Employment Agreements for Nonprofits - FAQs

Employment Contract for Nonprofit Leaders

As a long-time nonprofit leader and now consultant, I am a huge fan of employment agreements, also known as employment contracts. These tools cost little to nothing for employers to implement, yet they offer huge benefits for employees, especially those in leadership positions. 

While I offer a lot of resources on employment contracts—including a downloadable executive director employment contract template—I still hear questions from nonprofit leaders about the nuts and bolts of how they work. 

So I asked Morgan Daly, a dedicated attorney and community leader who I’ve personally worked with, to help me answer some of the most frequently asked questions about employment agreements. 

Disclaimer: This blog post is for information and educational purposes only. Nothing herein should be considered legal advice. For legal advice, please contact a licensed attorney in your jurisdiction. Learn More (hyper link to https://www.morgandaly.com/disclaimer)

What is an employment agreement?

An employment agreement is a formal, legally binding document between an employer and an employee that lays out job responsibilities, compensation, benefits, terms of employment, and other important conditions. It’s a contract that provides a clear understanding of the work relationship.

Please note that employment agreements and independent contractor agreements are entirely different documents with different rules and expectations. 

Morgan’s Summary: An employment agreement is a document that says, “Here’s what you’ll do, here’s what you’ll get, and here’s how we’ll handle things if something goes sideways.”

Are employment contracts and employment agreements the same thing?

Employment contracts and employment agreements are essentially the same thing. Both terms refer to a formal arrangement specifying the obligations and rights of both the employer and the employee.

Morgan’s Take: Same concept, different name. Call it what you want—either way, it’s the paperwork that defines the job. 

Is an offer letter the same thing as an employment agreement? If not, why not?

An offer letter is not the same as an employment agreement. An offer letter is a preliminary document that outlines basic terms, like your job title, salary, and start date. It’s usually not a comprehensive, legally enforceable agreement. On the other hand, an employment agreement goes into greater detail and is often binding in court. 

Morgan’s Clarification: Think of an offer letter as a teaser trailer and an employment agreement as the full movie. Please don’t sign offer letters and believe these are legally binding employment agreements—they are not.

What terms are usually covered in an employment agreement or contract?

Employment agreements commonly include salary and benefits, job duties, work schedule, confidentiality clauses, intellectual property rights, dispute resolution methods (like mediation), and termination conditions. You can also check out this more detailed breakdown of what is included in an employment contract. 

Morgan’s Quick Breakdown: Expect all the big and important information, plus the little details. Everything from what you’re getting paid to how disputes will be handled should be covered. 

How can employment agreements benefit employees and employers?

Employment agreements protect both parties. Employees gain job security and clarity about their responsibilities and rights, while employers get a structured framework to minimize misunderstandings and disputes.

Morgan’s Insight: It’s all about mutual protection. Employees know what to expect, and employers get peace of mind. Everybody’s covered when the rules are clearly spelled out. Everyone wins when the Executive Director can focus on results and impact and isn't worried about their job. Having the ability to disagree with board members and have constructive conversations is vital to the success of a nonprofit—making an excellent employment agreement even more valuable. 

Should I ask a lawyer to review my employment agreement before signing?

Yes, always. A lawyer can help you understand the terms, point out any concerns, and even negotiate better conditions if needed. Lawyers should be state-specific (licensed in the state you are employed in), as state employment laws vary greatly. You can also use this executive director employment contract template as a starting point. 

Morgan’s Tip: Yes, 100%. A lawyer can make sure you’re not getting the short end of the stick and/or having your rights violated. Typically, employees (like Executive Directorss) will need to hire their own attorney, as the nonprofit will have their own counsel who can not represent both parties. While the cost of this may feel burdensome at first, protecting your rights as an employee during employment and after termination is much more affordable upon hire than fixing legal problems that may arise later.

What happens if an employer breaches an employment agreement?

If an employer doesn’t fulfill their obligations under the agreement, the employee may have legal recourse. This can include financial compensation or other remedies, depending on the terms of the agreement and the nature of the breach.

Morgan’s Recap: If your employer doesn’t hold up their end of the deal, you could have the right to some legal remedies. Bottom line: it’s not something they can just ignore. You want to build in strong protections for you, the worker, like a severance package if you are fired without cause. 

Are terms like arbitration and confidentiality commonly included in an employment agreement?

Arbitration clauses (for resolving disputes outside of court) and confidentiality clauses (to protect sensitive information) are frequently included in employment agreements. 

Morgan’s Takeaway: Super common. I suggest utilizing informal mediation before seeking remedies like arbitration. Arbitration can be expensive and time-consuming. Utilizing information mediation and alternative dispute resolution methods typically cuts down on the drama. 

Morgan's Takeaway #2: Confidentiality Agreements and NDAs can prevent both parties from sharing information that may harm the other during disputes, partnerships, mergers, and negotiations. You should make sure your employment agreement (at minimum) has confidentiality protections and make sure that both parties understand what information must remain confidential. Adding an additional and detailed Confidentiality Agreement to your Employment Agreement can provide greater protection for both the worker and employer.

Can an employer change the terms of an employment agreement?

Generally, an employer can’t change the terms of an employment agreement unilaterally. Any modifications usually require mutual consent and may need to be documented in writing. How changes to the agreement can or can’t be made should be outlined in the employment agreement itself. 

Morgan’s Summary: The employer can’t just change terms because they want to and neither can the worker. Your employment agreement should clearly outline how amendments (changes) can and can't be made. The key here is communication, transparency, and following the procedure outlined in your employment agreement.

Can an employer revoke a severance agreement after signing?

Once signed by both parties, a severance agreement is typically binding. Revoking it could have legal consequences, but there are exceptions. Always check the specific terms or consult an attorney.

Morgan’s Note: Signed and sealed usually means it’s a done deal. But if your employer tries to backtrack, you might want to lawyer up.

**Note from Sean - If you are an interim executive director, check out this post in regards to employment contracts.

About Morgan Daly

Morgan Daly is a dedicated attorney and community leader, driven by a vision to foster positive change and empower those around her. With a diverse portfolio of businesses and nonprofit initiatives, Morgan is committed to building a better future for all. You can learn more about Morgan by visiting www.morgandaly.com or www.dalylegalservices.com