Legal Question in Employment Law in California

Potential Employee wants company to donate to charity in lieu of salary:

I recently made a job offer to a potential employee for a management position at our California S-Corp. Upon receiving the offer, he explained that he is willing to accept the offer, but only as a volunteer with the caveat that the gross amount he would normally receive in compensation be given by our company to a large and well-known non-profit charity. He explained that he is not willing to accept any compensation for his time.

Is it legal to allow this person to perform work as a volunteer for us and make the donation to the charity?

Thank you!


Asked on 8/12/11, 11:15 am

1 Answer from Attorneys

I don't think you would have wage and hour law problems, but you might run into trouble with the IRS and EDD. They may view it as him working for compensation that you must pay the employer's payroll taxes on, because his work generates the funds and he controls their distribution, but if he is not paid, it's hard to do that. A better approach would be to pay him, pay the payroll taxes on it, and let him direct that his pay be direct-deposited to the charity. He would then deduct 100% of his income on his tax return. It would have the same net effect but be far cleaner and clearer from a tax perspective.

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Answered on 8/12/11, 11:41 am


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