The board meeting went fine, the vote was clean, the director is out, and then someone mentions they're still technically on payroll. This is the moment a nonprofit discovers that removing a director and terminating an employee are two entirely different legal acts, even when they happen to the same person on the same day. A director sits on the board at the pleasure of the members or however the bylaws provide for removal, but an employee has a contract, and that contract doesn't evaporate because the person lost their seat at the governance table.
Canadian nonprofit law, whether under the Canada Not-for-profit Corporations Act or the various provincial equivalents, treats the director relationship as a creature of corporate governance. The bylaws say how someone becomes a director, how long they serve, and how they can be removed, and the members or the board follow those procedures. Employment law, meanwhile, doesn't care about your bylaws. It cares about whether there was a contract, what terms governed it, and whether termination followed the rules in the applicable employment standards legislation and the common law of wrongful dismissal. When the same person holds both roles, removing them from one does nothing to the other unless you handle each removal on its own terms.
An Alberta court decision in Maiani v C-Jazz illustrates how badly this can go wrong when a nonprofit conflates the two. The organization tried to end a relationship that straddled both governance and employment, and the court found that what might have been a clean directorship removal became entangled with employment obligations the nonprofit hadn't properly addressed. The exposure isn't just the unpaid notice period or the severance calculation, though those alone can strain a budget built on grants and donations. The exposure is also the procedural mess: trying to undo a directorship through employment mechanisms, or trying to end employment by pulling the governance thread, and finding that neither comes out clean.
The practical takeaway is that nonprofits need to treat the two hats as genuinely separate, not as a convenient fiction they acknowledge on paper and then ignore in practice. If someone is both a director and an employee, their director appointment letter should say nothing about their employment terms, and their employment contract should say nothing about their board seat. When the time comes to end either relationship, the board minutes for the director removal should be about the director removal, and the termination letter for the employment should be about the employment. The temptation to do it all in one motion, to tell someone they're out and assume the rest follows, is exactly the temptation that leads to a courtroom.
This gets more complicated when the person's employment was contingent on their directorship, or when their directorship came with the job, because now the two roles are contractually intertwined and unpicking them requires understanding what the contracts actually said. Most small nonprofits don't have HR departments or in house counsel reviewing these arrangements at the outset, which means the documents are often silent on exactly the question that matters most when things go sideways.
Running a nonprofit means running a business with fewer resources and more scrutiny, and the last thing anyone needs is a wrongful dismissal claim dressed up as a governance dispute or vice versa. Binder exists for exactly this kind of quiet exposure, the kind that doesn't announce itself until someone files a statement of claim, and the kind that a business owner shouldn't have to carry alone without something watching for it. If you've dealt with the director and employee overlap in your own organization, share your experience in the comments below.