Terminating Employees at Nonprofits: What MA and DC Executive Directors Need to Know
I. Introduction
Employment relationships sometimes end involuntarily due to budget constraints, performance issues, organizational restructuring, or other legitimate reasons. For any employer, approaching that process with care means balancing dignified treatment of the employee against sound legal process and thorough documentation.
Nonprofit employers face added pressures: mission-alignment expectations, potential donor and public scrutiny, and often limited HR infrastructure. Termination is a concentrated moment of employment law exposure. But careful documentation and a clear process can help ensure the organization moves through it without unnecessary disruption and can keep its focus on the mission, where it belongs.
II. At-Will Employment: The Baseline Rule
Most people — employers and employees alike — are surprised by how few legal protections attach to a person's job. An employer could, in theory, terminate someone because they dislike the color of their shirt. That's a terrible way to run an organization, and one unlikely to attract the talent a mission-driven organization needs. But it illustrates the breadth of the at-will doctrine.
At-will employment is the default employment status in the United States, and notably, the U.S. is one of the only countries in the world where that is true. Almost every other country requires "just cause" to remove an employee. In the U.S., at-will is the default in every state except Montana, and it means an employer may terminate an employee for almost any reason, or no reason at all, so long as the reason is not illegal. The alternative, just-cause employment, requires the employer to demonstrate evidence of wrongdoing and typically affords the employee certain procedural protections before a termination is finalized.
While at-will is the default, states and courts have created meaningful exceptions that vary significantly by jurisdiction. DC's Human Rights Act, for example, imposes such broad anti-discrimination protections that DC functions closer to just-cause in practice for many employers. Employee handbooks and offer letters can inadvertently create implied contracts giving employees procedural protections the employer never intended to confer. Massachusetts employers must be particularly alert to this risk. Personnel policies more broadly can constrain what would otherwise be discretionary termination decisions.
For nonprofit employers, the practical imperative is twofold: know the generally applicable law in each jurisdiction where you employ people, and know your own documents.
III. Exceptions to At-Will: Massachusetts
Massachusetts courts have carved out more exceptions to at-will employment than most states. Key exceptions include:
Implied contract. Language in personnel policies, offer letters, employee handbooks, oral agreements, and even informal representations on which an employee relies to their detriment can be sufficient to require cause before removing an employee. Carefully drafted disclaimers may — but are not guaranteed to — mitigate implied contract claims. This is the most common trap for Massachusetts nonprofit employers.
Covenant of good faith and fair dealing. Massachusetts recognizes an implied covenant of good faith and fair dealing in employment relationships, including informal ones. An employer who terminates in bad faith, even from a clearly at-will relationship, can face liability on this basis.
Public policy exception. A termination that violates a clearly established public policy is actionable even without a specific statute. These are highly case-specific, but Massachusetts courts have recognized the exception where an employer terminated an employee for testifying truthfully in a federal investigation (after the employer instructed the employee to lie), for consulting an attorney about employment matters, and for engaging in union-related activity (which may also constitute a violation of the National Labor Relations Act).
Protected class terminations. Massachusetts General Laws Chapter 151B prohibits discriminatory terminations and applies to employers with as few as six employees, a lower threshold than Federal law. It covers age, race, color, national origin, sex, religion, disability, and other protected characteristics, and in some respects provides broader protections than the federal Title VII, ADEA, and ADA.
IV. Exceptions to At-Will: DC
DC similarly recognizes exceptions to at-will employment, though with some key differences from Massachusetts. Notably, DC courts do not recognize the covenant of good faith and fair dealing for at-will employees. See, e.g., Kerrigan v. Britches of Georgetowne, Inc., 705 A.2d 624, 627 (D.C. 1997). Key DC exceptions include:
Implied contract. Handbooks, employment forms without a defined term, and in limited circumstances oral agreements may create implied contractual protections. Disclaimers are generally more effective in DC than in Massachusetts at preserving the at-will relationship.
DC Human Rights Act. The DCHRA covers more protected classes than federal law, including political affiliation, personal appearance, and source of income, and it applies to employers with as few as one employee. Its breadth makes it one of the most significant sources of termination-related liability for DC employers.
Public policy exception. DC courts have recognized this exception where employees were terminated for refusing to violate a statute, for testifying before the DC Council, or for reporting unlawful wage deductions. These are case-specific determinations.
