Tuesday, June 30, 2015

Religious Liberty After Obergefell v. Hodges

Now that that Supreme Court has determined that “[t]he Fourteenth Amendment requires a State to license a marriage between two people of the same sex,”[1] how will the Court’s decision impact religious organizations and individuals?  According to the four dissenting justices, the ruling means trouble ahead for religious organizations and individuals with conflicting religious beliefs.  In particular, the ruling portends new court battles between their constitutional religious liberty interests and developing laws that provide increasing sexual orientation and gender identity (“SOGI”) protection in areas such as employment, education, facility usage, and housing.

In Obergefell, a majority of five Justices determined that same-sex couples have a “fundamental right to marry,” arising out of liberty protections under the Due Process and Equal Protection clauses of the Fourteenth Amendment.  In so ruling, the Court reversed the Sixth Circuit Court of Appeal’s ruling[2] that states may define “marriage” as they wish.  Instead the Court sided with other federal courts that ruled unconstitutional state laws that limited marriage to unions between one man and one woman.    

Speaking for the majority, Justice Kennedy only briefly touched on religious liberty considerations, saying, “The First Amendment ensures that religious organizations and persons are given proper protection as they seek to teach the principles that are so fulfilling and so central to their lives and faiths.”  Notably, there was mention of neither religious exercise, as guaranteed under the First Amendment’s free exercise clause, nor broader protections to be recognized for faith-based organizations beyond churches. 

In conjunction with their scathing critiques of the majority’s decision, three of the four dissenting Justices addressed religious liberty and right-of-conscience considerations in varying degrees of alarm and foreboding.  Justice Roberts noted the majority’s omission of any reference to religious exercise.  He further warned, “Unfortunately, people of faith can take no comfort in the treatment they receive from the majority today.”  Justice Alito cautioned that the majority’s decision “will be used to vilify Americans who are unwilling to assent to the new orthodoxy.”  Justice Thomas flatly stated, “[T]he majority’s decision threatens the religious liberty our Nation has long sought to protect.”  He continued, “It appears all but inevitable that the two [(same-sex marriage and religious institutions)] will come into conflict, particularly as individuals and churches are confronted with demands to participate in and endorse civil marriages between same-sex couples.”  While the fourth dissenter, Justice Scalia, did not address religious liberty concerns in his own written dissent, he joined each of the three other dissenters, expressing his agreement with their statements.
The justices’ concerns have been echoed quickly.  As noted by the Chicago Tribune’s June 28, 2015, editorial board:

We find it worrisome that the majority opinion barely flicks at the conflicts between the newly affirmed constitutional right to same-sex marriage and the religious freedoms that have been enshrined in the charter for centuries . . . What’s sure to follow [] are years are years of uncertainty and strife as those conflicts are sorted out.

In the wake of the decision, the stage seems to be set for more rounds of religious liberty versus SOGI-related civil rights conflicts.  These battles will be fought on the fronts of still-emerging SOGI anti-discrimination laws regarding employment, public accommodations, and other areas.  They will likely impact many houses of worship and other faith-based organizations. 

So far, key measures for protecting religious exemptions have focused on religious organizations’ sincerely held religious beliefs and how such beliefs are central to their activities.  Such efforts are accomplished primarily through the following:  (a) corporate documentation; (b) internal policies and practices within ministry organizations; and (c) publicly available representations.   

Practically, this means the religious organization should express clear doctrinal stances on sexuality in the organization’s articles of incorporation, bylaws, statement of faith, and policies.  Leaders should check facility usage policies and agreements to ensure other organizations’ use of the religious organization’s facility is consistent with such religious beliefs.  Religious employers should evaluate and possibly upgrade employment-related documentation and practices in relation to expected compliance with religious beliefs and standards. 

The Christian Legal Society will be offering a series of webinars on how same-sex legal issues affect religious houses of worship and other faith-based organizations. The first webinar will be on July 8, 2015 at 2:00 pm EST, featuring attorney Sally Wagenmaker as one of the presenters.  For more information, see www.religouslibertyguidance.org. 

In addition, due to the legal complexity of these issues and the rapidly evolving legal landscape in specific jurisdictions, religious houses of worship and other faith-based organizations should seriously consider seeking skilled and experienced legal counsel to address their specific circumstances and goals.  Our attorneys at Wagenmaker & Oberly are available to further assist as needed with client-focused legal services in these areas.  We may be reached at info@wagenmakerlaw.com , or 312.626.1600.

