Employment policies are vital to the well-being of your favorite nonprofit. Such policies set workplace expectations, define work guidelines, reduce and eliminate confusion and misunderstanding, and provide steps necessary for any disciplinary action. Formalizing workplace rules makes certain that everyone—from independent contractors to management to staff to board members—are informed and on the same page.
COVID-19 has been particularly tough on the nonprofit sector and organizations providing essential social services. Employment policies in this environment are important, but I understand they could easily fall to the budgetary backburner. That’s why I want to make it clear, upfront, that I will work with each individual Iowa nonprofit organization to come to an agreement for a fee that fair, but also accessible and not a strain on the nonprofit. So, in short, the cost of drafting essential employment policies or other employment documents, like an employee handbook, is entirely flexible to fit each situation.
An official set of well-developed employment policies provides many benefits for your nonprofit. For nonprofit employers, policies capture the values you wish to instill in your workforce, outline the standards of behavior you expect, and provide a clear guide for rights and responsibilities. Instituting strong, fair, and unambiguous policies not only contributes to a happier workforce, but it can also improve employee retention. Further, employment law is vast, complicated, and can be tricky to navigate. Well-drafted employment policies, as described below, can also help you avoid legal issues and costly mistakes.
Employee handbooks are not required by law, but having one is in the best interest of your nonprofit and those who work for you— even if you have just one employee. A good employee handbook effectively communicates your nonprofit’s policies and procedures to employees and makes clear the rights and responsibilities of employees in your organization. Many disputes can be avoided by a clear, easy-to-read, and straightforward employee handbook.
An employment agreement sets the conditions, terms, and obligations between you as the employer and an employee. It’s considered a binding contract that should be administered in writing and signed by both the employee and an acting officer.
Employment agreements need to be individualized to suit each employment relationship. But important elements of employment agreements may include salary; benefits; work schedule; paid-time off (PTO) allotment; restriction on confidential information; non-compete and non-solicitation provisions; mandatory mediation and arbitration for all disputes; and making certain the employee is considered to be only “at-will,” that is, the employee can be fired at any time for any reason.
Formal Performance Review
Formal performance reviews are an assessment of an employee by a supervisor and employee (it’s a two-way, not a one-way discussion) that are based on jointly determined job goals and performance objectives. While often overlooked—and sometimes dreaded—performance reviews are of great value to nonprofit employers and their employees.
You should have in place a standardized form and consistent processes for conducting individual performance reviews of all employees. Evaluating the quality of an individual’s work, ability to meet goals, communication skills, adherence to your nonprofit’s mission, attendance, and dependability, among other criteria, is key to effective workforce management and to building trust with employees.
Employee Personal File
A personnel file is a hard copy folder or digital file that contains information related to every new employee, existing employees — full and part-time — and former employees. Knowing what needs to be stored in a secure personnel file — and what NOT to keep in it — will help your nonprofit in promotion and termination decisions; provide a means of tracking vacations, training, and achievements; and are necessary to comply with local, state, and federal regulations.
A personnel file should only contain items related to his or her job or employment status. These include (but are not limited to):
Application and resume
Signed acknowledgment page from employee handbook
Pay information including timesheets, W-4s, and withholding forms
Just as important as having the right information in a personnel file, is to avoid placing the wrong documents in a personnel file. Some items that should NOT be in an employee’s personnel file include:
Medical information and accommodation requests
Whistleblower complaints
Court orders, such as garnishment or restraining orders
Self-employed, freelancer, consultant. No matter what they call themselves, people who provide goods or services to your nonprofit, but are not your employees, are considered independent contractors. Independent contractors differ from employees in that IC’ers control their financial and work-related relationships and pay their own self-employment, Social Security, and Medicare taxes.
When you hire an independent contractor, you should have a written and signed contract that clearly outlines the scope of work, price, and payment, severability, deliverables, and clearly identifies the person as an independent contractor. Also, you can minimize and avoid legal liability by placing the right provisions in an independent contractor agreement.
