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Legal Issues for Nonprofits

Published July 2020

By Kevin Wilson, MA, SHRM-SCP, Engagement Manager, Executive Service Corps (ESC)


Imagine you are the Executive Director of a small non-profit performing a worthy mission. You receive in the mail a notice from the US Equal Opportunity Commission (EEOC) that a discrimination complaint has been filled against your organization. This begins a long and tedious period of work to resolve the issue. At some point you’ll want to know why it happened and how can you avoid these types of issues in the future. Having a basic knowledge of employment law should help you to at least know the right questions to ask and to get help when needed. 


In the course of working for many years as a Human Resource professional, here are some of the lessons I’ve learned regarding employment law. I’ve provided footnotes and links to sources where more specific information is available. This article is not intended as comprehensive list of all legal requirements, nor should it be considered as any kind of legal advice. 


Use a Third-Party Payroll Provider

If not doing so already, consider outsourcing payroll to a third-party payroll provider. They will be able to keep up with and cover all the legal requirements such as taxes, unemployment, paycheck stubs and workers compensation. 


Which Laws Apply

The laws that apply to your organization depend on the size of the organization. Also, there is no exemption for non-profits. Please see the links below for more information.    


Have an Employment Lawyer Available

Having a legal resource available to consult with is important especially if you are planning a termination. “A lawyer can help you make difficult decisions about your employees.” 

Employee Handbooks 

Create an employee handbook that has key policies listed. Employees should sign an acknowledgement that they received it. It should be updated annually with legal review. The handbook can be “… viewed as a means of protecting the employer against discrimination or unfair treatment claims.” While you want to have a handbook, you also want to provide a disclaimer which states that, “the employer has the right to change the rules without notice, that employment is at-will and that the handbook does not create a contract.”  


Employment At-Will

Employment at-will means that employees can leave whenever they want and the employer can terminate them for any or no reason without notice. This rule applies as long as the termination reason does not violate Federal, state or common laws. For example, a termination that was based on the employee’s protected status such as race is illegal. While some terminations might have a just cause such as economic factors, they could become illegal if a protected class was unfairly impacted such as only women had their jobs eliminated while men were retained. Even though employees are at-will, any termination should be planned, documented and an attorney consulted to avoid future legal complications. 


Be Aware of Minimum Wage Requirements

As of July 2020 the Federal minimum wage is currently $7.25 per hour. Illinois has a gradual increase from its current of $10 per hour as of July 1, 2020, to $15 per hour in 2025. Cook County and the City of Chicago minimum wages rates are higher. 

In addition, there are related rules regarding overtime pay, break times, record keeping, travel, call-in and child labor to be aware of regarding pay and hours. 


Avoid Sexual Harassment in the Workplace

Sexual Harassment is defined as any unwelcome sexual advances, requests for sexual favors or any conduct of a sexual nature when: 

1. Submission to such conduct is made, either explicitly or implicitly, a term or condition of an individual's employment; 

2. Submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual; or 

3. Such conduct has the purpose or effect of substantially interfering with an individual's work performance or creating an intimidating, hostile, or offensive working environment. 


You should have a clearly written policy on Sexual Harassment. See the link below for a model policy provided by the State.  In addition, Illinois requires annual training for all employees and has created a model program.  Be sure the policy is communicated to all employees in a way that they know the policy, understand the complaint process and that they know you will take action. Be sure to have multiple ways for employees to lodge a complaint and a clear practice as to your investigation process. When you become aware of a problem, act quickly to investigate, determine what facts of the case and, if warranted, take corrective action. Over the years, the courts have established that an organization is responsible for the actions of its supervisors  and the lack of an employee complaint isn’t a defense.  


In Illinois, State law says that, “Employers may develop their own sexual harassment prevention training programs provided they meet or exceed the minimum training standards outlined in Section 2-109(B) which include:

  • An explanation of sexual harassment consistent with the IHRA;

  • Examples of conduct that constitutes unlawful sexual harassment;

  • A summary of relevant federal and State statutory provisions concerning sexual harassment, including remedies available to victims of sexual harassment; 

  • A summary of responsibilities of employers in the prevention, investigation, and corrective measures of sexual harassment.” 


