Employment Law Considerations for Canadian Non-Profit Organizations – Part 1

If you were asked to define “impact” for your favourite non-profit organization, you would likely think about their role delivering vital services, supporting vulnerable communities or advocating for positive social, economic and environmental change.

Would you think about an organization’s “impact” in terms of how it manages its own workforce – ensuring the organization provides a safe, healthy and inclusive workplace for its employees or offers fair, equitable compensation?

We don’t often think about Canadian non-profit organizations in their role as employers, but we can’t afford not to. Approximately 170,000 non-profit organizations across Canada employ 2.5 million people, collectively representing Canada’s largest employer (Imagine Canada). 

The sector maintains a strong commitment to equity, diversity and inclusion and the Decent Work movement and continues to innovate on issues as the four day workweek. However, structural issues such as gaps in core funding, declining philanthropic giving and increased demand for services impact the extent to which individual organizations can focus on workforce issues as part of their day-to-day work.

As a labour and employment lawyer serving non-profit organizations, I’ve seen firsthand how professional employment law guidance can be the difference between a thriving workplace culture and costly setbacks.

While it can be difficult to proactively mitigate employment law risks in organizations with limited resources, it is often much more expensive to do damage control after a workplace incident occurs or employment litigation commences.

Below is a summary of some of the most pressing employment law issues I encounter with non-profit organizations in my practice.

1. High Turnover and Retention Challenges

High employee turnover in non-profit organizations can create significant instability and uncertainty in the workplace. The cost of recruiting, hiring and onboarding new employees and losing sources of institutional memory and internal expertise can be significant.

One of the key reasons for high turnover and retention challenges in the non-profit sector is comparatively low compensation. The average annual salary for non-profit workers is 13% lower than the average salary for all Canadian employees, and 31% lower for workers in community non-profit organizations specifically (Imagine Canada).

In a 2024 survey of the Carleton University Charity Insights Canada Project, 34% of respondent charities indicated that “remuneration and benefits" were the top reason for employee turnover, followed by “overwhelmed by amount of work/burnout” at 27%.

Another key source of employee turnover is the temporary or contract nature of non-profit sector employment, often due to program-specific grants and funding precarity. 27% of non-profit employees participating in Environics Institute research reported holding a temporary job (including casual, contract or seasonal jobs), compared to 17% of respondents in the public sector and 13% in the private sector.

In environments with high turnover, it is even more essential that non-profit organizations have effective, up-to-date employment agreements with clear termination clauses. Updated employment agreements can also help non-profit organizations navigate constructive dismissal risks, which contribute to better retention strategies and lower legal exposure over the long-term.

2. Navigating Equity, Diversity and Inclusion 

Compared to the rest of the Canadian labour force, workers in non-profit organizations are significantly more likely to identify as female, racialized, Indigenous and/or living with a disability (Imagine Canada; Environics Institute).

Diversity and inclusion are at the heart of many non-profits’ missions, yet the sector itself faces internal challenges. Compared to those in other sectors, non-profit workers are more likely to have faced discrimination or unfair treatment at work based on their personal characteristics, including gender, racial identity, Indigenous identity, and disability status (Environics Institute). While women are well-represented among sector leaders, they are predominantly white/Caucasian (Ontario Nonprofit Network).

Having a diverse workforce is a significant strength. However, non-profit organizations that are slow to introduce robust anti-discrimination policies, inclusive hiring practices and workplace investigation processes can find themselves on the receiving end of a human rights, employment standards or occupational health and safety complaint.

As an example, in predominantly female workplaces clear processes for accessing maternity/parental leave or compassionate caregiving leave and seeking accommodations for pregnancy-related illnesses or child or elder care are particularly important. The failure to do so could create human rights exposure on the basis of gender or family status.

Professional legal advice can help non-profits implement robust anti-discrimination policies, conduct inclusive hiring practices and investigate complaints in compliance with provincial human rights codes and occupational health and safety laws. Lawyers can also provide training on unconscious bias and workplace harassment—helping organizations live up to their values while complying with the law.

3. Compliance Across Multiple Jurisdictions

Many national or international non-profit organizations operate across multiple provinces, each with its own employment standards, human rights and occupational health and safety legislation. What is permissible in Alberta may not apply in British Columbia or Quebec.

Having experienced employment counsel ensures your organization maintains legally compliant handbooks, contracts, and policies tailored to each jurisdiction, reducing the risk of disputes or penalties.

4. Volunteer and Contractor Misclassification Risks

Non-profit organizations often rely heavily on volunteers and independent contractors. But when these individuals perform work under conditions that resemble employment—such as set schedules, supervised tasks, or long-term commitments—organizations risk triggering “employee misclassification” claims.

Lawyers can assess relationships with volunteers and independent contractors and design clear agreements that comply with employment standards and protect against liability related to unpaid wages, vacation pay, or wrongful dismissal claims.

5. Handling Internal Disputes and Workplace Investigations

In a 2024 Charity Insights Canada Project survey, 19% of respondent charities disagreed or strongly disagreed with the statement “Our organization has clear, accessible and confidential grievance procedures and practices in place to support its staff and volunteers in addressing and resolving conflicts with co-workers and supervisors”.

Disputes can and do arise in non-profit organizations—between employees, managers, volunteers, or board members. In many cases, these are deeply personal and may involve sensitive allegations like bullying, harassment, discrimination or even fraud.

An external employment lawyer provides objective, impartial guidance in conducting investigations, ensuring they are fair, confidential, and legally defensible. This protects an organization’s reputation and reduces the risk of litigation, particularly if employee misconduct rises to the level of termination for cause.

Conclusion

Non-profits and charities face complex employment issues, often with limited internal HR or legal resources. But ignoring these issues doesn’t make them go away—it increases the risk of legal claims, reputational damage and mission disruption.

Next week, Cave Law will share Part 2 – a round-up of other important employment law issues non-profit organizations should be aware of. Stay tuned!