When does a volunteer become an employee?

[updated Aug 2004] D1 014
This is intended as guidance only and should not be considered legal advice

As volunteering has become more formalised, the grey area between employment status and volunteer status has increased. Much speculation is the result of a couple of cases which decided that volunteers had employee status in the eyes of the law. Employee rights include the minimum wage, rights against discrimination and unfair dismissal, rights to maternity leave, sick leave and holidays. Although it is clearly good practice to avoid discrimination and to treat volunteers fairly, this does not make it desirable that the distinction between employees and volunteers should be blurred.

Volunteering is a form of contribution distinct from employment - volunteers are not under the same obligations or responsibilities as employees, it is a more flexible arrangement and they need to be managed in a different way to staff. Keeping this clear for everyone makes it less likely your organisation will be unexpectedly met with the liabilities which go hand in hand with employee status i.e. liability for unfair dismissal or discrimination claims, or for payment of the national minimum wage.

This information sheet considers the differences between volunteering and employment, noting a few cases which have been decided in the past. The majority of volunteering is quite clear cut: someone giving of their time - maybe a couple of hours a week - and expecting nothing in return. The judgements in the cases where an individual has successfully argued they have employment status are not at all surprising when you look at the unusual arrangements in place. It is these sorts of unusual arrangements which organisations need to be careful don’t arise if they are not intended.

Unfortunately, it is not possible to come up with a checklist of points, which, if followed, will absolutely guarantee that a person will not be considered an employee. The difficulty for organisations is that the main guidelines are contained in decisions made at employment tribunals where no two cases will have the same facts. These decisions have been few and sometimes inconsistent. Having said this, the situation has now been made somewhat clearer by an Employment Appeal Tribunal decision, South East Sheffield Citizen’s Advice Bureau v Grayson [2004] IRLR 353. The Employment Appeal Tribunal set out what amounts to a robust defence of the concept of volunteering as a distinct, freely entered into relationship held by the majority of volunteer involving organisations.

However, volunteering is, as is always quoted, ‘a two way process’. Doing something in return for something is the basis of a contract - the issue is in what circumstances this could become an employment contract. There is no legal definition of volunteering. The National Minimum Wage Act defines a ‘voluntary worker’ but according to the Dept of Trade and Industry, ‘the intention is not for the voluntary workers exemption to be used as a precedent for defining volunteering’ .

Defining Employment

In order to be employed, there needs to be a contract, and then it needs to be shown that it is an employment contract.

The key legal ideas in defining a contract are ‘agreement’, ‘consideration’ and ‘intention’. A contract does not have to be written, and money does not necessarily have to be paid.

When looking at whether someone is employed under an employment contract, an Employment Tribunal will look at the whole situation, rather than looking at isolated facts. This, of course, makes the question of whether or not someone is employed harder to determine. It is crucial then, that a voluntary organisation looks at the whole situation concerning the role of volunteers in the organisation.

One way to think about it is to consider whether there is mutuality of obligation between the organisation and the volunteer. In a true volunteering situation there is no legal obligation on the part of the volunteer to do the work, nor is there an obligation for the organisation to offer work. ie there is no legally enforceable employment contract.]

‘Intention’ - Was it intended that an employment situation be created? Things which might count here are whether other people do the same tasks and have similar responsibilities but are employed. Is the voluntary work intended to lead on to paid work? If so, is there a clear change between volunteering and employment? How does the wording and formality of your volunteering agreements compare with your staff contracts? The onus is on the party trying to avoid a contract to show that there is no intention to create one (as noted in Alexander v. Romania at Heart).

‘Consideration’ is the exchange of something of value between the volunteer and the organisation. Usually, in an employment contract this is wages, but it could be other things such as training or ‘perks’. Are regular payments given that are above out of pocket expenses? Just labelling the money as expenses can’t disguise the reality of a salary being paid (Migrant Advisory Service v. Chaudri). It is often a question of degree when deciding whether training and perks amount to consideration. In Gradwell v. Council for Voluntary Service Blackpool, Wyre & Fylde training was held not to amount to consideration. However, in Armitage v. Relate, training was decided to be consideration, partly because the volunteer had to repay the costs of training if they left.

Keeping the Differences Clear

In avoiding an employment situation arising, it is important to think clearly about the difference between your staff and your volunteers. Much good practice in involving volunteers is based on employment practice - such as equal opportunities, complaints procedure or having a written description of tasks. Staff procedures are a good starting point but need to be adapted with the role of the volunteer in mind. They need to be less formal than personnel policies but formal enough to ensure clarity. eg Volunteer Agreements, Volunteer tasks lists, Equal Opportunities Policy and Complaints Procedures.

Payments

The safest system is to make payments on receipts only, and it is a good idea to keep receipts and records of money paid out in case there are queries. No-one should be out of pocket for volunteering. Rewards, presents and one-off payments, such as ‘honoraria’ can be problematic if it can be shown that there was an expectation that the volunteer would receive something for their work. An honorarium is only acceptable if it is both totally unexpected and there is no precedent surrounding it. Otherwise it is taxable and could give the volunteer employee status. There is also a danger of creating bad feelings amongst those volunteers who don’t receive them. It is best to be wary about paying honoraria, instead you could always invest in making volunteering roles more rewarding by offering better training (see below), more social activities, extra resources or outings to say thank-you.

