BOARD ROLES, DUTIES AND RESPONSIBILITIES IN EMPLOYEE MATTERS Presented by: James K. Martin Booth Law Group LLC 10520 Wayzata Boulevard Minnetonka, MN 55305 Phone: 763-253-4155, ext. 7 Cell: 612-581-8450 Fax: 763-253-4160 e-mail: jmartin@boothlawgroup.com This presentation was prepared by Booth Law Group LLC. It is not intended, nor should it be used, as a substitute for specific legal advice or opinion since legal counsel may only be given in response to inquiries regarding particular factual situations.
I. INTRODUCTION BOARD ROLES, DUTIES AND RESPONSIBILITIES An organization s Board of Directors is an elected or appointed body that holds the organization in trust for members past, present and future, with a guiding principle of leaving the organization stronger at the end of each Director s term than it was at the beginning. The Board s special responsibility is to see that the leadership of the organization, however that leadership is composed (board leadership, executive director, volunteers) manages the organization in a manner that responds to the expressed needs of members and anticipated needs of the future Board and organizational leadership. The Board typically does not and should not serve in an operational or managerial role. II. RESPONSIBILITIES A Board of Directors is the governing body of an organization (for profit and nonprofit) with many serious responsibilities, which can be loosely categorized as follows: A. Setting the policy for the organization. 1. Creating or updating the organization s mission and vision statements. 2. Determining the organization s programs and services. 3. Approving the organization s strategic plan. 4. Evaluating whether the organization has remained true to its mission and vision. B. Monitoring the organization s operations. 1. Hiring/appointing and periodically evaluating, as required, the organization s operational leadership. 2. Working with and providing support to the organization s leadership. 1 3. Approving the annual budget, annual report, contracts and grants. 4. Providing direction and oversight of the direction, planning, mission and vision of the organization. 5. Soliciting and reviewing program evaluations. 1 Items in Bold identify board actions related to employee matters. 2
6. Promulgating and updating policies. C. Serving as a public figure for the organization. 1. Fundraising, if applicable, as necessary. 2. Advocating for the organization. 3. Communicating with members and the community. D. Fulfilling other Board responsibilities. 1. Documenting policies and decisions to create an organizational memory. 2. Preparing for and attending Board meetings. 3. Researching and discussing issues before decisions are made. 4. Replacing and orienting Board Members when a vacancy arises. 5. Engaging in ongoing training in order to stay abreast of the laws and regulations affecting the organization. III. DUTIES A Board of Directors also has certain legal obligations known as fiduciary duties. One common definition of fiduciary duty is the requirement that Board members remain objective, unselfish, responsible, honest, trustworthy, and efficient. Board members, as stewards of public trust, must always act for the good of the organization, rather than for the benefit of themselves. Board members need to exercise reasonable care in all decision making, without placing the organization under unnecessary risk. The following are some common fiduciary responsibilities for members of a non-profit Board: A. Taking reasonable care when making decisions for the organization (called Duty of Care ). 1. Active participation in the management of the organization including attending meetings of the board, evaluating reports, reading minutes 2. Establish Committees having the authority of the Board and rely on information, opinions or reports of these committees 3
3. Board action - A Board member who is present at a meeting when an action is approved by the entire Board is presumed to have agreed to the action unless the Board member does not participate in the meeting, votes against the action or the Board member is prohibited from voting on the action because of a conflict of interest. 4. Minutes of the meetings - Written minutes should be taken at every Board meeting that accurately reflects Board discussions as well as actions taken at meetings. 5. Books, records, bylaws Board members should have general knowledge of the books and records of the organization as well as its general operation. The organization s articles, bylaws, accounting records, voting agreements and minutes must be made available to Board members who wish to inspect them for a proper purpose. 6. Investigations Board members have a duty to investigate warnings or reports of theft or mismanagement and in some situations to report misconduct to the appropriate authorities, such as the police or the Attorney General. Where appropriate, a Board member should consult an attorney or other professional for assistance. 7. Maintaining confidentiality. B. Acting in the best interest of the organization (called Duty of Loyalty ). 1. Avoiding using position on the Board for financial gain for yourself or a family member. 2. Putting the good of the organization first. 3. Avoiding diversion of a corporate opportunity for personal gain. C. Acting in accordance with the organization s mission (called Duty of Obedience ). 1. Following the law including, but not limited to, taxes, FICA, unemployment and work compensation obligations. 2. Seeking outside help and counsel 3. Standing aside when there is a conflict of interest ( recusal ). 4