If you already have some (or even all) of the above-listed employment policies in place, when were they last updated? Think about the many ways your organization has changed and grown since they were written, including new employees you hired and existing employees whose roles evolved. Changes to state and federal laws may have rendered some elements of your employment policies incomplete or out of compliance. It may be time to renew your commitment to a productive and happy workplace by revising employment policies.
What Other Policies Do You Need
Be aware this blog discusses only employment policies. To work toward optimal IRS compliance, you should adopt the nine major policies and procedures which appear on IRS Form 990. Also, you should have documents in place covering ethics; grantors and grantees; endowment management; and legal training for your board of directors.
To discuss further, please don’t hesitate to contact me via email (gordon@gordonfischerlawfirm.com) or on my cell phone (515-371-6077). I’d be happy to discuss employment law with you any time. I offer a one-hour free consultation, without any obligation whatsoever. Also, as I mentioned, I allow my nonprofit clients to essentially choose their own rate during this trying time of COVID-19, when more than ever before, our communities need the essential services that Iowa nonprofits provide.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2019/07/Screen-Shot-2019-07-28-at-1.04.19-AM.png6891043Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2021-06-23 09:00:002021-06-20 14:24:03What Written Employment Policies Does Your Nonprofit Need
When forming a new nonprofit there are really two must-have documents you need to get the dream off the ground. Those two documents are articles of incorporation and bylaws. Of course, there are other important documents you will need, but it’s good to tackle first things first!
Recently on the blog we explored the state and federal requirements and best practices for articles of incorporation. Now, let’s learn about bylaws!
What Exactly Are Bylaws?
Undoubtedly you’ve at least heard of or read through a set bylaws. But, what does this document do? Effective bylaws should do the following:
serve as the internal operating rules of a nonprofit.
specify processes like the election process of directors and operation of meetings.
resolve any uncertainty between board members on issues of correct process.
Do Bylaws Need to be Filed or Adopted?
Unlike articles of incorporation, bylaws are not filed with any government entity like the Iowa Secretary of State. However, Iowa law does require that the initial bylaws of a nonprofit be adopted by its board of directors.
A nonprofit’s bylaws should address the high level governing decisions that founding board members deem non-negotiable for the organization’s success. Here are a few provisions that great bylaws often include:
Purpose for organization
Board structure
Official meeting requirements
Terms of board service for officers
Officer position descriptions
Procedure for officer/board member succession and removal
Provisions for membership (if any)
Voting rights
Another essential element that can be mistakenly forgotten is a paragraph for amending the bylaws in the future. Times change and the circumstances of how your organization can do the most good can shift. In such a case your board will want to rely on the procedure for amendments outlined in the bylaws to reflect the transition.
Again, an organization’s bylaws are like an internal roadmap if there’s any question of structure or procedure. As fiduciaries of the organization, board members should re-read the bylaws at least annually for sustainable good governance. Of course, brand new board members should be provided with a copy as a part of their board orientation.
What About All the Other Documents I Need?
At this point you may be skeptical that you just need two documents–articles of incorporation and bylaws. What about all the other documents you’re certain you need to have? It’s a valid question and to obtain and maintain qualified tax-exempt status there’s certainly more “paperwork” to be done:
For IRS charitable exemption status you’ll need to file Form 1023.
There is much more to be said on bylaws as they can and should be tailored to your individual organization. It’s a wise investment to enlist a professional (like an attorney well-versed in nonprofit law!) to draft quality, comprehensive bylaws personalized for your nonprofit’s needs, mission, and goals.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2018/11/rawpixel-675358-unsplash.jpg26664000Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2021-06-22 09:00:402021-06-20 14:24:10Nonprofit Must-Have: Bring on the Bylaws
To get the ball rolling in forming a tax-exempt charitable organization there are just two main documents to put in place. Seriously, just two–articles of incorporation and bylaws. Let’s start with exploring the components of what should be in your nonprofit’s articles of incorporation. (We’ll dig into bylaws in another post!)
Articles of Incorporation
Think of articles of incorporation as the constitution of your nonprofit. While articles of incorporation can be fairly short, there are some necessary elements required under both Iowa and federal law to gain and retain that golden tax-exempt status.