V. Whistleblower Protections
In my experience representing employees and advising on federal personnel matters at the Merit Systems Protection Board, whistleblower protection laws were among the easiest to invoke and the most frequently asserted claims. The ultimate success of a whistleblower retaliation claim requires success at multiple complex steps, but the breadth of coverage means that even unsuccessful claims require employers to expend significant resources on defense.
The general principle across these statutes is consistent: an employer may not terminate or take an adverse action against an employee because the employee disclosed information the employee reasonably believed reflected a violation of law, rule, or regulation. The policy rationale is to promote safety, legality, and accountability, and the protections are broad by design.
Federal protections
The Sarbanes-Oxley Act (18 U.S.C. § 1514A) protects employees who report fraud on federally funded programs. It covers nonprofit employees who contract with publicly traded companies or receive federal funds, which can catch nonprofits off-guard.
The False Claims Act protects employees from retaliation for reporting fraud against the federal government. These so-called qui tam provisions are particularly relevant for organizations that receive federal grants or contracts.
The National Labor Relations Act, Section 7, grants employees the right to engage in concerted activity, including discussing working conditions. Non-disparagement and confidentiality provisions in employment agreements and separation agreements can run afoul of the NLRA if they are overbroad or could reasonably be read to chill employees' rights to communicate with the NLRB or other agencies. Separately, employees must be permitted to file charges with — and participate in proceedings before — the NLRB, EEOC, OSHA, the SEC, and other federal and state agencies. Provisions purporting to restrict that right are unenforceable.
IRS Form 990 asks whether the organization has a written whistleblower policy. The 990 is a public document, and an organization's answer is visible to donors, funders, and the press. All organizations should have a policy in place regardless of size.
Massachusetts
Massachusetts broadly prohibits employers from retaliating (including by terminating) against an employee who discloses, objects to, or refuses to participate in conduct the employee reasonably believes violates law or poses a risk to public health, safety, or the environment. The statute covers more ground than most federal analogs. It generally requires the employee to first bring the concern to a supervisor in writing and give the employer a reasonable opportunity to correct the problem — unless there is an imminent risk of physical harm or the supervisor is already aware. Nonprofit health care employers face an additional layer of whistleblower protection for reports concerning unsafe patient care. Massachusetts also has its own False Claims Act, which covers disclosures related to organizations receiving state contracts or grants.
DC
The DC Whistleblower Protection Act primarily covers DC government employees, but nonprofits operating under DC government contracts are also covered. The DCHRA provides additional retaliation protections for any exercise of rights under that chapter. Procedurally, DC law imposes lower burdens on employees asserting claims and higher burdens on employers defending against them. This combination increases the practical risk of litigation even where the underlying claim is weak. DC's False Claims Act covers nonprofits receiving District funding and carries significant damages provisions.
One practical takeaway: the person most likely to blow the whistle is a disgruntled employee you were already managing out. Sequencing a termination after an informal complaint, even one made verbally, creates serious retaliation exposure. The timing of an adverse action relative to a protected disclosure is often the most important fact in these cases.
VI. Reductions in Force for Grant-Funded Organizations
A reduction in force (RIF) — a large-scale cut to an organization's workforce — carries significant procedural obligations. Failure to follow required processes can delay the RIF's effective date and require continued payroll during that period, while simultaneously generating litigation exposure. The Federal government's recent experience with agency-wide RIFs is instructive: in multiple cases, agencies failed to provide sufficient statutory notice, resulting in employees remaining on payroll for months without working, at substantial cost to taxpayers, while the actions were challenged in court.
These procedural protections exist because mass workforce reductions have immediate economic consequences for workers and communities alike, and the law reflects a judgment that affected employees deserve meaningful advance notice.
Federal WARN Act. The Worker Adjustment and Retraining Notification Act requires employers with 100 or more employees to provide 60 days' advance written notice before a plant closing or mass layoff. A qualifying mass layoff affects 50-499 workers if they constitute at least one-third of the workforce at a single site or results in employment loss for at least 500 full-time employees. Limited exceptions exist for unforeseeable business circumstances. Nonprofits facing a major funding loss should assess WARN applicability immediately and either issue notice or carefully document the basis for any claimed exception.
