Not so kind

December 2007

Kathryn Lloyd explains how charities can minimise costly employment tribunal claims...

The recent influx of employment litigation, resulting in an increase of 15% in the total number of Employment Tribunal claims brought between April 2006 and March 2007, has had a serious impact on charities and not-for-profit organisations.

There are usually three main reasons why this sector is particularly exposed to tribunal claims:

A reliance on volunteers with a corresponding wish to show them gratitude;
An aversion to confrontation and reluctance to tackle poor performance - charities like to be kind;
The fact that the sector attracts litigious or potentially litigious individuals who are keen to exercise their perceived employment rights.

Charitable organisations are under more pressure than ever to demonstrate their charitable purpose and public benefit so it is crucial to consider what steps can be taken to minimise unnecessary exposure to litigation which serves as an unwelcome distraction from the worthwhile causes served by the sector.

Dealing with volunteers

Most charitable organisations are highly dependent on volunteers and want to reward their freely given efforts. However, charities must watch how they go about this because volunteers can – and do – argue that they are technically ‘employees’ and therefore entitled to the full breadth of employment law rights. Of course, charities can thank their volunteers for the help they provide, but they must not be too generous or treat them in a similar way to employees as this can encourage employment litigation.

An individual must have been ‘an employee’ to bring an unfair dismissal complaint. To bring a discrimination claim, an individual must work or have worked under a contract personally to provide a service. In very general terms, when determining the employment status of an individual, Tribunals will look at the following factors:

Was there an obligation on the volunteer to do work and on the charity to give work?
What level of control does the charity exercise over the volunteer?
Does the volunteer have to do work personally?

The other key issue is whether there is a legal ‘contract’ with the volunteer. To show that there is no contract, a charity needs to demonstrate:

the absence of any intention to create a legally binding relationship;
the absence of anything of value passing to the volunteer in exchange for his work (‘consideration’) ; and
the absence of any enforceable obligations on either the charity or the volunteer.

Volunteer agreement

In order to reduce the risk of litigation from individuals working within the voluntary sector, volunteers should provide their services on an informal basis. This can be achieved either by having no document or by requiring volunteers to complete a volunteer agreement before they start.

A volunteer agreement – whether written or just spoken – must not impose any specific obligations on either party. Particular care should be given to the following:

Minimum number of sessions. If the charity says it hopes to offer a volunteer a [minimum] number of sessions per year, it should go on to state that the charity recognises that the volunteer may choose not to provide voluntary services at each session.
Non-attendance. The agreement should acknowledge that there is no obligation on the volunteer to do work or to give any notice in the event that the volunteer is unable to attend. The agreement may state that if a volunteer is unable to attend a session for which they are on a rota, they could be ‘requested’ to swap with another volunteer or to contact the manager for alternative arrangements to be made. The agreement should clarify that volunteers are not personally required to attend any particular session for which they are on a rota.
Holidays. The agreement can express the charity’s hope that a volunteer would inform the organisation of their intention to take holidays in order to help their planning, but make it clear that there is no obligation on the volunteer to do so.
Penalities and sanctions. Absolutely no sanctions should be imposed if a volunteer is unable to volunteer in the manner that is hoped by the charity.

It is advisable throughout the relationship to avoid using language which would normally be used in an employment relationship. So, rather than a volunteer being ‘suspended’ or ‘dismissed’, they should be told their services are ‘not required’ – either temporarily or permanently.

Volunteer benefits

Out-of-pocket expenses do not affect the status of a volunteer if the charity is only reimbursing the actual expenses the volunteer has incurred when carrying out a volunteering activity – there should be no benefit to the volunteer.

Charities often require their volunteers to undertake some training before they carry out their volunteer duties. Can this be perceived as ‘consideration’ and lead to a finding that a contract was in place? A charity should be able to argue successfully that basic training does not amount to consideration but provides volunteers with the necessary tools of the trade. Volunteers must not be provided with training unrelated to their voluntary work where for example it happens to be available to staff or, worse still, where the training enhances the volunteer’s transferable skills.

Relevant cases

In South East Sheffield CAB v Grayson[i], the Tribunal considered the status of the Bureau’s volunteers. The Bureau had a volunteer agreement which referred to a ‘usual minimum commitment of six hours’ but the Bureau maintained there would be no sanction for a volunteer who did not meet this ‘commitment’. The agreement was drafted in terms of the Bureau’s ‘hopes and expectations’. Out of pocket expenses were reimbursed and training was provided. The EAT found this was not a contractual relationship.

However in Migrant Advisory Services v Chaudri[ii], Mrs Chaudri claimed that she was an employee for the purpose of bringing her complaints of unfair dismissal and sex discrimination. Mrs Chaudri was paid £40 ‘expenses’ per week even though she incurred no actual expenses. She received these payments even when she was sick or on holiday. It was held that this created a contract of employment, and the decision was upheld by the EAT when Migrant Advisory Services appealed.

Underperforming employees

Employers may think they are being kind to an employee by not making a fuss about underlying performance concerns (charities are particularly prone to this) but procrastination always makes matters worse. Performance problems not addressed at an early stage can result in the line manager viewing dismissal as the only option later down the line; but the employee has not been made aware that the employer has any concerns in respect of his performance or had an opportunity to address them. If an employer proceeds to dismissal in such circumstances, an employee (with one year’s service) is almost certain to succeed with a complaint of unfair dismissal.

In order to avoid this situation, the following steps should be taken:

Hold a meeting with the employee to advise him of your concerns, set clear objectives with realistic timescales and agree a period within which performance will be reviewed, and confirm this in writing.
Carry out a performance review against the set targets once the employee has had the opportunity to put things right. This will determine whether or not the employee has achieved the agreed objectives.
If the objectives have not been met, instigate a disciplinary or capability procedure. If appropriate, the employer can issue a formal warning and clarify the level of improvement required by the next review date.
Keep the employee’s performance under review and if necessary, proceed to the next stage of the disciplinary procedure if the employee still fails to meet the required standard.

The ‘charitable’ nature of voluntary organisations is often visible in the misguided approach to employee relations. For example, where an employee resigns with immediate effect without giving notice, a charity employer has been known to make a payment in lieu of notice even though the employee is not entitled to one. Charity employers are not permitted by the Charity Commission to make any ex gratia payments without its express approval. However, if a charity believes a termination payment is beneficial to the charity – possibly to head off Employment Tribunal proceedings – legal advice should be taken and a binding compromise agreement drawn up with the employee.

Charity employers must remember their rights and not be afraid to refuse requests from employees asking for more than they are entitled to.

Employment policies and procedures

The most effective way to reduce the risk of employment litigation is to adopt clear employment policies and procedures and apply them consistently. This is particularly important in the context of conduct and capability issues and it must be clear to both parties from the outset what the consequences will be if the employee is found to have committed acts of misconduct and/or to have failed to meet the required standard of performance.

Risk and reputation

Charities are highly protective of their reputation because of their reliance upon public funding and the goodwill of volunteers. So they avoid litigation where possible because, even if they have acted properly, allegations of unfair treatment or discrimination are seen to be damaging. However, it is usually better to fight a strong case and win it, and have a good press and communications strategy, as an over-reliance on settlement can open the floodgates to further spurious claims. Where the prospects of success are very low and/or where the potential costs of defending the claim are disproportionate, it is of course sensible to attempt to settle out of court.

Employees in the charity sector have a passion for a good cause. It is no coincidence that they are more willing than most to bring a complaint against their employer in the event that the relationship turns sour. The risk of litigation can be reduced by being open and frank with employees, adopting clear policies, managing poor performance early and consistently, and avoiding the common pitfalls with volunteers.

[i] South East Sheffield CAB v Grayson [2004] IRLR 353

[ii] Migrant Advisory Service v Chaudri [1999] 28 ILJ3 249 EAT