Stephanie Dean and Stefani Hovarter (yeah, I know!) have filed a lawsuit against Feed The Children for wrongful dismissal. Dean and Hovarter claim that they were fired after pointing out to the charity that more than $1 million was owed to the State of Oklahoma.
The tax allegedly owed is in the form of use tax. Use taxes are roughly the equivalent of sales tax and are owed when sales tax is not paid. Dean and Hovarter noticed the discrepancy for the time period January 1, 2002 to June 30, 2009, and alerted officials at the charity. They also advised that there may be similar amounts due in other states. The pair then alleged that Christy Tharp, CFO for Feed the Children, was aware of the problem and chose not to report it, instead hoping that the statute of limitations would run.
On September 17, the accountants notified the Tax Commission of the discrepancy. After the disclosures, Dean and Hovarter were fired on September 29. They filed suit 2 weeks later, seeking lost wages, emotional distress and punitive damages.
Feed The Children has not offered any comment.
My two cents on the suit? Unless there’s a written contract that says otherwise (and I don’t know that there isn’t), Dean and Hovarter may be out of luck. In the US, for the most part, employment laws are favorable to employers. Most employees are considered “at will” which means I can fire my employees for wearing yellow to work if I wanted. However, there’s one big exception that might apply: if their actions fall under one of the whistleblower statutes, there might be some additional protection. I have not seen the actual text of the lawsuit, so I’m not sure if they’re playing that card or not… I’ll let you know when I find out.
Wow, what a fascinating case. I googled and came up with this article
http://newsok.com/feed-the-children-may-owe-oklahoma-1.1m/article/3409857
The article links to a PDF of the court filing, which you can find here:
http://s3.amazonaws.com/content.newsok.com/documents/o16ftclawsuit.pdf
Also, in line 3 of the last paragraph of your post, I think you meant to write “favorable to employERS” rather than “favorable to employEES.”
Thanks for the quick catch, Mary. I made the change. 😉
I also appreciate the link. After reading the actual filing, I still believe it’s an iffy case, at best, unless there is something in OK law that protects whistleblowers.
Feed the Children would have had to have their own whistleblower policy to submit with their 990 for the last year or two. Would that not have some bearing on this case? Even though the whistleblower policy is a Federal requirement, the policy is intended to govern the actions of the organization in any US jurisdiction, and should trump at-will employment laws (in my non-lawyer lay person opinion). At the very least, FTC should not be able to asset that they are in compliance with their own whistleblower policy next year. Assuming, of course, that the policy indicates that reporting to the Board is an acceptable next step after not succeeding with one’s supervisor.
Why should the charity, if they are a true charity, have to pay any use or sales tax. This is good example, of the attutide of people in this country.
The true issue is the children, all the other issues going on are foolishness!
The Feed the Children is doing what I government (federal and State) should have been doing all a long.
David England
The memo in the court filing that Mary linked makes mention of a partial exemption from use tax that the two accountants applied for on behalf of the organization.
However, sales tax exemption is a state issue, and different states have different policies as to whether and how nonprofits get sales tax exemption. In PA, for instance, charities have to apply separately from their federal 501(c)(3) to the state for sales tax exemption, and have to demonstrate that they are a “purely public charity.” I don’t know of any cases of 501(c)(3)s that have not met that threshhold, though I do know of several that have had to appeal an initial denial of their application, sometimes through multiple layers of bureaucracy. And there probably are some 501(c)(3)s that don’t get sales tax exemption.
Now, whether or not that’s good tax policy is of course a different question.
Too bad. In Texas, there is no private whistle blower law. There is one for public employees (ie, state and local government), but not private employees. I hope for their sakes that Oklahoma has some better protection.