Reason #9 The Legal Risks of Treating ERG Leads Like Business Consultants

Disclaimer: I’m not a lawyer, and nothing in this article should be taken as legal advice. This content is for informational purposes only. Please consult with your legal team or qualified counsel to assess your specific situation.

In the rush to turn ERGs into revenue engines, many companies are making a strategic—and legally risky—misstep: pushing volunteer ERG leaders into business consulting roles without acknowledging the liabilities that come with it.

It’s a corporate risk profile no one’s prepared to carry.

When companies position ERGs as Business Resource Groups (BRGs)—expected to drive innovation, sales, and customer insights—they also open the door to legal exposure. And if you haven’t properly scoped, structured, or safeguarded that work? You’re sitting on a landmine.

1. “It’s Giving Union”: The Identity Slippage Problem

There’s a legal line—and a psychological one—that companies risk crossing when they push ERGs too far into business advisory territory.

We’ve already covered the legal issues with ERGs consulting on benefits or workplace policy (which can trigger employer-dominated union concerns). But there’s a subtler risk that shows up even when those specific topics are off the table:

When you position ERGs—especially identity-based groups—as internal consultants for external strategy (e.g. marketing, product, or revenue), you blur the role they’re actually supposed to play.

Why? Because once you center ERGs as strategic advisors on behalf of their identity group, it’s not long before members start to internalize that identity as a corporate decision-making lever.

That’s where it gets tricky.

You start with “How should we show up externally?”

Then it becomes “Why aren’t we doing the same thing internally?”

And before long, your ERG is accidentally behaving like a bargaining unit—with no structure, no protection, and no guardrails.

This isn’t to say that driving revenue is inherently union-like. But once you assign a group the role of speaking for a protected class, and give their feedback material weight in shaping corporate decisions (even external ones), you’re priming them to believe they have authority over internal conditions too.

That’s not a knock on ERG leaders. That’s human nature. You give people responsibility. You give them a seat at the table. You publicly validate their insights. And naturally, they begin to believe they have—and should have—influence beyond what the law technically allows.

It is a very real risk of perception drift—and companies need to account for that before pushing ERGs into spaces that blur advisory lines.

2. Wage & Hour Violations: The Hourly Employee Risk Most Miss

Here’s the legal truth: if your ERG leaders are hourly employees and you’re not tracking or compensating their time, you may be in violation of wage and hour laws.

That’s because under the Fair Labor Standards Act (FLSA), once a non-exempt (hourly) employee performs any work that benefits the company—whether that’s driving engagement, building culture, or advising on business strategy—they are likely entitled to compensation.

And yes, that includes ERG work.

Even if the activity feels mission-driven or “voluntary,” the legal system doesn’t judge based on vibes—it looks at impact and expectations.

This gets especially risky when:

• ERG meetings happen outside of scheduled work hours

• Employees are expected to prepare content or lead events

• The ERG activity clearly benefits the employer

When that happens, you’re now in the danger zone for:

• Unpaid wage claims

• Retroactive timekeeping disputes

• Wage and hour audits

• Legal challenges tied to misclassification or inconsistent job expectations

Bottom line: If it’s work, it must be paid.

And ERG leadership—especially when structured, expected, or relied upon by the company—often qualifies as work.

To be fair, this is something that’s relevant 4th C or not…but especially if there’s a commerce requirement. The problem is unpaid ERG work by hourly employees. That’s the compliance trigger. And it’s one of the most overlooked risks in ERG program design today.

3. Liability Around Discrimination, Retaliation, and Ownership

ERGs are often asked to provide input on company culture, engagement, and even business strategy. But what happens when that input gets implemented—and negatively impacts another group?

In these cases, the company could face claims of:

• Disparate treatment or impact, especially if a change benefits one group while unintentionally disadvantaging another. If ERG-informed decisions result in policies or programs that unintentionally disadvantage another protected group, a claim of disparate treatment (intentional) or disparate impact (unintentional but measurable) could potentially be made. We talked about this too a bit un a previous newsletter.

  • Note: Reverse discrimination is just another way of saying someone was treated unfairly because they’re part of a majority group. Legally, it’s still considered disparate treatment—meaning one group was treated differently based on a protected characteristic.

• Retaliation, if an ERG leader is demoted, disciplined, or dismissed after offering feedback tied to identity or inclusion efforts. (I’ve seen this happen before with a lead)

These risks don’t mean you should ignore ERG input—but they do mean your process needs to be clear, fair, and well-documented. Asking for advice without safeguards opens the door to liability. Acting on that advice without evaluation opens the door even wider.

Additionally, there’s the question of intellectual property ownership.

If an ERG leader—especially one serving in a volunteer capacity—develops a scalable program, contributes a product idea, or recommends a vendor or campaign that the company later adopts, the issue of who owns that contribution becomes legally relevant.

Without clear contracts, attribution agreements, or formal role definitions, companies risk:

• Internal disputes over ownership or credit – can escalate into formal HR grievances or legal claims if employees believe their unpaid contributions were taken without acknowledgement or compensation.

• Claims of misappropriation – may lead to lawsuits or arbitration if an employee argues that their idea or work product was used commercially without permission or proper licensing.

Even if the company is technically within its rights, the lack of clarity and consent can expose it to legal and ethical challenges. This may not be a huge concern to many, but it’s a major headache when it happens.

WHEW with all of that said, that concludes our 9 reasons…but wait there's more. 

Throughout the rest of the week we'll explore some common pushback responses that I get around the 4th C / BRGs and how I'd respond (helpful for you to point folks to, and helpful for me to reference 🎉 a win win) and we'll close on Friday with an alternative approach.