Legal Requirements in Iowa for a Nonprofit’s Articles of Incorporation
Under Iowa law, articles of incorporation for a nonprofit must contain the following:
A corporate name which satisfies two requirements.
First, the corporate name must be distinguishable from any other nonprofit or business authorized to do business in Iowa. In other words, the name must be different and unique from all other names – even if it’s different by just a single letter. For example, no one could incorporate using the name, “Gordon Fischer Law Firm.” But if there were another lawyer with my name, he could legally incorporate simply by naming his business, “Gordon R. Fischer Law Firm,” or “The Gordon Fischer Law Firm.”
The second requirement is that the name does not contain language stating or implying that the corporation is organized for an unlawful purpose. To take an extreme example, “The Nonprofit Association of Heroin Dealers” would not be a proper name (in addition to many other legal issues!).
The address of the corporation’s initial registered office and the name of its initial registered agent at that office.
The “registered agent” is a legal name for “contact person”–the person who will be mailed if there’s any sort of problem or issue with the corporation. The “initial registered office” is simply that person’s (the registered agent’s) physical address, like a home address. It cannot be a PO Box; it must be a street address.
Be certain that the registered agent is responsible and involved. There can be obvious, profoundly negative consequences if the Iowa Secretary of State, or a taxing and/or regulatory agency (like the IRS) were to mail to the registered agent, and the registered agent doesn’t see the mail, and/or doesn’t provide the mail to the organization.
The name and address of each incorporator.
The “incorporator” is a legal term meaning the founder(s); the person(s) responsible for starting the nonprofit.
Whether or not the nonprofit will have members.
Unlike a regular corporation, a nonprofit does not have stockholders. (Of course, this is because nonprofits do not issue stock.) Instead, nonprofit can choose to have “members.” A formal “membership” structure often grants members certain basic rights, such as the power to vote for directors and approve a sale or merger. Most nonprofits (especially smaller ones) do not have members, due to the additional paperwork and required formalities. Instead, most nonprofits instead rely on their board of directors. In any case, a nonprofit must formally declare in their articles whether or not it will have members.
Provisions not inconsistent with law regarding the distribution of assets on dissolution.
When a nonprofit dissolves (i.e., terminates), any remaining assets must be distributed to another nonprofit (or government entity for a public purpose). No individual or group can be unduly enriched when a nonprofit ends. And, if you think about it, that makes a lot of sense. Folks contribute to a nonprofit to support its tax-exempt purposes, they wouldn’t want their funds to end up supporting non-charitable purposes.
An incorporator must sign and file the articles of incorporation.
The articles of incorporation must be filed with the Iowa Secretary of State’s office (and the ISOS will check that all the requirements above are met before filing is allowed). Currently, the filing fee is $20.00.
Federal Legal Requirements for a Nonprofit’s Articles of Incorporation
Of course, like all organizations, a nonprofit is governed by both state and federal law. Simplifying a bit, the IRS has two major requirements for a nonprofit’s initial governing documents.
The articles of incorporation must limit the nonprofit’s purposes to exempt purposes set forth in Internal Revenue Code Section 501(c)(3). The exempt purposes set forth in section 501(c)(3) are “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.” An explicit reference or citation to 501(c)(3) and one or more exempt purposes is sufficient to meet this requirement.
In addition, an organization’s assets must be permanently dedicated to an exempt purpose. This means that if an organization dissolves, its assets must be distributed for an exempt purpose pursuant to 501(c)(3), or to the federal or state government or a local government entity, for a public purpose.
Amended and Restated Articles of Incorporation
No doubt some of you are thinking, hey, we already have articles of incorporation! Sure, we may need better articles, or improved articles, but we do have them.
In such cases, when a nonprofit wants to update or revise current articles, the organization files with the Iowa Secretary of State what is known as “amended and restated articles of incorporation.” These amended and restated articles completely supplant the earlier articles.
If filing amended and restated articles, Iowa law requires a statement in the document to the affect that all the amendments, changes, revisions, etc. are reflected in this new, single document. To meet this requirement, I use this statement:
“I [the incorporator] hereby certify that these Amended and Restated Articles of Incorporation consolidate all amendments into this single document.”