IV. LIMITING LIABILITY While a Board and its members have many responsibilities, there are also activities and conduct to be avoided in order to avoid exposure to personal liability. Generally, Board Members should avoid being over- or under-involved. A. Board members can limit or eliminate exposure to liability by avoiding the following: 1. Making any commitment of the organization s staff or financial resources except with the prior authorization of the Board and/or the organization s leader. 2. Making any offer or commitment to allow exceptions to the organization s policies/practices. 3. Rubber stamping decisions. While the Board should take the recommendations of the organization s leadership, staff, and members into consideration, the Board needs to be an independent decision-making body. B. A Board of Directors should: 1. Attend Board meetings regularly. 2. Be familiar with the organization s goals, objectives and programs. 3. Read preparation materials prior to each Board meeting so that active, informed participation is assured. If you do not understand what has been presented ask questions. 4. Make sure the organization keeps a written, permanent record of all Board official actions. 5. Be certain the organization is fulfilling all aspects of its nonprofit and tax-exempt status (as applicable). 6. Exercise general supervision over the organization s affairs. 7. Know the budget, budget process and financial situation of the organization. Again, if you do not understand, ask the treasurer or the organization s accountant or auditor. 8. Pursue the warning signs that something is wrong and inquire if there is something you do not understand or if something comes to your attention that causes you to question a policy or practice. 5
9. Insist on meaningful Board meetings with full disclosure of operating results. 10. Require the organization to engage competent legal counsel. 11. Require all committees to make reports at the board meetings, when appropriate. 12. Authorize appropriate indebtedness for major programs. 13. Know the Directors and Officers of the organization. 14. Avoid conflicts of interest. 15. Monitor the community and professional image of the organization. 16. See that the organization maintains a good credit and financial standing. 17. Review the organization s insurance program. V. OBLIGATIONS OF AN EFFECTIVE BOARD MEMBER A. Being prepared for meetings. B. Asking questions and seeking clarification of all matters in front of the board as necessary or required. C. Putting the interests of the organization first rather than representing a particular constituency. D. Accurately interpreting applicable law and policy in the best interests of the organization rather than interpreting the law or policy too broadly in order to meet the desires of Board member(s) or key personnel. E. Referring problems or complaints to the appropriate staff member or other leader instead of encouraging staff and members of the public to come to you personally with problems (except concerning complaints/allegations against the organization s leader). In other words, respect the organization s complaint process. F. Properly post meetings in a timely manner. G. Following the provisions of the Open Meeting Law. 6
H. Protecting and preserving attorney-client privileged information or other data that is protected by law. I. Attending to important matters rather than getting bogged down in minutiae. J. Being policy maker rather than an administrator or otherwise micromanaging. VI. SCHOOL DISTRICT GOVERNANCE, POWERS AND DUTIES A. From the Minnesota School Boards Association Service Manual (2016) SCHOOL BOARD MEMBER/SUPERINTENDENT LEADERSHIP TEAM GUIDELINES. AS A MEMBER OF THE SCHOOL BOARD, I WILL IN WORKING WITH THE SUPERINTENDENT OF SCHOOLS AND STAFF: 1. Hold the superintendent responsible for the administration of the school district. 2. Give the superintendent authority commensurate with his or her responsibilities. 3. Assure that the school district will be administered by the best professional personnel available. 4. Consider the recommendation of the superintendent in hiring all employees. 5. Participate in school board action after considering the recommendation of the superintendent and only after the superintendent has furnished adequate information supporting the recommendation. 6. Insist the superintendent keep the school board adequately informed at all times. 7. Offer the superintendent counsel and advice. 7
