Employees or Volunteers? A Vital Distinction for NFPs

Employment and other engagements (such as volunteer engagements) are different when it comes to protections under the Fair Work Act (FW Act), and only employees are protected from unfair dismissal provisions under the FW Act writes Employment Lawyer, Amogh Kadhe.

The recent FWC case of Paul Mifsud v The Fire and Rescue NSW Band Incorporated and Jason Webster v Fire and Rescue NSW Band Incorporated [2024] FWC 853 showcases the importance of distinguishing between an employee vs a volunteer. The FWC’s decision highlights the test for determining whether an employment relationship exists in a given scenario and the sort of factors will be considered before coming to that conclusion.

What happened in this case?

Paul Mifsud and Jason Webster (Applicants) were members of the Fire and Rescue NSW Band (with Mr Mifsud being a longstanding member, having volunteered with the band for 37 years) and brought separate actions for unfair dismissal against the Fire and Rescue NSW Band Incorporated (Respondent) claiming that they were employees of the Respondent.

The Respondent filed its own response to the unfair dismissal application arguing that neither of the Applicants were employees but were engaged by the Respondent as volunteers.

The Applicants argued that they were employees of the Respondent because of a variety of factors that suggested an employer – employee relationship existed between the Applicants and the Respondent. These included attendance requirements imposed by the Respondent, payments made by the Respondent to the Applicants for attendance at rehearsals and performances, provision of uniforms, and other factors.

The key question before the FWC was to ascertain whether the Applicants were protected from unfair dismissal under s382 of the FW Act.

If they were protected from unfair dismissal, then an appropriate remedy could be granted, however the FWC found both Applicants to be volunteers of the Respondent and were not protected from unfair dismissal under s382 of the FW Act, and their application was dismissed.

Why does the distinction matter? 

The volunteer versus employee distinction is important to make, and one that isn’t always simple. However if an organisation fails to correctly classify it’s employees (in other words, they treat volunteers who are in fact employees) they can be exposed to considerable penalties, both against the company and personally, as well as being required to provide back pay (for leave entitlements, minimum wages, superannuation etc.)

There are also new wage theft laws popping up around the country, including in Victoria, that can result in criminal penalties where organisations and/or individuals deliberately and dishonestly withhold employee entitlements.

Key takeaways for NFPs

 Key takeaways from the decision in Paul Mifsud v The Fire and Rescue NSW Band Incorporated and Jason Webster v Fire and Rescue NSW Band Incorporated [2024] include:

Volunteer vs employee distinction: Volunteers cannot seek remedies under the Fair Work Act for unfair dismissal – which applies strictly to employment relationships.

Contract basics matter: Employment relationships only exist where a person agrees to perform work pursuant to a ‘contract of service’ or a ‘contract of employment’. When in doubt, it is important to go back to basics, that for an agreement to be enforceable as a contract the following must occur:

• parties must have reached agreement as to the terms of the contract;

• consideration must be provided by both parties to each other;

• agreement must be intended to be legally enforceable; and

• the terms of the agreement must have sufficient certainty;

Internal guidelines vs employment contracts: Internal documents such as the ‘Band Protocol’ or other policies which can unilaterally be changed will not generally be regarded as contracts of employment.

Draft clear agreements: This decision serves as a cautionary tale for organisations that engage volunteers in roles that might otherwise be considered as employment, emphasising the importance of clear agreements and the legal distinctions between different types of engagements (for example whether individuals are volunteers vs employees).

The decision in this case also underscores the need for clarity in the classification of roles within an organisation and the importance of formalizing employment arrangements where such an arrangement is sought by the parties and demonstrates the need for better communication between NFPs and its members, employees, volunteers and other stakeholders.

For help navigating employee dismissals or other workplace-related issues, please reach out to our Employment + Workplace Relations lawyers via: [email protected]