So, How Do I Go About Getting Articles of Incorporation
Each organization is unique and it’s smart to enlist someone (like an attorney well-versed in nonprofit law!) to draft a quality, comprehensive set of articles personalized for your nonprofit’s needs, mission, and goals.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2018/11/Screen-Shot-2018-11-14-at-10.18.07-PM.png6881045Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2021-06-21 09:00:182021-06-20 14:24:22Articles of Incorporation: Like a Nonprofit's "Constitution"
What Written Employment Policies Does Your Nonprofit Need
NonprofitsEmployment policies are vital to the well-being of your favorite nonprofit. Such policies set workplace expectations, define work guidelines, reduce and eliminate confusion and misunderstanding, and provide steps necessary for any disciplinary action. Formalizing workplace rules makes certain that everyone—from independent contractors to management to staff to board members—are informed and on the same page.
COVID-19 has been particularly tough on the nonprofit sector and organizations providing essential social services. Employment policies in this environment are important, but I understand they could easily fall to the budgetary backburner. That’s why I want to make it clear, upfront, that I will work with each individual Iowa nonprofit organization to come to an agreement for a fee that fair, but also accessible and not a strain on the nonprofit. So, in short, the cost of drafting essential employment policies or other employment documents, like an employee handbook, is entirely flexible to fit each situation.
Benefits of Employment Policies
An official set of well-developed employment policies provides many benefits for your nonprofit. For nonprofit employers, policies capture the values you wish to instill in your workforce, outline the standards of behavior you expect, and provide a clear guide for rights and responsibilities. Instituting strong, fair, and unambiguous policies not only contributes to a happier workforce, but it can also improve employee retention. Further, employment law is vast, complicated, and can be tricky to navigate. Well-drafted employment policies, as described below, can also help you avoid legal issues and costly mistakes.
Employee Handbook
Employee handbooks are not required by law, but having one is in the best interest of your nonprofit and those who work for you— even if you have just one employee. A good employee handbook effectively communicates your nonprofit’s policies and procedures to employees and makes clear the rights and responsibilities of employees in your organization. Many disputes can be avoided by a clear, easy-to-read, and straightforward employee handbook.
Employment Agreement
An employment agreement sets the conditions, terms, and obligations between you as the employer and an employee. It’s considered a binding contract that should be administered in writing and signed by both the employee and an acting officer.
Employment agreements need to be individualized to suit each employment relationship. But important elements of employment agreements may include salary; benefits; work schedule; paid-time off (PTO) allotment; restriction on confidential information; non-compete and non-solicitation provisions; mandatory mediation and arbitration for all disputes; and making certain the employee is considered to be only “at-will,” that is, the employee can be fired at any time for any reason.
Formal Performance Review
Formal performance reviews are an assessment of an employee by a supervisor and employee (it’s a two-way, not a one-way discussion) that are based on jointly determined job goals and performance objectives. While often overlooked—and sometimes dreaded—performance reviews are of great value to nonprofit employers and their employees.
You should have in place a standardized form and consistent processes for conducting individual performance reviews of all employees. Evaluating the quality of an individual’s work, ability to meet goals, communication skills, adherence to your nonprofit’s mission, attendance, and dependability, among other criteria, is key to effective workforce management and to building trust with employees.
Employee Personal File
A personnel file is a hard copy folder or digital file that contains information related to every new employee, existing employees — full and part-time — and former employees. Knowing what needs to be stored in a secure personnel file — and what NOT to keep in it — will help your nonprofit in promotion and termination decisions; provide a means of tracking vacations, training, and achievements; and are necessary to comply with local, state, and federal regulations.
A personnel file should only contain items related to his or her job or employment status. These include (but are not limited to):
Just as important as having the right information in a personnel file, is to avoid placing the wrong documents in a personnel file. Some items that should NOT be in an employee’s personnel file include:
Independent Contractor Agreement
Self-employed, freelancer, consultant. No matter what they call themselves, people who provide goods or services to your nonprofit, but are not your employees, are considered independent contractors. Independent contractors differ from employees in that IC’ers control their financial and work-related relationships and pay their own self-employment, Social Security, and Medicare taxes.