[1] Obergefell v. Hodges, No. 14-556, 2015 WL 2473451 (U.S. June 26, 2015).
[2] DeBoer v. Snyder, 772 F.3d 388 (6th Cir. 2014).

Monday, June 29, 2015

Replacing a Nonprofit CEO: Boards and Succession Planning

By Guest Blogger Tom Okarma[1]

Replacing a CEO ranks among a nonprofit board’s highest and sometimes most leadership-intensive responsibilities. While such transition presents huge opportunities, it can also be disruptive and filled with emotion, politicking, and hurt feelings.   Sooner or later every nonprofit will likely faces this challenge.  How it is managed will have repercussions for years to come.  Several important overarching considerations are well worth proactive attention and evaluation, as follows.

·      The board alone owns this duty and must take charge of it.

o   Once the board learns the CEO plans to leave, the leadership should work to establish a mutually acceptable separation date. Once set, that date should be considered firm and the board should stick with it.  The timetable for everything that must be done to replace the CEO should be established from that date backwards.

o   It is best to start the process of replacing a CEO early, in fact, as soon as possible. It may take many months to identify and hire a suitable replacement and there are many steps and unknowns along the way. To avoid rushing into a poor decision, it is best to build ample time into the schedule.

    • The entire board should be involved in this important task, with a search committee leading the effort and being responsible to the board for carrying out the day-to-day steps of the process. The search committee should report its progress frequently to the board, usually during executive session.

    • Confidentiality should be maintained throughout the process.  People’s reputations and careers are involved, not to mention the nonprofit’s own reputation in the community.  One person might serve as the spokesman for the board’s efforts whenever people invariably ask how the search is going.

    • Whenever possible, it is usually best to hire from within, so the board should review its internal leadership pipeline for viable candidates first.  If none exist, then building internal leadership bench strength is something that should be addressed in the near future.

    • Ideally, the nonprofit already has one succession plan in place—the emergency succession plan—to be used in the event of a tragic event occurring. That plan may offer solid ideas on the replacement process as well.

  • Understand and recruit towards the nonprofit’s future direction.

    • A board should look forward and not backward when hiring a new leader.  It should first review (or update) its strategic plan and then build a leadership profile listing a combination of the most desirable skill sets, experiences, relationships, that complement the nonprofit’s strategic plan and future direction.

    • The board should seek appropriate wisdom regarding  the proposed new leader’s profile.  It is human nature to try and replace the exiting leader with someone comfortable, or similar in style and skills, or with the next internal person in line. While they may appear to be ideal candidates, it is also possible they are not a good fit for the kind of leadership the nonprofit needs going forward.  Thoughtful consideration may well lead to some fine-tuning.

  • Support and engage the outgoing leader.

    • The outgoing leader hopefully has led well; it is now time for he or she to leave well.  Having this discussion early on can help things go smoothly later. 
    • The board may want to debrief the outgoing leader, not unlike an exit interview to obtain a ground level and frank assessment of the nonprofit that the board can use when crafting the new leader’s profile.
    • It is usually best to keep the outgoing leader entirely out of the replacement process. This may be met with some resistance but is actually a huge gift. The leader may well be swamped with requests from friends and nonprofit colleagues either to put in a good word to the search committee for them, or in seeking inside information on the interview process, etc.  Keeping him or her out of the process gets the leader “off the hook” and keeps them from being put in the middle of the search effort.  It also allows him or her to focus on duties surrounding their “leaving well”.
    • It is a good idea to periodically check-in with the leader to see how he or she is doing during this period, which may be a very personal and emotional time. The leader is still the face of the organization and needs to stay focused.
    • The board should plan an appropriate celebration to recognize the leader and all the nonprofit’s accomplishments.
    • The board and the new leader should ask the outgoing leader to clean up or update any confusing procedures or complicated manuals before leaving. This gives the next leader time to step in and learn the ropes. The same goes with any long-standing projects. Can they be wrapped up before he or she leaves?

  • Prepare the nonprofit for its next chapter.

