Charities and not-for-profits across Australia rely heavily on volunteers to deliver their services. According to the Australian Charities and Not-for-profits Commission (ACNC), more than half of all registeredcharities (52.1%) operate without any paid staff, with this figure rising to nearly 90% for extra small charities. At the same time, the charitable sector is a significant employer, with 1.54 million people (10.7% of Australia's workforce) employed by charitable organisations.
But where does goodwill end and employment begin? The line between a volunteer and an employee is not always clear, and misclassifying a worker can expose charities to serious legal and financial consequences.
While there is no single accepted definition of 'volunteer' in Australia, guidance from the Fair Work Ombudsman and the courts helps to distinguish genuine volunteers from employees. This article examines the key factors that determine when a volunteer arrangement may give rise to an employment relationship, and what charities can do to manage this risk.
Who is a 'national system employee' under the Fair Work Act?
The Fair Work Act 2009 (Cth) (FW Act) is the principal legislation governing the employment relationship between certain employees and employers in the national workplace relations system.
Under the FW Act, a ‘national system employer’ includes constitutional corporations, the Commonwealth and Commonwealth authorities, employers of certain workers in constitutional trade or commerce (including flight crew, maritime employees and waterside workers), bodies corporate incorporated in a Territory, and persons carrying on activities in an Australian Territory.
A ‘national system employee’ is an individual employed by a national system employer, with an express carve-out for those on a ‘vocational placement’.
A vocational placement, commonly referred to as a student placement, is an unpaid arrangement that satisfies each of the following criteria:
- It is undertaken with an employer for which the person is not entitled to any remuneration; and
- It is undertaken as a requirement of an education or training course; and
- It is authorised under a law or administrative arrangement of the Commonwealth, a State or a Territory.
Charities often engage individuals on vocational placements, particularly in sectors such as aged care and disability support, where hands-on experience forms a component of accredited education and training courses. As individuals undertaking a vocational placement fall outside the definition of a 'national system employee' under the FW Act, charities hosting such placements may not be subject to the employment-related obligations that would otherwise arise under that legislation. However, charities should ensure that any vocational placement they host genuinely satisfies the statutory criteria outlined above, as a placement that does not meet those requirements may give rise to an employment relationship.
If an unpaid arrangement does not meet the definition of a vocational placement, it may still be a genuine volunteer arrangement, provided there is no employment relationship between the individual and the organisation.
Note that amendments to the FW Act in 2024 introduced a further statutory definition of ‘employee’. A similar multifactor test to that which arises under the common law applies, directed at determining the “real substance, practical reality and true nature of the relationship” by examining all parts of the working relationship between the parties.
Who is a volunteer?
The FW Act does not define ‘volunteer’. However, the Fair Work Ombudsman identifies the following as key characteristics of a genuine volunteering arrangement:
- The individual performs work primarily for the purpose of benefitting someone else;
- Neither the individual nor the organisation intends to create a legally binding employment relationship;
- The individual is under no obligation to attend the workplace or perform work; and
- The individual does not expect to be paid for their work.
When will a volunteer be considered an employee?
An employment relationship may exist even where the worker is described as a 'volunteer'.
Courts and tribunals have identified a range of factors relevant to determining whether a person is a volunteer or an employee. These include (but are not limited to):
- Whether the arrangement is based on moral or altruistic motivations rather than enforceable legal obligations;
- The duration of the arrangement, as longer periods of service increase the likelihood that the individual may be characterised as an employee;
- The nature and purpose of the activities performed, noting that volunteers are less likely to be considered employees where there is no expectation or requirement of productivity;
- Whether the organisation derives significant commercial benefit from the arrangement or expects the position to generate revenue; and
- Any documented terms and conditions governing the arrangement.
A common area of uncertainty arises where volunteers receive reimbursements or stipends. In Mifsud v Fire and Rescue NSW Band Incorporated [2024] FWC 853, the Fair Work Commission considered the case of two members of a Fire and Rescue NSW Band who were expelled from the band and subsequently filed unfair dismissal applications. The musicians relied on the band’s protocol, which outlined rules and requirements for members, and cited the $15 per hour payment they received for rehearsals and performances as indicative of an employment relationship.
The Commission found that no employment relationship existed and that the payments were properly characterised as honorariums rather than wages. While certain obligations under the band’s protocol resembled those of an employee, such as requirements relating to attendance, following directions, taking leave, wearing a uniform, and payment of expenses, other aspects were inconsistent with an employment relationship. Critically, there was no evidence to support a finding that the applicants commenced playing in the band with the intention of entering a legally enforceable contract.
Whether a volunteer or employment relationship exists will depend on the specific facts and circumstances of the arrangements between the individual and the organisation, highlighting the need for a case-by-case analysis.
Consequences of misclassification
Misclassifying an employee as a volunteer carries significant financial risk, including liability for unpaid wages, taxes and superannuation contributions. Beyond the financial exposure associated with unpaid entitlements, organisations may face penalties under the FW Act for contraventions of the National Employment Standards or applicable modern awards. Misclassified workers may also have access to termination remedies, including unfair dismissal claims, creating further legal exposure for charities.
For charities, the reputational consequences can be equally significant. Adverse findings may undermine public trust and donor confidence. Misclassification may also attract scrutiny from the ACNC, which requires registered charities to comply with governance standards. A finding that a charity has failed to properly classify its workers could call into question the charity's compliance with those standards and, in serious cases, may put its registration at risk. Additionally, charities that rely on government grants or funding agreements may face consequences where those arrangements require compliance with workplace laws as a condition of funding. Misclassification may also give rise to issues under workplace health and safety legislation and insurance arrangements that distinguish between volunteers and employees.
Key takeaways
Charities should regularly review their volunteer arrangements to ensure they reflect genuine volunteering relationships. Practical steps include:
- Documenting volunteer arrangements in writing, clearly stating the voluntary and non-binding nature of the relationship.
- Avoiding arrangements that resemble employment, such as fixed rosters, performance reviews, or productivity expectations.
- Maintaining clear records of any payments or reimbursements made to volunteers.
- Ensuring volunteers are free to decline shifts or tasks without consequence.
It is also important to note that, even where a volunteer is not considered an employee for employment law purposes, other legislation may deem volunteers to be 'employees' or 'workers' for specific purposes, such as work health and safety obligations and discrimination laws.
How we can help
If you have questions about volunteer arrangements or worker classification, please contact our specialist Charities and Social Sector team or our Employment team.