State law. Neither Massachusetts nor DC has a currently enforced state WARN analog directly applicable to nonprofits, but the picture is not entirely clean. Massachusetts has a plant closing statute on the books; its enforcement mechanism has not been funded, but the statute's existence means it remains a theoretical exposure. DC does have its own Displace Workers Protection law (D.C. Code § 32-101 et seq.), which refers to worker retention rights for contractors in certain industries and applies to employers with 50 or more employees and requires 90 days' advance notice.
Selection criteria and disparate impact. Regardless of jurisdiction, employers conducting a RIF must document objective, non-discriminatory selection criteria before making individual decisions, and should conduct a disparate impact analysis to assess whether the RIF disproportionately affects any protected class. Without that documentation, affected employees can far more easily argue that discriminatory or retaliatory motives drove selection. Age-skewed RIF outcomes are a particularly common source of ADEA exposure.
VII. Drafting Compliant Separation Agreements and Releases
Separation agreements are an important risk management tool — but only if they are enforceable. To be enforceable, an agreement must offer the employee something beyond what they are already entitled to receive. Standard components include a defined release scope, confidentiality provisions, non-disparagement clauses, a cooperation clause, and return-of-property obligations.
Several requirements and hazards deserve specific attention:
OWBPA compliance. The Older Workers Benefit Protection Act governs releases of age discrimination claims under the ADEA. A compliant waiver must include specific statutory language, provide the employee at least 21 days to consider the agreement (45 days in group termination situations), and allow a 7-day revocation period after signing. A release that does not meet these requirements is void as to federal age claims. Importantly, OWBPA compliance does not also release Massachusetts state age discrimination claims, those require separate consideration.
Wage claim restrictions. Both Massachusetts and DC restrict the ability of employees to release wage claims through separation agreements. Under the Massachusetts Wage Act (G.L. c. 149, § 148 et seq.), wage claims generally cannot be released without approval from the Attorney General. Separation agreements must be carefully constructed to avoid purporting to release claims that are not legally waivable.
Non-compete provisions. The 2018 Massachusetts Non-Compete Reform Act imposes significant substantive and procedural limitations on non-compete agreements, including garden leave requirements. DC's Non-Compete Clarification Act of 2022 substantially restricts non-competes for most DC employees. Separation agreements that include these provisions must comply with both statutes to be enforceable.
Agency filing rights. Any provision purporting to restrict an employee's right to file a charge with or participate in proceedings before the EEOC, MCAD, DC OHR, or other government agencies is unenforceable and will draw agency scrutiny to the agreement as a whole.
VIII. Pre-Termination Checklist for Executive Directors
Best practices in employment separations combine clear policy, consistent communication, and statutory compliance. At minimum, pre-termination due diligence should address the following:
Is there documentation supporting the stated reason for termination?
Has the employee made any protected complaint — formal or informal — recently?
Does the handbook or any other organizational document contain inadvertent just-cause language?
Is severance being offered? If so, does the release comply with OWBPA requirements?
Does the employee have unpaid wages, accrued PTO, or outstanding commissions that trigger obligations under the Massachusetts Wage Act or the DC Wage Payment and Collection Law?
Has legal counsel reviewed the separation agreement before it is presented to the employee?
IX. Conclusion
Involuntary separation is one of the highest-stakes moments in any employment relationship and one of the most concentrated sources of legal exposure for nonprofit employers. Getting the policies in place before a termination is ever contemplated, training on them regularly, and treating affected employees with dignity and process are not just good management practices, they are the foundation of a defensible termination.
A working understanding of the applicable law — combined with counsel involved before, not after — can mean the difference between a clean separation and a costly dispute. If you are interested in understanding your organization's overall employment compliance posture, Commonlight Legal offers a flat-fee compliance audit designed to surface exposure before it becomes a claim.
This article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For advice specific to your organization's situation, contact Commonlight Legal LLP.
Alex Booker is the Managing Partner of Commonlight Legal LLP, a boutique law firm serving nonprofits in Massachusetts, DC, New York, and Connecticut. He advises executive directors and boards on employment law, governance, and general nonprofit counsel.
Before founding Commonlight, Alex adjudicated federal employment cases at the U.S. Merit Systems Protection Board, where he researched and advised on novel issues in federal personnel law, and he litigated whistleblower, wage and hour, and civil rights cases on behalf of employees at a DC employment firm. He is admitted to practice in Massachusetts and Washington, DC.