Many companies are unaware that they may be exposed to significant legal liabilities for engaging a person as an unpaid volunteer, if that person should have been engaged as a paid employee.
Interestingly, there is no statutory definition of what constitutes an employee. Under common law, an employment relationship exists if a person performs work
pursuant to a valid and enforceable contract of service. A contract of service can be oral or in writing, which means it can be very informal.
Even if the parties have no intention of creating an employment relationship, the courts can look beyond any agreement between the parties to determine the character of the relationship.
If a person is wrongfully classified as a volunteer, they may have statutory rights to certain employee benefits such as minimum wages, paid leave and superannuation. They may also be entitled to the benefits of terms and conditions of employment under an industrial instrument such as a modern award or enterprise agreement. If a company fails to provide these benefits, they could face a claim for back payment of entitlements and the imposition of financial penalties.
In addition, employers have statutory obligations such as PAYG tax withholding, payroll tax and workers compensation. Again, penalties can be imposed for non-compliance with these obligations.
Legal action can be taken by the affected individuals themselves or by regulators such as the Fair Work Ombudsman
or the Australian Tax Office in response to complaints made by the affected individuals or a workplace audit.
From an immigration perspective, if the Fair Work Ombudsman identifies potential non-compliance with the provisions of the Migration Act 1958 and Migration Regulations 1994 during the course of its own investigations, it can alert the Department of Immigration and Border Protection.
Under the employer sanctions provisions within the Migration Act, employers must check a person’s right to work before employing them. It is unlawful to allow a person to work in breach of the conditions of their visa or to allow a ‘non-citizen’ to work.
Consequently, temporary visa holders may not have the right to work in Australia, depending on the conditions of their visa. If a person does not have the right to work, a company cannot simply engage them as a ‘volunteer’. If the person is performing an activity that is ordinarily performed by a paid employee (i.e. normally attracts remuneration), they may be held to be an employee and both the company and the visa holder could be in breach of the employer sanctions provisions. In addition to the potential imposition of financial penalties, this may also affect the company’s sponsorship status if it is an approved business sponsor under the 457 visa program.
An unpaid volunteer can cost your company more than you might think.