Volunteer Agreements

It is important to have a volunteer agreement, while making clear that this serves to clarify what the volunteer and organisation will be doing and does not imply an employment contract. They ought to be less formalised using language such as ‘expect’ and ‘hope’ instead of ‘must’ and ‘will’. A voluntary work outline is also a useful document that needn’t be avoided for fear of creeping towards an employment arrangement.

Perks

Avoiding ‘consideration’, does not mean stopping all support for your volunteers. It is important to make volunteers feel valued by offering ‘thank yous’ such as xmas lunches, or social evenings. Where it becomes difficult, is when these perks become expected, regular, of increased ‘money’ value.

Training

It is also appropriate for people to use volunteering as a means of extending their skills through benefiting from training related to their volunteering. However, do be careful, as it might become ‘consideration’ if training is not related to the volunteering and is seen as something given in exchange for the work done. eg. paying for computer training if this isn’t used for the work done.

The National Minimum Wage

The National Minimum Wage Act 1998 (as amended) excludes “voluntary workers” (section 44). To ensure volunteers are kept outside the scope of the Act, the key points to remember are:

pay expenses on receipts or a flat rate as near as possible to the genuine amount (as was done in Gradwell v. Council for Voluntary Service Blackpool, Wyre & Fylde).
training given should be related to the job done.
provision of subsistence is OK if the need arises from doing the voluntary work, but where this is made as a money payment, it should not include money for accommodation. (section 44(4))
consider any other perks or benefits given to volunteers carefully as these could begin to edge a volunteer towards possible employee status.

The Whole Picture

It is the combination of factors which matters rather than any single factor in isolation. So, if the arrangements for your volunteers fall into any of the difficult areas mentioned in this factsheet, you should think through how to make the distinction between volunteers and employees clearer. It should be thought of as a scale with volunteering for no benefit at one end and waged employment at the other. Volunteering is a two way process - volunteers need to get something out of their experience of volunteering - but this need not make them employees. Having said this, it is important that organisations do not cut back on the support they give to volunteers unnecessarily because they fear it will constitute an employment contract.

Further Information

The National Minimum Wage Act 1998 Ch.39 section 44

Bowgett, Kate et.al. ‘Expenses, Benefits and the National Minimum Wage’ in The Good Practice Guide (2002, 2nd edition), The National Centre for Volunteering (pp.106-113)

Volunteering England, Managing Volunteers: Appeal tribunal clarifies volunteering relationship http://www.volunteering.org.uk/missions.php?id=823

Volunteering England, Managing Volunteers: National Minimum Wage and Expenses http://www.volunteering.org.uk/missions.php?id=432

The Cases:

Armitage v. Relate 1994, Folio 9/272/037

Mrs Armitage was a volunteer counsellor who an Industrial Tribunal decided was an employee. Volunteers had to agree to undertake a minimum 600 hours counselling or repay the cost of the training they had received. After three years, counsellors could become paid employees or have some sessionnal paid work. The obligation to repay the costs of training and the requirement to work 600 hours constituted “employment” for the purpose of bringing a claim under the Race Relations Act 1976. It was noted that ‘if Relate Cleveland wanted to they could sue a counsellor under the terms of the agreement to recover losses sustained in training expenses.’

Alexander v. Romania at Heart, 1997, Folio 14:142:44

Mrs Alexander ran a charity shop for three years with managerial and financial responsibilities. She had a job description, was paid expenses and received training. Although training could amount to consideration, because the organisation had no obligation to provide it, it did not count. The skills which Mrs Alexander learned simply accrued to her and were not supplied as a benefit to her by the shop. Therefore she was not an employee.

Migrant Advisory Service v. Chaudri, 1998, EAT/1400/97

Over three years Mrs Chaudri was paid £25 per week which was raised to £40 per week for doing administrative work four mornings a week. This was despite her having no expenses, such as lunch or travel. She was also paid when she was off sick or on holiday. It was decided that the money given to her counted as wages, as it was a regular amount which was not related to any expenses incurred. This was ‘consideration’ and meant she was employed.

Gradwell v. Council for Voluntary Service Blackpool, Wyre & Fylde, 1997 Case No:2404314/97

Volunteers signed a volunteer agreement. Other than attending training and a meeting once a month, there were no set minimum hours. They were paid actual expenses only. It was decided that neither payment of genuine expenses or providing the training amounted to consideration.

Further information

Advice, information and support on all aspects of volunteer management can be obtained from the Resource Unit at Volunteer Centre Edinburgh – Telephone: 0131 225 0630, Email: admin@volunteeredinburgh.org.uk and from our website www.volunteeredinburgh.org.uk

See also Volunteer Centre Edinburgh Factsheets on:

Volunteering and Welfare Benefits http://www.volunteeredinburgh.org.uk/resources/benefits.htm

Volunteer Expenses http://www.volunteeredinburgh.org.uk/resources/Expenses.htm

BECOME RICHER. WORK FOR NOTHING.