A nonprofit needs strong leadership to successfully fulfill its mission and its promise. When it comes to hiring an executive director, chief financial officer, or other mission-critical executive, nonprofits need to follow employment best practices to promote an effective (and legal) employment relationship.
1. Make sure you share a consistent vision.
Nonprofits guided by a particular mission, vision, or religious identity should have leadership that affirms these values. Therefore, it’s advisable to discuss the organization’s values with candidates prior to offering a leadership position. Religious organizations must take care not to violate any religious liberty legal protections; consult with a nonprofit attorney experienced in this area of the law to protect your organization.
2. Share job expectations.
Beyond discussing expected job responsibilities with candidates, be sure to provide those expectations in general terms in the offer letter or written agreement. In an attachment, provide a more detailed list of expectations when it comes to things like work hours, travel, fundraising, management of staff, program management, etc.
3. Define terms of employment.
All employment terms need to be identified in writing, in an employment agreement or offer letter. Whatever type of written document is used, employment is generally defined as “at will” — meaning an employee may be terminated with or without cause.
4. Address confidentiality.
In general, nonprofit executives have a fiduciary duty to protect sensitive information like donor and financial information. Depending on the type of nonprofit, it may be important to identify these duties in writing with a non-disclosure or confidentiality agreement. Since these agreements are contracts, they should contain some of the general clauses that other contracts include. For example, provisions that identify what state law will govern the contract, how disputes will be handled (including whether mediation or arbitration is required), and other similar types of clauses.
5. Address employment benefits.
What health or retirement benefits will you provide your executives, if any? There are many options out there, including two new Health Reimbursement Arrangement (HRA) options that are well suited for smaller employers.
6. Address Board involvement.
Typically, nonprofit executives work closely with the Board of Directors and have responsibility for carrying out Board directives. Some nonprofits require that those serving in an executive director role have a seat on the Board as either a voting or non-voting member. Whatever the executive’s involvement with the Board will be, it needs to be communicated clearly.
7. Avoid conflicts of interest.
Public confidence is clearly essential for nonprofits to successfully fulfill their missions and conflicts of interest by nonprofit executives can negatively erode confidence in an organization. Nonprofits should provide executive staff with a conflict of interest disclosure statement so he or she will fully understand the duty to disclose conflicts.
8. Identify intellectual property usage and ownership.
Are you hiring someone who has written books, created music, or authored other creative works? Will they be continuing that during their employment with you? If so, the ownership of this intellectual property and its usage should be addressed.
9. Get Board approval.
Executive hires should be approved by a nonprofit’s Board of Directors as part of its governance duty. The Board should also approve the terms of employment.
10. Uphold good employment practices.
Depending on the size of the nonprofit, it may be useful to publish an employee handbook that outlines the organization’s policies. In today’s environment of ever-changing employment laws, the employee handbook has a significant role to play in educating employees on all their rights and providing proof that your nonprofit understands and is following the rules and regulations set forth by employment laws.
The Church Law Center of California advises churches and other nonprofits on how to protect themselves from risk while furthering their mission. Call us today at (949) 689-0437 or reach out to us through our contact page.