    • Change is coming, and not everyone may be ready for it.  The nonprofit culture must be protected and key staff, leaders, and volunteers may need some special handling.  It is important to identify what, and whom, must be protected and, in the case of key individuals, “re-recruited” so they stay onboard.  Periodically walking around the offices may reveal how well this is going.
    • Feedback is always important but especially during transition. Insure services are still satisfactorily being delivered and that the nonprofit continues to operate as normal as possible.

  • Develop a plan to help transition in the new leader.

    • Since the new leader will face many new challenges and probably have a lot of questions the board chair should offer to be available to the new leader, as needed, to help navigate those first few months. Giving the new leader a safe place to ask questions and receive feedback will help speed up the orientation process.
    • The nonprofit’s key staff should understand they are expected to play an important role in helping make this leadership transition successful. This should be made clear early on, even before the new leader is hired.
    • It might even be a good idea to include some key staff in the candidate interview process. It should be made clear, however, that they would not have ultimate veto or hiring power, but that their feedback would factor into the decision.   
    • To help the new leader start off on the right foot, a board should provide a “deep dive” session or two to immerse the new leader in the details of the nonprofit’s Mission, Vision, Values, ongoing internal and eternal issues, informal protocols, key upcoming events, etc.
    • Someone should be responsible to introduce the new leader to all external key stakeholders of the nonprofit. Many important relationships need to be cultivated and transitioned so the sooner, the better.
    • It is reasonable for a board to set certain expectations for the new leader and ask for periodic updates over the upcoming 30, 60, 90 days.
    • Consider asking the new leader to assess the nonprofit and its people, and to make any observations and recommendations within the first 45 to 60 days.

Some forethought and commonsense will make this important transition a success, but it will take time. The payoff is a nonprofit that continues to serve its clients without missing a step.

[1]           This article has been adapted from an article originally published in the Christian Leadership Alliance’s Outcomes magazine (2015) and is published here with appropriate permission. Tom Okarma helps nonprofits with effectiveness in execution, organizational excellence, board development, strategic planning, change management, client intimacy, and talent management. Tom is the author of Break Through the Ick Factor, a book on helping nonprofit leaders realize their organizations’ full potential.  Learn more about Tom at www.tomokarma.com..

Tuesday, June 23, 2015

Sharing With Others: Benefits of Written Facility Usage Agreements

How can nonprofit organizations best share their facilities with others on a long-term basis?  Many nonprofits allow other organizations to use their space in order to promote like-minded organizations, to help cover the financial expenses associated with building upkeep, and to achieve community outreach goals.  Such arrangements, however, can lead to conflict and expense without the proper foundation of a written facility-use agreement.  Consider the following scenario.

A church has grown sufficiently to purchase its own worship facility.  Just as others have been generous to the church, its leaders now seek to exercise generosity, as well as wise stewardship of the new facility.  One Sunday morning after a church service, amidst all the fellowship, mingling, and kids running around, a couple of visitors ask the pastor about using the sanctuary for their new church plant’s Sunday afternoon services, along with occasional use of the kitchen and fellowship hall.  Knowing that church leaders would likely support such opportunity, the good-hearted pastor makes a verbal agreement with the visitors for a schedule, shakes their hands, and gives them keys to the building.  Isn’t that beautiful?  Who needs red tape or administrative hoops to jump through?

Hold on!  Although it might be possible for the shared space situation to work temporarily, the foundation to this working relationship was laid poorly.  Eventually, when common problems and misunderstandings arise, they will likely stress the relationship between the churches, expose the flaws in the agreement, and possibly bring things crashing down.  Misunderstandings and miscommunications may detract both churches from their purposes and may inflict personal wounds on all those involved.  A written agreement can help both parties avoid these common problems so that they can focus on fulfilling their missions.  Nonprofits can build a strong foundation for facility usage by considering the following guidelines.

1.  Preserve the organization’s mission and purpose.  State property tax exemption laws generally require that the organization’s property be used “exclusively” for tax-exempt purposes.  Beyond that, stewardship principles demand that the organization use all assets to further its mission.  If space sharing limits the ability to accomplish this mission, wisdom may guide leaders away from agreeing to share space.  Evolving expectations regarding legal rights of access to facilities (e.g., for same-sex weddings) also may be of concern if the owner makes its facilities widely available to some but not to others.  Be careful to ensure that the organization’s mission is served through sharing its space.

