When can non-profit board members face personal liability?

On Behalf of | Aug 30, 2022 | Nonprofit |

Being asked to serve on the board of directors of a non-profit organization can be a big honor. It can give you the chance to make a real difference for an organization and cause you believe in. If you’re a respected member of the community or active in a particular area of philanthropy, your name on the board can help the organization increase donations and sponsorships.

Board members have legal and ethical responsibilities to donors to use their assets responsibly and to those served by the organization to carry out the group’s stated mission. In this litigious climate, though, you may be concerned that you could personally be held liable as a board member if the non-profit is sued. Employee matters, discrimination accusations, mismanagement of funds and injury claims are just a few of the issues that can land a non-profit in court facing a costly lawsuit.

Incorporation offers protection

As long as the non-profit organization is incorporated, individual board members are protected under the law from personal liability for actions by the organization or others. This works much the same as it would for a business corporation.

Pennsylvania law offers protection

For unincorporated nonprofits, the laws vary by state. Pennsylvania is one of the states with a “charitable immunity” law the protects directors from “civil damages as a result of any acts or omissions relating solely to the performance of his duties…unless the conduct of the person falls substantially below the standards generally practiced and accepted….”

Directors can still be liable for their own actions and breaches

Therefore, unless a director has seriously breached their duty of care, they’re likely not going to have to worry about personally being sued. However, they can face liability for their personal actions. An obvious example would be if they stole or misused donations or other funds belonging to the organization. Another would be if they personally harmed someone – for example if they engaged in sexual harassment.

Before accepting a position on a board, find out about their corporation status. It’s also wise to do some due diligence into their financials, any legal or tax issues they’re currently dealing with and the reputations of those running the organization. Ultimately, as long as you uphold your duty of care, you shouldn’t find yourself in legal or financial jeopardy.