8. Recognize the status of the superintendent as the chief executive officer and a non-voting, ex officio member of the school board. 9. Refer all complaints to the proper administrative officer or insist that they be presented in writing to the whole school board for proper referral according to the chain of command. 10. Present any personal criticisms of employees to the superintendent. 11. Provide support for the superintendent and employees of the school district so they may perform their proper functions on a professional level. VII. Board Members and District Employees. A. The board handles the mission and policy objectives for the district and staff handles the administrative and management side of things. B. Relationships between the board and district employees can create situations where board members may overstep their proper role, causing potential liability for the board member and the district. C. Board members do not have administrative authority as an individual and they cannot give orders or otherwise supervise district employees, unless specifically directed to do so by the board. Board members must remember that staff work for the entire board (as a whole), not for one individual board member. D. Investigating and Terminating District Employees 1. Individual board members are not authorized to independently investigate employees or terminate employment. 2. The superintendent heads up the administrative branch with responsibility to the board for the proper administration of all affairs relating to district. E. Negotiating Severance Packages 1. Individual board members are not authorized to agree to severance packages. 2. The board may employ and discharge necessary employees and may contract for other services. Minn. Stat. 123B.02, Subd. 14. 8
3. Board members who may be involved in negotiating any contracts on behalf of the district must make it very clear that only the board can enter into a contract. The full board could later ratify the contract. However, if the board does not ratify the contract, the individual board member potentially could have personal liability for claims raised by the contracting party, such as detrimental reliance or promissory estoppel if the board member does not clearly identify his/her role. F. Personal Liability for Board Members 1. Subject to certain limitations, state law (Minn. Stat 466.07) generally requires school districts to defend and indemnify board members (and employees) for lawsuits arising out of their official duties, as long as the board member or employee did not act in bad faith, malfeasance, or willful neglect of their duties. 2. The doctrine of official immunity protects public officials from suits based upon discretionary actions performed in the course of their official duties. Neither official immunity nor the statute applies when a board member acts outside the scope of official duties or with malice or in bad faith. 3. Examples of Situations Where Personal Liability May Arise a. Defamation Immunity applies to statements, in good faith, during a proper occasion and based on probable cause. b. Tort Liability Immunity will not apply if board member acts outside of scope of official duties. Consider invasion of privacy where board member stakes out employee s home to determine if employee is violating sick leave policy. VIII. Open Meeting Law and Employee Issues A. The Open Meeting Law requires that public business be conducted in public. With limited exceptions, all school board meetings must be open to the public. B. Exceptions Related to Employment Matters 1. Board meeting must be closed for preliminary consideration of allegations or charges against an individual subject to the school board s authority. But the meeting must be open at the request of 9
the individual subject to the discussion. Minn. Stat. 13D.05, subd. 2. 2. Board may close a meeting to consider strategy for labor negotiations. Minn. Stat. 13D.0 a. The time and place of the closed meeting must be announced at the public meeting and a written roll of all present at the meeting must be available to the public after the meeting. b. The meetings must be tape-recorded and preserved for two years after the contract is signed. 3. Board may close a meeting to evaluate the performance of an individual subject to the board s authority. Minn. Stat. 13D.05, subd. 3. a. The individual must be identified prior to closing the meeting and the school board must summarize its conclusions at the next open meeting. b. The meeting must be open at the request of the individual. 4. Board may close the meeting if the closure is expressly authorized by statute or permitted by the attorney-client privilege. Minn. Stat. 13D.05, subd. 3. 5. Electronic Record of Closed Meetings: All closed meetings, except those closed as permitted by the attorney-client privilege, must be electronically recorded. Unless otherwise provided by law, the recordings must be preserved for at least three years after the date of the meeting. Minn. Stat. 13D.05, subd. 1(d) 10