United States: Leave-Based Donation Programs Facilitate Hurricane Katrina Relief Efforts

In the past month, residents of the Gulf Coast region have suffered extreme hardship following the unprecedented damage and destruction caused by Hurricane Katrina. Americans across the country have answered the call to help once again, and aid is pouring in.

Leave-based donation programs, where employees can forego vacation, sick or personal leave in exchange for cash payments, can be a very effective tool for raising the level of charitable contributions.

Notice 2005-68 outlines the IRS’s approach to leave-based donation programs for Hurricane Katrina relief. Cash payments must be made directly from the employer to qualified relief agencies working with victims in the Gulf Region. A qualified organization to whom these funds may be distributed, includes: (1) federal, state, or local governments; (2) a non profit entity (e.g., the Red Cross) operated solely for public purposes; and (3) a post or organization of war veterans if none of its earnings go to a private person. Notice 2005-68 also makes it clear that employer contributions must be used by the organization only for assisting Hurricane Katrina victims.

In addition, Notice 2005-68 says the IRS will not assert that payments made by an employer through a leave-based donation program constitute income or wages for an employee so long as payments are made (1) to qualifying §170(c) organizations for the relief of Hurricane Katrina victims and (2) before January 1, 2007. Second, the IRS will not assert that an employee’s opportunity to make these leave-based donations is constructive receipt of income or wages. Third, employees electing to make a contribution cannot claim a corresponding charitable deduction under §170. Fourth, the IRS will permit an employer making leave-based donations to Hurricane Katrina victims to deduct the cash payments under either §170 or §162 (the standard tax code provision that permits businesses to deduct "ordinary and necessary" expenses incurred in "carrying on any trade or business") of the Internal Revenue Code. Finally, leave-based donation payments do not have to be included in Box 1, 3 or 5 of Form W-2.

Pitfalls Of The OWBPA

In Kruchowski v. Weyerhaeuser, 2005 WL 2212312, --F.3d--- (10th Cir. 2005), the court ruled that former employees of an Oklahoma mill, who signed releases as part of a reduction in force, could pursue their age discrimination claims because the releases failed to meet the technical requirements of the Older Workers Benefit Protection Act ("OWBPA").

At the time of the reduction in force and in exchange for a severance package, each of the plaintiffs executed releases waiving their claims under the ADEA. Under the OWBPA, where a waiver is requested for an exit incentive or other termination program offered to a group of employees affected by a layoff, each of the individuals must be provided the following in writing in a manner that can be understood by the average individual: (1) any class, unit or group of individuals covered by such program (also referred to as the decisional unit); (2) any eligibility factors for such program; and (3) any time limits applicable to such program.

The court ruled that the releases were legally insufficient because defendant failed to meet two of the informational requirements under the OWBPA. Specifically, the defendant failed to provide sufficient information regarding the decisional unit and the eligibility factors. As to the decisional unit, defendant did not properly give the plaintiffs the positions and job titles of all the individuals in the decisional unit. Defendant initially defined the decisional unit as all salaried employees. However, later, the defendant changed the scope of the decisional unit and failed to provide the job titles and ages for 15 employees who were a part of this newly defined decisional unit.

With regard to the eligibility factors, the defendant did not disclose any of the criteria it used in making layoff decisions (e.g. leadership, abilities, technical skills, employee behavior and employer needs). The court stated "the term ‘eligibility factors’ must refer to factors used to determine who is subject to a termination program, not the factors used to determine who is eligible for severance pay after termination."

The informational requirements under the OWBPA were created to ensure that, before executing a release, plaintiffs have sufficient information to determine the factors defendant used in making the layoff decision and whether evidence of age discrimination exists. The court here emphasized that a single error or omission can lead to the invalidation of a release.

As this case highlights, there is no room for error in the area of OWBPA compliance. Courts are "sticklers" and require strict adherence to the requirements.

Companies that are undergoing a reduction in force must carefully analyze the requirements under the OWBPA to determine compliance. Companies must also take great pains to accurately define the decisional unit that is subject to layoff and ensure that it discloses the job titles and ages of all employees who are part of that decisional unit. This includes both those that are ultimately laid off and those that are not. Moreover, the information disclosed must reveal the criteria used for the termination decision, as well as the factors that determine eligibility for any severance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions