Defining Volunteer and Employee Relationships: Why It Matters and How to Mitigate Legal Risks

In many nonprofit and community-focused organisations, volunteers play a key role in supporting operations and delivering services. Their contributions are often essential, with volunteers giving their time, energy, and skills to benefit the community. However, as the lines between volunteering and employment blur, organisations can face significant legal risks and reputational damage if these relationships are not clearly defined and managed appropriately.

In this blog post, we explore why it’s critical to define volunteer and employee relationships, what legal obligations organisations need to be aware of, and how to mitigate the risks associated with misclassification.

Why Defining the Relationship Matters

At first glance, the distinction between an employee and a volunteer may seem obvious. Employees are paid staff who perform tasks under contract, while volunteers offer their services without financial compensation. However, in practice, the line can be much less clear—particularly when the volunteer role isn’t defined or volunteers receive benefits beyond basic reimbursement. In legal and operational terms, the distinction between a volunteer and an employee is significant.

1. Legal Compliance

Employment laws exist to protect workers’ rights, covering areas such as wages, working hours, benefits, health and safety, and protection against unfair dismissal. If an organisation misclassifies someone as a volunteer when they are effectively performing the role of an employee, they may be liable for unpaid wages, taxes, and benefits. Legal disputes can be costly and damaging to an organisation's reputation.

2. Insurance and Liability

Employees and volunteers are typically covered under different insurance policies. Employees may be covered under workers' compensation schemes, while volunteers may require separate public liability or volunteer workers insurance. Misclassifying a volunteer as an employee or vice versa can leave gaps in coverage, putting both the individual and the organisation at risk if an incident occurs.

2. Insurance and Liability

Employees and volunteers are typically covered under different insurance policies. Employees may be covered under workers' compensation schemes, while volunteers may require separate public liability or volunteer workers insurance. Misclassifying a volunteer as an employee or vice versa can leave gaps in coverage, putting both the individual and the organisation at risk if an incident occurs.

3. Fairness and Expectations

Defining roles helps set clear expectations on both sides. Volunteers need to understand what is expected of them and what they can expect from the organisation. Likewise, employees need clarity on their obligations and responsibilities. Without defined boundaries, issues of burnout, overcommitment, or conflict can arise.

Understanding Your Legal Obligations to Volunteers

Legal obligations vary across countries, so it’s important to first connect with the relevant organisations who champion volunteering in your country. This can include national peak or state bodies, DOVIAs or organisations such as NCVO in England. Many of these organisations provide training and resources to support you with understanding your legal obligations to volunteers. For example, in Australia, Justice Connect’s Not-for-profit Law in consultation with Volunteering Australia have created the National Volunteer Guide, which provides information about legal obligations Australian organisations owe volunteers as well as templates, tips and practical examples.

Best Practices for Managing the Relationship

Managing the boundary between volunteer and employee relationships takes proactive, transparent approach. Here are key steps to mitigate risk:

1. Define Roles and Expectations: Create role descriptions for both volunteers and employees. Make sure the boundaries are clear to avoid role creep or duplication. Additionally, role descriptions provide clarity around expectations of volunteer’s performance should grievances arise.
2. Include the right people in the development of new volunteer roles: When developing a new volunteer role understand who is impacted and include them in the role development. This will support change management and reduce important information being missed. Additionally, for some organisations this can include involving trade unions.
3. Develop a Volunteer Agreement: : Avoid using language that implies an employment relationship. A well-drafted volunteer agreement sets expectations while clarifying:
   
   - The volunteer role is unpaid
   - Participation is voluntary and can be ended by either party
   - The agreement does not create an employment relationship
4. Provide Training and Support: Both volunteers and employees should receive appropriate induction, ongoing training and supervision. Training provided should include safety obligations and organisational policies.
5. Create Feedback Channels Establish forums for both volunteers and employees to express concerns, suggest improvements, and provide feedback. Listening to all voices fosters a collaborative culture.
6. Recognise Contributions Equitably: Celebrate and recognise the contributions of volunteers and employees alike. Recognition doesn’t have to be monetary — a thank-you event or feature in a newsletter can go a long way.
7. Review Policies Regularly: Ensure your volunteer policies, safeguarding procedures, and grievance mechanisms are up to date and aligned with current legal standards.
8. Avoid Payment: While it’s common to reimburse volunteers for out-of-pocket expenses, organisations should avoid offering stipends, honorariums without seeking legal advice. These can be misinterpreted as wages or compensation.
9. Maintain Records: Keep clear and accurate records of volunteer roles, hours, agreements, reimbursements, and training. This documentation can help defend your organisation in the event of a legal claim or dispute.
10. Review Regularly with Legal Counsel: As laws and organisational needs evolve, it’s vital to periodically review your volunteer policies and practices with qualified legal advisors. This ensures ongoing compliance and risk management.

The relationship between volunteers and employees is delicate but essential. When managed thoughtfully, it can lead to a thriving, mission-driven organisation built on respect and shared purpose. But when ignored or mishandled, it can breed resentment, disrupt operations, and expose the organisation to legal liability.

By understanding and adhering to legal obligations, clearly defining the volunteer role and putting robust policies in place, organisations can foster a safe, compliant, and mutually beneficial environment for both employees and volunteers. In doing so, they protect their mission, their people, and their long-term sustainability.

The information in this blog is not legal advice and is provided by the author as opinion from her experience working in the volunteering sector for over 20 years.