Ethical, Legal and Equitable Duties in Fundraising

August 10, 2017 | Lisa Goodfellow

There are a number of ethical, legal, and equitable rules that directors, officers, and employees of charities and not-for-profit organizations must follow. This article focuses in particular on persons engaged in fundraising roles and what they need to know to ensure they follow these rules.

Duty of Confidentiality:

One of the most important obligations for an organization to always keep in mind is the duty of confidentiality. This duty is implied in every contract of employment, even if it is not expressly stated, and is also a duty of directors on boards. The duty of confidentiality is the duty to keep confidential any information relating to or belonging to the organization that is not generally available to the public—not to disclose it, and, beyond that, not to use it for any reason other than in the performance of duties for the organization.

This duty lasts not only for the duration of employment or office, but indefinitely beyond that  for as long as the information is not generally available to the public.

Confidential information includes things like donor names and contact information, their giving habits and profile or history. It also includes non-public information about the way the organization is run, such as marketing strategies, innovative fundraising ideas, personnel information, and internal processes. When an employee or officer leaves an organization, he or she may not take physical or electronic copies of such things; as for the information that is in his or her head, careful attention is required not to use it or disclose it to others.  General know-how, that is not unique in any way, is the employee’s to use in his or her next position.

This duty plays a big role in what a person can legally or properly do to try to bring donors over from one organization to another.

Privacy legislation, such as PIPEDA and CASL, also places significant limitations on the collection, use and disclosure of personal information about donors and potential donors.

Duty of Fidelity:

Every employee of an organization also has a duty of fidelity, or loyalty. This means that employees should not do anything which is not in the best interests of the organization, nor anything that would put them in a conflict of interest with the organization. The duty of fidelity ends when the employment relationship ends. This duty subsists when planning to leave, right up until the last day of work, and prohibits employees from doing anything to solicit donors or co-workers away from the organization while still there.

Fiduciary Duty:

In addition to having a duty of fidelity, senior management employees, directors and officers of an organization are fiduciaries of the organization. This is a higher and more onerous duty that covers everything within the duty of fidelity and more, and which, most importantly, also continues for some period of time after they leave an organization. It could last as long as a year or two afterward. Fiduciary duty means putting the interests of the organization ahead of the individual, and allows no room for self-interest whatsoever.

Fiduciary duty includes a duty not to compete unfairly against the organization, even after the senior employee or officer has left. It includes a duty not to solicit the employees or donors, or other relationships formed while with the organization, in an effort to make them end their relationship with the organization and move their allegiance or donations to a new one.

Contractual Duties:

In addition, employees may have contractual non-competition or non-solicitation obligations to their former employer that last for some period of time following the end of the relationship. Non-competition restrictions may be difficult for an employer to enforce, unless they are reasonable in terms of their timeline, geographic scope, and subject matter. By comparison, non-solicitation restrictions are much easier to enforce, and can even prevent employees who were not senior enough to be fiduciaries from soliciting donors and other employees away from the former employer for a reasonable period of time after their employment ends.

One should be mindful of these duties, especially when making a move from one organization to another. Even where there is pressure to deliver new donors to a new employer, one should not breach these duties, which are both legal and ethical duties.  Although relationships with donors may feel like personal relationships, which an employee should be free to bring along for the benefit of a new organization, they are not truly personal. They are relationships that the employee forged on behalf of the former employer, while being paid by that former employer, and they are not the employee’s to take with him or her.

The fact that a donor might follow if asked does not give the employee licence to ask.

So do be careful. Do consider the obligations that employees might have, whether contractual or equitable, before doing anything that may be in breach of these duties. If the employee is a manager, he or she should ensure that employees for whom he or she is responsible understand their duties as well, so that management can enforce those duties and protect the organization.

On the difficult matter of what to do when another employee, or manager, is breaching their duties to the organization, remember this: the duty of loyalty is owed to the organization, not to any one individual in the organization. So even if an employee is a manager or a higher level executive in the organization, he or she should not stand by and watch.  The senior employee must make the breach known to the organization so that the breach can be dealt with appropriately.

The duties owed to the organization require employees, directors, and officers to come forward to disclose any witnessed impropriety. Whether it be financial impropriety, or breach of other laws such as human rights or health and safety laws, it is the responsibility of the individual employee to come forward. If it feels too unsafe to do so, consider whether an anonymous complaint is possible.

Many organizations do have whistle-blower policies that encourage employees to report such matters while ensuring that their anonymity is protected. Also, most legislation has anti-reprisal protections built into it, which make it illegal to take any sort of action against a person who makes a good faith complaint or report of a breach of the legislation. For example, the Ontario Human Rights Code, the Occupational Health and Safety Act, and the Employment Standards Act, 2000 all have anti-reprisal sections.

Whenever possible, these reports should be made within the organization to enable it to investigate and address them first internally, with maximum confidentiality, and a minimum of bad press or the potential for reputational damage to the organization. Where the CEO or Executive Director of the organization is the subject of the complaint, then it should be made to the Board of Directors, to whom that person is accountable.

If that is not effective, then, as an alternative or a last resort, the complaint could be made to an external agency, such as the Canada Revenue Agency, the Ministry of Labour, or whatever body is appropriate to the nature of the concern. By first attempting to deal with the issue internally, the employee permits the organization to address the issue before it becomes public, thereby protecting the reputation of the organization from damage. After all, protecting the organization is the reason individuals make these complaints in the first place.

If you have any questions about how the duties discussed in this article apply to the directors, officers, or employees of your organization, please contact the author or a lawyer in the Social Impact Group at Miller Thomson.


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