Nonprofit boards are in a unique and sometimes challenging position when it comes to assessing the state of mission-driven organizations. Their responsibilities are distinct from those of staff and executive leadership, and they are not typically involved in the day-to-day operations of the organization. Some board members interpret this distance as evidence that they are not responsible for ground-level employment decisions. However, board actions and choices can have a significant downstream impact and, in certain circumstances, can contribute to organizational risk and potential liability.
For employees, volunteers, and beneficiaries, the duties and intentions of a nonprofit board can sometimes feel opaque or difficult to interpret. This ambiguity can create room for misunderstanding, particularly when board-level policies, priorities, or strategic direction change. In some cases, shifts in mission or policy may be cited as contextual evidence in employment-related claims, such as allegations of wrongful termination, discrimination, or labor law violations, especially when employment decisions closely follow those changes or are applied inconsistently.
Board members themselves may also face heightened scrutiny. Public statements, affiliations, or personal beliefs can be examined and, in certain circumstances, used to support claims of double standards or unfair treatment. While such factors alone do not create liability, they can become relevant when tied to employment actions, enforcement decisions, or organizational messaging.
Because board members often lack direct visibility into daily management practices, it can be difficult for them to anticipate how their decisions will affect employees. Below are some of the key employment-related risks nonprofit boards may encounter.
Misalignment of Values
As primary stewards of organizational policy and values, nonprofit boards play a central role in defining workplace expectations. However, boards may have limited insight into how those policies are implemented or enforced in practice. Policies addressing workplace conduct, professionalism, or organizational values are common, but there is not always a universal, agreed-upon understanding of how these standards apply, when they are enforced, or what consequences follow violations.
When enforcement is inconsistent, unclear, or poorly documented, current or former employees may point to those policies as evidence supporting claims of discrimination or wrongful termination. For example, if an organization publicly emphasizes transparency and open communication, but a terminated employee is not provided with any explanation for their dismissal, that inconsistency may be cited as evidence of unfair treatment. While the actions of individual managers often drive these situations, board-approved policies can still be drawn into the analysis, even if the board was not directly aware of how they were applied.
Conflicts of Interest
Because nonprofit board members frequently have professional roles or business interests outside of their board service, certain decisions may raise questions about potential conflicts of interest. This is particularly common when boards are composed of subject matter experts, private sector leaders, or individuals with personal or financial ties to the nonprofit’s field of work. Whether a board member’s external interests actually influenced a specific decision can be difficult to establish, which may create room for others to interpret actions as self-serving.
For instance, a board may direct management to reduce operating costs in response to decreased government funding, fundraising challenges, or other financial pressures. Boards typically view such directives as necessary to preserve the organization’s long-term viability and mission. Organizations may respond by outsourcing work, implementing automation, or engaging third-party service providers to replace eliminated roles. If those vendors or services are financially connected to a board member, even indirectly, this may raise concerns about a potential conflict of interest and contribute to employment-related disputes or governance scrutiny.
Double Standards
Former employees sometimes allege that they were disciplined or terminated for violating organizational values while board members engaged in similar behavior without consequence. This issue has become more prominent with the rise of social media, where board members’ public statements, advocacy, or personal conduct are more visible. When board members are outspoken on political, cultural, or social issues, employees may perceive a disconnect between stated organizational values and actual behavior at the governance level.
In certain situations, publicly available statements or conduct by board members may be cited as circumstantial evidence suggesting disparate treatment or inconsistent enforcement of policies. Even when personal activity is not political in nature, it may still be interpreted as setting an example that conflicts with organizational standards. While personal expression alone does not create liability, these issues can increase risk when combined with inconsistent discipline, unclear policies, or weak documentation.
Cause for Termination
There are situations in which board-level directives, communications, or documentation can complicate the stated reasons for an employee’s termination. For example, if a board issues a directive to reduce costs and an employee is terminated shortly thereafter for alleged performance issues, the employee may argue that the true reason for the termination was budget-related rather than performance-based. The strength of such claims often depends on the quality and consistency of documentation supporting the employer’s stated rationale.
While many employees are employed on an at-will basis and are not legally entitled to a detailed explanation for termination, risk increases when termination decisions conflict with prior practices, stated values, or written policies. If an employee was not warned about performance issues, provided an opportunity to improve, or evaluated consistently with peers, a termination may be portrayed as unfair or pretextual. In these cases, gaps in documentation, rather than board intent, are often what drive employment claims.
501(c) Services Can Help Your Nonprofit Succeed
With decades of combined experience supporting nonprofit organizations, 501(c) Services helps employers navigate complex governance, employment, and risk-management challenges. Our work focuses on strengthening alignment between policy, practice, and documentation, helping nonprofits reduce exposure while staying focused on their mission. If you would like to learn more about how we support nonprofit employers, we invite you to get in touch.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
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