have the money returned and let us move on.

Please provide us with the Board's decision by 10-19-11.

Herb

Im not sure who he means by "we" or "us" since its only him doing the complaining.

Since there are exceptions to this rule and the board and membership agree with our decision in this case should we be concerned. I just dont want to end up in a legal battle over it. He has a new complaint just about every week and we are really getting tired of his harassment, if anything the members are almost ready to just dissolve the HOA in order not to have to deal with this situation. There are just to many rules and regulations and no one wants to serve on the board and almost no one shows up to the meetings, and we only have one a year.

Darcy,

You state:

‘Over the years I have been paid a total of 245.00 for labor I performed with the approval of the then board members and the majority of the homeowners.’

A.The ‘NO COMPENSATION” law became effective ONLY in July 2010. Therefore, if you were compensated $245 prior to that year you were not breaking any law to begin with because such law did not even exist.

B. Also, this law also allows directors to be compensated if permited by By-laws or approved by a majority of owners approve I do not knopw what your By-laws say but you state you had obtained the memberships' approval. This is why I said, at the very beginning, you did not break any laws. The owner did not cite the entire provision which provides for exceptions, including these:

(d) Any fee or compensation authorized in the governing documents.
(e) Any fee or compensation authorized in advance by a vote of a majority of the voting interests voting in person or by proxy at a meeting of the members.

C. Finally, any judge would hardly consider ‘$245 over the years’ compensation.

Darcy:

Seems you might be worrying about nothing.

$245 over YEARS! Hardly, worth sweating over IMO.

From the quoted words you provided sounds like Herb is a putz.

$245 is not compensation for service as a member of the Board.Your activities were certainly outisde those of a Board member.
To suggest that would be nonsense.

Some people read the letter of the law rather than considering the meaning of the law.

If the owners and Board were aware of these HUGE payments and savings to the property I would disregard the nonsense created by one PIA.

Were you acting in the best interest of the property? Sounds to me like you can't run off to retirement with all of that $245 cash you robbed from the property.

Every property has a few wodden nickel lawyers who will never be happy not matter what you do. Ignore Herb and move along.

I put up X-Mas decorations each year for the past 8 years. So far no complaints or legal issues and we have been able to do so without perosnal injury each year.

Don't let an idiot force you to change your behavior especially when it benefits your property.

Hopefully he will just go away with all of his problems.

I doubt you run the risk of jail time.

Good luck.

Herb strikes me as a yo-yo.

Every property has one or more. Second guessing every decision and action of the Board like a bad itch.

Using the letter of the law to support their views and agendas.

When you consider or respond to people like Herb you give them power.

I would ignore his accusations and demands and leave him talking to himself in the corner.

My job is to act in the best interest of the property not react to nonsense and stupidity put forth by an ignoramus.