Below is a summary of the risks in developing contracts and has been prepared by James Sinclair Taylor who is a partner in Sinclair Taylor and Martin, Solicitors, advising a range of charities and volunteer using organisations and was prepared for Volunteering England.
Charities and other voluntary organisations, which allow the distinction between, paid employees and volunteers to become blurred create a real risk for themselves. As has happened in the past, volunteers can successfully assert that they are in fact employees rather than volunteers. A volunteer who asserts that they are an employee can change from being a positive resource to a potentially large liability.
Firstly the boundary between a contract of employment and a volunteering arrangement is an ill-defined one and it is possible for a voluntary organisation to cross that boundary without consciously intending to do so. In deciding whether a relationship is one of employment or volunteering the test applied is one of fact. A court/tribunal will look at the particulars of each case i.e. the factual reality, not what you want it to be or intend it to be. The greater pressures on charities to deliver, particularly where contracts have replaced grant-funding means that the input of volunteers may be crucial. That pressure may lead organisations or their local branches or projects to offer inducements to volunteers in order to ensure reliable input. Such an inducement or consideration immediately raises the risk of a contract being created.
Volunteer or employee, is there a contract?
In order for there to be a contract of employment three tests must be satisfied. There must be an offer and acceptance leading to agreement; there must be an intention to be legally bound (a contractual intention), and there must be consideration.
The growth of quite formal written agreements setting out the organisation’s policy towards their volunteers can create difficulties. Volunteer agreements should be carefully checked to ensure that the agreements do not create a contract. In reviewing any agreement words with contractual connotations such as “agreement”, “contract”, “pay”, “holiday” should be avoided. Also, avoid using the language of mutual obligations. A contract is much more likely to be implied if the volunteer is expected “to do something in return for receiving something”. The agreement should carefully use a language setting out “intentions”, recalling “policies” and expressing hopes, rather than any more binding phraseology. Insert a clear statement that no contract or relationship of employment is being created, but do not be lulled into thinking that this will solve everything. Even if a clear statement is there if everything else points to the contrary the court/tribunal will find on the central facts.
The essence of volunteering is that it is a gift relationship. The volunteer can withdraw from it whenever he or she wants. Neither volunteer nor charity can legally force the other party to perform. An intention to be legally bound may be inferred by an agreement, or from custom and practice. A situation may arise where the parties must be presumed to intend that obligation to be binding. If volunteering for a number of days gives certain rights – to free access, privileges, holidays, or other encouragement\’s – then even if they may only have a limited monetary value, the court may well take the view that it was intended that the volunteer should have a right to these, i.e. that a legally binding obligation has arisen. In trying to be fairer to its volunteers and give something back to those who give something, many charities are quite understandably emphasising that volunteering brings benefits, but they must do so with caution.
Under English Law, every contract needs some form of consideration. Consideration is not limited to payment of cash or wages. A consideration is any benefit received (by the recipient) or any disadvantage or cost suffered by the providing party. This wide definition covers many things that are provided routinely to volunteers, for example, benefits such as free entry, free or reduced-price use of facilities, discounts on sales, being trained. Potentially fraught is the area of expenses. It is not consideration to repay a volunteer the expenses incurred. However, it is our experience that expenses are sometimes used to reward volunteers. In some organisations a standardised travel allowance is paid instead of the actual cost of travel, the difference between the actual travel cost and a larger payment is consideration. A wide range of payments will not create consideration necessary to support a contract, for example, genuine ex gratia payments. However, the law around such payments is complex. An Industrial Tribunal has accepted in a leading case involving the Auxiliary Coastguards that quite substantial regular payments can be made in circumstances where the rest of the relationship clearly indicates that they are not wages arising out of employment. In this case [Milton and Another v. Department of Transport COIT 5086/44] the tribunal indicated that the nature and organisation of the auxiliary coastguard meant that the payments were genuinely an allowance and not payment for work done. The boundary between a true volunteer and an employee is difficult to judge. That judgment is made more complex by the fact that the regulatory authorities, Industrial Tribunal, Inland Revenue, Health and Safety Law, National Insurance Rules draw the boundary in different ways. In a key case involving a claim against Relate in the Industrial Tribunal a “volunteer” established that the relationship between her and the voluntary organisation was not one of volunteering but one in which a contract of employment arose. The “volunteer” claimed for race discrimination [Maria De Lourdes Armitage v.Relate and others Case No. 43538/94 Folio reference 9/272/037]. In this case, the “volunteer” had applied to become a counselor. Relate clearly expected high standards from its counselors and had drawn up an agreement containing detailed obligations. Relate agreed to provide and pay for a programme of training and the counselor agreed to provide voluntary counseling. There was also the possibility of paid counseling work. There was no salary or pay but the tribunal found that the offer of training in return for the provision of counseling sessions together with the other terms amounted to a contract of employment.
Consequences of the Creation of a Contract of Employment
Once the contract arises the organisation’s responsibilities to the individual expand hugely and include:
– Duty not to wrongfully or unfairly dismiss with an attached liability by way of injunction, or damages or compensation claim
– Obligation not to discriminate under sex, race or disability legislation
– Redundancy and maternity rights
– Obligations under the Transfer of Undertakings Regulations, Health and Safety Regulations and to insure
Contract of Employment or some other type of Contract?
If a contract has been created with someone who was formerly thought to be a volunteer, it may be a contract for the delivery of services, i.e. with that person on a self-employed basis. Here legal obligations are much more limited but still could be important. If for example that person is involved in fundraising and there is a contract, but not a contract of employment, important duties arise under Section 59 of the Charities Act 1992 Part II in that the individuals may fall within the definition in Section 58 of Professional Fundraisers.
One issue that has created difficulties for a number of organisations is the question of copyright of material produced by volunteers. Volunteers often have a valuable role in creating plans, photographs or data. Under a contract of employment, the copyright for such material created by an employee for the employer during working hours will pass to the employer. However, under a genuine volunteering arrangement there is no such implied transfer of copyright. A situation may therefore arise where if a charity falls out with a volunteer the volunteer may withdraw his or her consent to the charity using the copyrighted material. If that material is or is about to be incorporated in major publications or core documents of the charity, the charity may find itself experiencing severe difficulties or embarrassment and potential financial loss if that material has to be extracted. It is clearly better to ensure that where a volunteer produces any material a simple agreement transferring that copyright to the charity is entered into.
In most situations, volunteers are going to remain clearly volunteers, but a variety of factors conspire to blur that boundary. The desire to document relationships creates “agreements” which look distressingly like contracts of employment. The desire to be fair to volunteers creates “benefits” which may provide “consideration”. The pressures of service delivery, safety requirements and good practice create a need for reliability and consistency by volunteers which may give rise to a relationship where the mutuality of legal obligation central to a contract arises. Good practice and regular reviews of both the way in which the volunteer arrangement is documented and rewarded can help prevent the unexpected claim. Once created a contract of employment is now much more likely than ever to give rise to the potential for a substantial claim because the rights of employees have been extended to all part-time workers however irregular their part-time work, [The Employment Protection (Part-Time Employees) Regulations 1995 S.1 1995/31], and therefore many more of those “volunteers” who are in fact employees will qualify to bring claims. It must also be remembered that the right to bring claims for sexual, racial, or most recently disability discrimination, exists without a qualifying period and indeed prior to any selection. Employment law is one of the most rapidly expanding areas of law. It is also one of the most costly areas in which voluntary organisations can make mistakes. Unexpected claims can be avoided with regular reviews. “
This material does not give a full statement of the law. It is intended for guidance only and is not a substitute for professional advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be accepted by the authors or Sinclair Taylor & Martin”