2.  Space sharing is not a “lease.”  The term “lease” connotes commercial activity, which is fundamentally inconsistent with most state property tax exemption requirements, particularly that no “view to profit” exist.  Thus, if an organization is exempt from property taxes, terms like “rent” and “tenant” should not apply.  Instead use “space-sharing” or “cost-sharing” terminology to identify the arrangement, including “contributions” instead of “rent” and “guest” instead of “tenant,” for both external and internal integrity. 

A.    Set forth the agreement’s noncommercial nature.  If the arrangement is a “space-sharing agreement” and not a “lease,” how is the written agreement different?  As an overarching matter, the agreement should reflect how the parties’ missions overlap (e.g., shared religious focus, shared educational aims, shared community improvement goals).  Such language can be included in preamble “Whereas” clauses.  Second, the agreement should not be couched in draconian commercial terms, such as late fees owed for overdue rent or punitive financial terms for occupancy holdovers. 

B.  Charge monetary contributions.  If the arrangement is less than “commercial,” does this mean that the nonprofit owner may not charge money?  Quite the contrary.  An appropriate total amount should be identified, along with a summary itemization of the guest’s shared facility-related costs, such as utilities, landscaping, cleaning, and security (to the extent not separately paid by the guest), as well as building maintenance, long-term systems, and exterior building costs.  In other words, the agreement should reflect that the guest is contributing a proportional amount for its usage, based on the owner’s due diligence and reasonable expectations.  The agreement should also identify when and where periodic contributions are to be paid.

3.  Clarify the “where” and “when” of property use.  The best space-sharing agreements typically contain an attached floor plan showing the specific space provided for exclusive use by the guest (include areas such as locked storage rooms or cabinets).  Additional areas for common usage (e.g., stairwells, bathrooms) may be identified.  Time considerations should be identified, as well.  Using the above example, the written agreement could identify the worship area as available during specified hours on Sunday for exclusive use by the guest, common areas available during such times, and other areas available at certain times during the week.  An owner-controlled facility calendar for special events or other one-time uses may be helpful too, to be coordinated with the guest (perhaps for an additional cost-sharing payment).

4.  State any responsibility for maintenance, repair, and changes.  Make expectations clear if groups are responsible for fixing things that break or if they may have their handyman do the work instead of hiring professionals.  In addition, identify what the owner will maintain and repair, such as major operational systems and exteriors.  State whether you anticipate minimal set-up changes from any standard set-up configuration and require the space to be “broom clean” with garbage removed after use.  Explain expectations about removing furnishings and equipment from the premises.  Also make it clear if you will allow material changes such as build-out, new fixtures, and sign postings. 

5.  Explain how the guest’s occupancy may end and how other problems will be addressed.  Specify a set term when your agreement expires.  In addition, provide for when things go wrong.  For example, what happens if the guest’s contributions are late?  Or if the guest does not repair damage caused by one of its program participants?  A strong written agreement anticipates such events and allows for resulting termination (and possibly a “cure” period beforehand).  In addition, a good agreement provides for addressing “roommate” issues through use of healthy communication channels and dispute resolution.

6.  Preserve security and safety.  Written agreements need to make clear who is allowed in the building, who is responsible for security, and who may have keys, as well as who will take care of the ice and snow and who will clean up slippery spills.  Consider child-protection and adult-supervision requirements that otherwise may vary by culture.  Such measures help prevent theft, needless injuries, and other harm.  They also should be highly beneficial in the event of any later insurance claim. 

Any guest group should have its own liability insurance policy that names the owner organization as an additional insured.  The owner should have a copy of the insurance policy and a right to receive notices of any cancellation or coverage changes.  A security deposit may be desired as well.  The space-sharing agreement also should provide for indemnification by the guest in case of any liability or other monetary harm to the owner as a result of the guest’s use. 

7.  Have respectful relationships, not authoritarian ones. If you don’t plan and communicate well with guest users, you risk “pulling rank” when conflicts arise. Such response may send a message of condescension towards others and their missions, as well as otherwise adversely affect important relationships. 

8.  Never apologize for paper work.  Having only a verbal plan is not more laudable than having a written one.  Written space-sharing agreements really do help everyone involved to achieve more with excellence.  If someone is offended that you have written it down and expect his or her signature, a simple explanation may be “so we don’t forget.”  The longer explanation is “to protect property tax exemption, to provide clarity of understanding between the parties, to allocate rights and responsibilities, to promote healthy relationships, and to otherwise exercise wise stewardship.”  All that is certainly worth the paperwork effort!

