Employment Agreements are an essential feature of the employer-employee relationship in the for-profit sector. They should be considered equally important in the not-for profit sector
A properly prepared employment agreement with senior executives will provide the basis for a positive working relationship with lay leaders. Of course, employment agreements are recommended for all staff but it is essential for effective operations of a not-for profit that the senior staff, i.e. CEbe, Executive Director have an employment agreement that is fair to both the employee and the organization.
An agreement provides certainly regarding the responsibilities and establishes the key terms of employment including salary, term, confidentiality, termination and notice, performance review, contract renewal.
In the absence of a written employment agreement, the terms of the legal relationship are determined by an oral agreement they are more difficult to prove and confirm, leading to serious legal conflict in the event that the working relationship breaks down and a change needs to be made. There is greater certainty of enforcement with a written agreement although disputes will still arise and litigation cannot always be avoided.
Senior executives generally require greater notice provisions for termination than provided for by statutory law and, in some situations, that provided for by the common law. While this is a matter of negotiation, the end result is that there is a clear understanding of what benefits will be provided to the employee in the event that termination needs to be invoked. In addition to severance or salary continuance for a period of time, other benefits can be provided such as continued health benefits (for a period of time, subject to the provider’s agreement), out placement counseling and continued use of equipment for a period of time.
Written agreements can also provide for a dispute resolution mechanism that the parties can use with the hope of resolving conflicts, avoiding costly litigation and, in some cases, rectifying the situation so that the employment relationship can continue
For the organization, it is important to have a well crafted employment agreement that will mitigate to potential costs of lengthy conflicts that can lead to litigation. Litigation, if not settled quickly, can lead to a serious drain on the organizations financial and staff resources. There is also the possibility of serious reputational risk if the public learns that the organization is engaged in a protracted dispute with an employee or former employee.
It is important to include confidentiality provisions that obligate the employee not to reveal confidential information to third parties and make use of information that is the property of the organization, i.e. donor lists and contact information, financial, intellectual property, business strategy etc. The breach of these provisions can result in serious damage to the organization that could involve consideration resources to repair.
In the current environment where competition is increasing for the public’s attention and support of a non for profit organization’s goals and charitable needs, organizations need highly skilled and experienced senior staff. Written employment agreements are one of many critical tools that will provide greater stability to the organization and, at the same time, provide security of tenure to the individual employee.