Legal Risks for Nonprofit Boards to Tackle

Legal Risks for Nonprofit Boards to Tackle

Boards of directors for nonprofits are brought on to help advance an organization’s mission. The people who serve in these roles are often passionate advocates for the nonprofit’s cause and feel strongly about furthering the agenda of the group. Unfortunately, focusing solely on the work of the organization and not the inner workings of the institution can leave the organization vulnerable and the board members potentially liable in the event of a lawsuit.

Some areas on which the nonprofit board should be sure to focus their time to help mitigate risks include:

Employees: A good rule of thumb is for the board to set clear guidelines around the entire lifecycle of an employee. From hiring to employment to termination, having set procedures and expectations that apply to all employees can help avoid legal problems. Similarly, the board should create explicit rules around the appropriate code of conduct for work, use of social media, and its intolerance for harassment of any kind (by fellow coworkers or vendors). Additionally, the board needs to set protocols for employees to report problems and have established pathways for dealing with common issues.

Nonprofit Status: In order for an organization to have the designation of a nonprofit, it must comply with very strict laws about its operations. In order to remain tax-exempt, the organization must follow the rules around fundraising, lobbying, and communicating information, among other activities. The specific guidelines vary depending on how an organization is structured and filed with the IRS, so it is important for the board to understand what limits are placed on their organization and make sure they keep things inside those lines.

Intellectual Property: Nonprofits are used to running lean operations and don’t always have the time and resources to make sure their work is protected. Determining if copywriting or trademarking the organization’s output is appropriate needs to be considered by the board.

Working with Outside Parties: All too often, an agreement between a nonprofit and an outside vendor is based on an understanding or verbal agreement, rather than a written contract. Boards should make sure all business relationships have strong contracts in place in case anything is amiss in the service the outside party provides.

A board can do a lot to protect the nonprofit it serves by focusing on areas of risk like these. Addressing these key points can open up more bandwidth and breathing room for the group, so it can further its mission. Riesterer Law has worked with numerous nonprofit boards. Contact us at 216-245-2580 to see if we can help your board tackle any of these issues.

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