When you hire an independent contractor, you should have a written and signed contract that clearly outlines the scope of work, price, and payment, severability, deliverables, and clearly identifies the person as an independent contractor. Also, you can minimize and avoid legal liability by placing the right provisions in an independent contractor agreement.
Updating Employment Policies & Additional Policies Needed
If you already have some (or even all) of the above-listed employment policies in place, when were they last updated? Think about the many ways your organization has changed and grown since they were written, including new employees you hired and existing employees whose roles evolved. Changes to state and federal laws may have rendered some elements of your employment policies incomplete or out of compliance. It may be time to renew your commitment to a productive and happy workplace by revising employment policies.
What Other Policies Do You Need
Be aware this blog discusses only employment policies. To work toward optimal IRS compliance, you should adopt the nine major policies and procedures which appear on IRS Form 990. Also, you should have documents in place covering ethics; grantors and grantees; endowment management; and legal training for your board of directors.
Let’s Talk!
To discuss further, please don’t hesitate to contact me via email (gordon@gordonfischerlawfirm.com) or on my cell phone (515-371-6077). I’d be happy to discuss employment law with you any time. I offer a one-hour free consultation, without any obligation whatsoever. Also, as I mentioned, I allow my nonprofit clients to essentially choose their own rate during this trying time of COVID-19, when more than ever before, our communities need the essential services that Iowa nonprofits provide.
Nonprofit Must-Have: Bring on the Bylaws
NonprofitsWhen forming a new nonprofit there are really two must-have documents you need to get the dream off the ground. Those two documents are articles of incorporation and bylaws. Of course, there are other important documents you will need, but it’s good to tackle first things first!
Recently on the blog we explored the state and federal requirements and best practices for articles of incorporation. Now, let’s learn about bylaws!
What Exactly Are Bylaws?
Undoubtedly you’ve at least heard of or read through a set bylaws. But, what does this document do? Effective bylaws should do the following:
Do Bylaws Need to be Filed or Adopted?
Unlike articles of incorporation, bylaws are not filed with any government entity like the Iowa Secretary of State. However, Iowa law does require that the initial bylaws of a nonprofit be adopted by its board of directors.
A nonprofit’s bylaws should address the high level governing decisions that founding board members deem non-negotiable for the organization’s success. Here are a few provisions that great bylaws often include:
Another essential element that can be mistakenly forgotten is a paragraph for amending the bylaws in the future. Times change and the circumstances of how your organization can do the most good can shift. In such a case your board will want to rely on the procedure for amendments outlined in the bylaws to reflect the transition.
Regularly Review and Reference
Again, an organization’s bylaws are like an internal roadmap if there’s any question of structure or procedure. As fiduciaries of the organization, board members should re-read the bylaws at least annually for sustainable good governance. Of course, brand new board members should be provided with a copy as a part of their board orientation.
What About All the Other Documents I Need?
At this point you may be skeptical that you just need two documents–articles of incorporation and bylaws. What about all the other documents you’re certain you need to have? It’s a valid question and to obtain and maintain qualified tax-exempt status there’s certainly more “paperwork” to be done:
So, How Do I Go About Drafting Bylaws
There is much more to be said on bylaws as they can and should be tailored to your individual organization. It’s a wise investment to enlist a professional (like an attorney well-versed in nonprofit law!) to draft quality, comprehensive bylaws personalized for your nonprofit’s needs, mission, and goals.
Questions? Want to learn more about turning your dream of an organization that makes a significant impact or positive change? Grab my complimentary Nonprofit Formation Guide and then contact GFLF for a free consult!
Articles of Incorporation: Like a Nonprofit’s “Constitution”
NonprofitsTo get the ball rolling in forming a tax-exempt charitable organization there are just two main documents to put in place. Seriously, just two–articles of incorporation and bylaws. Let’s start with exploring the components of what should be in your nonprofit’s articles of incorporation. (We’ll dig into bylaws in another post!)
Articles of Incorporation
Think of articles of incorporation as the constitution of your nonprofit. While articles of incorporation can be fairly short, there are some necessary elements required under both Iowa and federal law to gain and retain that golden tax-exempt status.
