Nonprofit organizations across the country play a crucial societal role by aiding those in need. However, due to their not-for-profit ethos, these organizations often face funding and human resources constraints. To overcome these challenges, many nonprofits turn to independent contractors to obtain specialized skills and expertise in a cost-effective manner. Hiring independent contractors can be a valuable strategy, but it also comes with its own set of considerations and responsibilities that nonprofits should be aware of. In particular, different government agencies define and classify the term “independent contractor” differently; it is important to understand this distinction to ensure that your organization is not accidentally treating contractors in a way that would inadvertently classify them as employees. In this article, we explore the key factors nonprofits should consider when hiring independent contractors.

On June 25, 2024, the Oklahoma Supreme Court handed down its opinion in Drummond ex rel. State v. Oklahoma Statewide Charter School Board, answering the important question of whether St. Isidore of Seville—a Catholic, virtual, K-12 charter school (the School)—can contract with the state’s Charter School Board (the Board) to operate with public funding in the State of Oklahoma. The Oklahoma Supreme Court ruled that the arrangement between the School and the Board was unconstitutional under the Oklahoma Constitution, as well as under the Establishment Clause of the First Amendment to the United States Constitution. It remains to be seen whether the Supreme Court of the United States will let the Oklahoma decision stand on state-law grounds or whether the Court will find that there is a potential conflict between Oklahoma’s law and the First Amendment’s Free Exercise Clause.

As you begin the formation process, chances are you will apply for federal 501(c)(3) tax-exempt status. If this applies to you, whether your organization’s exempt purpose will be primarily religious or charitable, you may intend to refer to your organization colloquially as a “charity” or “charitable organization.” However, according to the IRS, the term “public charity” has a very specific meaning and not all 501(c)(3) nonprofits are public charities. In fact, the default assumption by the IRS is that a 501(c)(3) organization is not a public charity but a “private foundation.” Organizations applying for 501(c)(3) status should be aware of this default position, since private foundations are subject to certain restrictions that do not apply to public charities. The following introduction to this topic should give you a good idea of where your organization will fit in.

Nonprofit organizations are uniquely affected by the public’s perception of their ethical (or not-so-ethical) behavior. For organizations that rely on public funds for financial support, it is particularly important to maintain strong ethical guidelines and promote a culture of reporting ethical violations should they occur. Because individual employees’ abilities for moral decision making and awareness may differ, an organizational structure for ethics reporting can assist in implementing certain norms and expectations. This resource explains the need for whistleblowers and includes a sample policy.

A few weeks ago, the Fourth Circuit decided in Billard v. Charlotte Cath. High Sch. that it was permissible under Title VII’s ministerial exception for Charlotte Catholic High School to refuse to continue the employment of a substitute teacher who was openly living in a same-sex relationship. This blog post provides a summary of the case, as well as a few takeaways for nonprofits.