Work to Prevent Employment Discrimination

“Employment Discrimination laws seek to prevent discrimination based on race, sex, sexual orientation, religion, national origin, physical disability, and age by employers. Discriminatory practices include bias in hiring, promotion, job assignment, termination, compensation, retaliation, and various types of harassment.”   Also, military status should be included as well. 


If an employee files a complaint, or if an employee is involved as a witness to a complaint, they are protected against retaliation. For example, an employee, who filed a sexual harassment complaint, is subsequently demoted or fired, they could file another compliant for retaliation. There have been many cases where there was no finding of discrimination on the original compliant but the organization was found guilty of retaliation on the subsequent complaint.  


Keep Up to Date on Required Employment Posters

Follow the link below to required Federal and State employment posters.  There are many vendors who can supply the required posters. 


Make Hiring Procedures Efficient and Legally Compliant

As the need to hire people develops, it is important to be able to identify the key tasks that the position should accomplish. This should be documented in a job description which includes the essential duties and the requirements of the job. Once the essential duties are set, then you’ll need to extrapolate out from there the skills, knowledge and abilities required for the job. Usually, these can be divided into required and desired qualifications. For example, a job in distribution requires that the incumbent be able to lift 25/50/80 pounds regularly, while a desired requirement might be knowledge of warehouse operations. 


Research has shown that structured interviews tend to be more valid than unstructured ones. Structured interviews have a fixed set of questions, related the job requirements, that you ask all candidates and then compare their answers. You can build in some flexibility to ask follow-up questions on a given topic.  Build your questions based on the job description. 


“Behavioral interviewing focuses on a candidate’s past experiences by asking candidates to provide specific examples of how they have demonstrated certain behaviors, knowledge, skills and abilities.”  Research has also shown that questions that explore related past experience where the interviewee gives examples of things they have done, are more valid that more generic questions. For example, one questions might be, “Give me an example of a time when you were able to secure a major contract.” During the interview, you should then ask them how did the opportunity presented itself, what did they actually do, and what was the result? The goal is to gather information related to the job requirements. 


Avoid Potentially Illegal Questions

The purpose of any question asked in an interview is to gather data directly related to the requirements of the job. Any question that might illicit information concerning a person’s protected status such as race, sex, sexual orientation, religion, national origin, physical disability, military status and age may be illegal. If the job requires overtime or travel, it is ok to state the job requirement and ask the person if they can meet it. However, it could be potentially illegal if you ask about child care or related marital status. See the link below to some do’s and don’ts.   


Many states and localities have prohibited asking a person about their salary history. It is okay to ask about their salary expectations. While a candidate might volunteer information on their compensation, it is suggested that you don’t write their answer down but use it to confirm they are in your salary range. 


Keeping Personnel Files

You do have to keep personnel files by law and employees have the right to view them upon request. Under Illinois law (820 ILCS 40/2), only employers with five or more employees are covered by the law governing personnel files.  Generally, the personnel file should contain records that are necessary to support the actions of the employer with respect to compensation, discipline, promotion, transfer or discharge. Be sure to keep any medically related documents separately for confidentially, as required by law.


There have been numerous changes to laws and regulations regarding the pandemic. As these seem to be issued and changed frequently, I recommend you consult your attorney on specific actions needed. SmithAmundsen, an employment law practice, has some great articles regarding this issue. 


Other Federal Laws

Listed here are some of the other major employment Federal employment laws not covered in this article. 

  • Family Medical Leave Act (FMLA)

  • American With Disabilities Act (ADA)

  • Pregnancy Act 1991

  • Employee Retirement Income Security Act (ERISA 1974)

  • Consolidated Omnibus Budget Reconciliation Act of 1985 COBRA 

  • Occupational Safety and Health Act (OSHA 1970)

  • Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA)

  • Immigration Reform and Control Act (IRCA)

  • Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (ACA)

Thank you and Good Luck

Good luck as you navigate your organization through the legal landscape of today workplace. 

This article contains general legal information and does not contain legal advice. The law is complex and changes often. For legal advice, please ask a lawyer.

Resources and References

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