For further guidance regarding space-sharing arrangements and related legal considerations affecting nonprofit organizations, please contact an attorney in our law firm at info@wagenmakerlaw.com or 312-626-1600.

Friday, June 12, 2015

Great Board Expectations

Serving on a nonprofit board presents great opportunities for meaningfully contributing to a worthy cause.  But board service also involves significant responsibilities that may feel burdensome at times.  How can current board leaders effectively equip newly-recruited board members for successful board service?  In a nutshell, it’s all about a good fit, clear expectations, and safeguards.

A.             Who is the right person for the job?

Nonprofit boards need leadership from individuals who share a passion for the organization’s mission.  To help potential leaders understand this mission, make sure that the nonprofit’s corporate purpose statement clearly and accurately articulates the organization’s mission.  Ask prospective board members to read the corporate purpose statement.  Then ask them to consider the following question.  Is this mission something that I believe in, and is it worth committing my best efforts?

B.             What will be expected of board members?

Board leaders often speak in terms of “time, treasure, talents” or “wealth, wisdom, work” parameters.  These phrases may be helpful to show that board members should expect to contribute some of their time, some of their money, and some of their skills or expertise.  But better yet:  develop a one or two-page “Board Expectations” document that helps new board members to understand more clearly how they are to contribute meaningfully.  Also consider assigning seasoned board members to mentor new board members in their new responsibilities.

A “Board Expectations” document could include the following elements to inform new board members about their roles.

1.     Specific governance expectations:
·      Program oversight (typically through accountability expected from executive-level staff, not “micro-managing” or other administrative involvement)
·      Financial oversight as a priority
·      Strategic planning involvement
·      Independent judgment required for board decisions
·      Commitment to maintaining the nonprofit’s mission
·      Loyalty to the organization in business decisions

2.     Time commitment expectations:
·      Frequency of board meetings (and any travel)
·      Board meeting preparation and follow-through
·      Service on committees
·      Fundraiser involvement
·      Donor communications
·      Other volunteer opportunities

3.     Financial support expectations:
·      Specific dollar amount of contributions per year
·      Alternatively, a “give or get” option (to contribute personally or bring in other contributions)
·      Other cultivation of prospective donations
·      Unreimbursed costs (e.g., for board-related travel expenses)

4.     Knowledge expectations:
·      Generous use of one’s talents and wisdom
·      Understanding of organization’s bylaws and other key corporate policies
·      Familiarity with organization’s other key documents (as contained in a hard-copy or electronic corporate notebook)
·      Reasonable inquiry into and evaluation of pertinent facts affecting business decisions
·      Attentiveness to needs for outside expertise (legal, accounting, etc.)

5.     Other expectations for effective board service:
·      Constructive and cooperative engagement with the board’s deliberative processes through respectful listening, thoughtful questions, and appropriate follow-up
·      Unified support for board decisions, once made
·      Willingness to learn and grow through board trainings and board self-evaluations
·      Loyal attentiveness to potential growth opportunities (finances, board development, volunteers, other participants and supporters)

C.            What could go wrong?

Directors and officers typically enjoy broad legal protections from personal liability arising from their nonprofit board service.  Such protection is due to state nonprofit corporation laws, which provide corporate “shields” and indemnification rights, and to state and federal “Good Samaritan” laws.  Essentially, so long as directors and officers serve as volunteers and fulfill their fiduciary duties to serve the nonprofit with diligence and loyalty, no personal liability should result. 

A few caveats are in order.  First, while it is definitely rare, individual nonprofit leaders may be held personally liable in limited circumstances and for specific public policy reasons (e.g., liability arising from personal involvement with organizational failure to pay employment taxes; liability arising from approval of transactions with nonprofit insiders that result in abuse of charitable assets).  Second, directors’ and officers’ insurance is extremely important, both to cover legal defense costs and to promote a safety net in the event of actual liability.  Third, directors and officers should make sure that the nonprofit’s corporate status is well-maintained at all times in compliance with applicable state and federal reporting laws, for maximum legal protection.

For further guidance on legal aspects of nonprofit board matters and related considerations, please contact one of our law firm’s attorneys at 312.626.1600 or info@wagenmakerlaw.com, or visit us on the web at www.wagenmakerlaw.com.