Nonprofits Lawsuits

February 9, 2015

A few decades ago not-for-profit organizations benefited from a type of charitable immunity – essentially they were protected from lawsuits. It was widely held that a nonprofit’s money should pay for good works, not someone’s injuries. However, over the years, the courts have stamped out this immunity in most states and nonprofits are required to take legal responsibility for the actions taken by the organization, its employees and volunteers, just as any for-profit firm must do. With an increase in general litigation, nonprofits need to follow the example of commercial enterprises and adopt a risk-management program, with a particular focus on employment practices liability. Talk to your human resources experts to come up with a policy that can minimize your exposure.
Here are a few tips:

Appoint a manager. Tap someone to take responsibility for your employment practices. The person should make sure that there are written standards for hiring, retaining and firing personnel. All employees should be informed of the rules, which should be followed as closely as possible.

Include volunteers. Make sure that volunteers receive training and understand the rules that affect them. If there are problems, give them feedback and a chance to improve. However, if problems continue, volunteers should be let go.

Take complaints seriously. If an employee charges a colleague with misbehavior, talk with the accused person and explain the possible consequences. Monitor the situation while the investigation continues. If a lawsuit is threatened, employers need to show that they’ve acted on a complaint.

Go by the book. Have an employment law firm review employee handbooks and other personnel materials before publication. New employees should have an opportunity to read the manual before they start to work and sign a statement that they’ve read and will agree to adhere to the policies. Establishing rules and regulations in writing can go a long way to protect you in case of a lawsuit.

Protect yourself. During quarterly performance reviews, ask each employee to sign off that there has been no harassment and that there are no conflicts. This creates a pattern that may be used in your defense if some legal action is filed later.

Review insurance. In recent years, directors’ and officers’ insurance has expanded to cover employment practices liability, but the policies aren’t standard. Read yours carefully to see who is insured and if the policy covers volunteers. Remember that many committee members are volunteers and make sure your insurance policies also cover legal costs. When it comes to your employment practices liability, an ounce of prevention today can forestall a legal pounding tomorrow.


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