Legal Requirements in Iowa for a Nonprofit’s Articles of Incorporation
Under Iowa law, articles of incorporation for a nonprofit must contain the following:
A corporate name which satisfies two requirements.
First, the corporate name must be distinguishable from any other nonprofit or business authorized to do business in Iowa. In other words, the name must be different and unique from all other names – even if it’s different by just a single letter. For example, no one could incorporate using the name, “Gordon Fischer Law Firm.” But if there were another lawyer with my name, he could legally incorporate simply by naming his business, “Gordon R. Fischer Law Firm,” or “The Gordon Fischer Law Firm.”
The second requirement is that the name does not contain language stating or implying that the corporation is organized for an unlawful purpose. To take an extreme example, “The Nonprofit Association of Heroin Dealers” would not be a proper name (in addition to many other legal issues!).
The address of the corporation’s initial registered office and the name of its initial registered agent at that office.
The “registered agent” is a legal name for “contact person”–the person who will be mailed if there’s any sort of problem or issue with the corporation. The “initial registered office” is simply that person’s (the registered agent’s) physical address, like a home address. It cannot be a PO Box; it must be a street address.
Be certain that the registered agent is responsible and involved. There can be obvious, profoundly negative consequences if the Iowa Secretary of State, or a taxing and/or regulatory agency (like the IRS) were to mail to the registered agent, and the registered agent doesn’t see the mail, and/or doesn’t provide the mail to the organization.
The name and address of each incorporator.
The “incorporator” is a legal term meaning the founder(s); the person(s) responsible for starting the nonprofit.
Whether or not the nonprofit will have members.
Unlike a regular corporation, a nonprofit does not have stockholders. (Of course, this is because nonprofits do not issue stock.) Instead, nonprofit can choose to have “members.” A formal “membership” structure often grants members certain basic rights, such as the power to vote for directors and approve a sale or merger. Most nonprofits (especially smaller ones) do not have members, due to the additional paperwork and required formalities. Instead, most nonprofits instead rely on their board of directors. In any case, a nonprofit must formally declare in their articles whether or not it will have members.
Provisions not inconsistent with law regarding the distribution of assets on dissolution.
When a nonprofit dissolves (i.e., terminates), any remaining assets must be distributed to another nonprofit (or government entity for a public purpose). No individual or group can be unduly enriched when a nonprofit ends. And, if you think about it, that makes a lot of sense. Folks contribute to a nonprofit to support its tax-exempt purposes, they wouldn’t want their funds to end up supporting non-charitable purposes.
An incorporator must sign and file the articles of incorporation.
The articles of incorporation must be filed with the Iowa Secretary of State’s office (and the ISOS will check that all the requirements above are met before filing is allowed). Currently, the filing fee is $20.00.
Federal Legal Requirements for a Nonprofit’s Articles of Incorporation
Of course, like all organizations, a nonprofit is governed by both state and federal law. Simplifying a bit, the IRS has two major requirements for a nonprofit’s initial governing documents.
Amended and Restated Articles of Incorporation
No doubt some of you are thinking, hey, we already have articles of incorporation! Sure, we may need better articles, or improved articles, but we do have them.
In such cases, when a nonprofit wants to update or revise current articles, the organization files with the Iowa Secretary of State what is known as “amended and restated articles of incorporation.” These amended and restated articles completely supplant the earlier articles.
If filing amended and restated articles, Iowa law requires a statement in the document to the affect that all the amendments, changes, revisions, etc. are reflected in this new, single document. To meet this requirement, I use this statement:
“I [the incorporator] hereby certify that these Amended and Restated Articles of Incorporation consolidate all amendments into this single document.”
So, How Do I Go About Getting Articles of Incorporation
Each organization is unique and it’s smart to enlist someone (like an attorney well-versed in nonprofit law!) to draft a quality, comprehensive set of articles personalized for your nonprofit’s needs, mission, and goals.
Questions? Want to learn more about turning your dream of an organization that makes a significant impact or positive change? Grab my complimentary Nonprofit Formation Guide and then contact GFLF for a free consult!