Your employment law obligations as a not-for-profit employer

Running a non-profit does not soften your obligations as an employer. The moment your organisation hires staff, it takes on the same duties as any commercial business, and the core of those duties sits in the Fair Work Act 2009 (Cth). What makes a non-profit different is the mix of people doing the work: paid employees, independent contractors and volunteers can all sit side by side, and the legal line between them is where many community organisations come unstuck.

This guide sets out the employer obligations that apply to a non-profit, who they apply to, and the consequences of getting them wrong. We cover worker classification, the National Employment Standards (NES), modern awards and enterprise agreements, work health and safety (WHS) and protection from discrimination. The Justice Connect Not-for-profit Law resources make the same point in a sentence: not-for-profit organisations have the same legal obligations as any employer to their workers.

Who the Fair Work Act obligations apply to

Most of an employer's obligations in the Fair Work Act 2009 (Cth) (the FW Act) apply to a "national system employer". Under s 14 of the FW Act, that includes a constitutional corporation, the Commonwealth and Commonwealth authorities, so far as they employ individuals. Most incorporated non-profits fall in the first bucket: if your organisation is a company limited by guarantee (the standard structure for a registered charity), it is a constitutional corporation and therefore a national system employer.

Two points are worth noting on scope:

• Unincorporated associations: Because every state and territory has referred its industrial relations powers to the Commonwealth, state laws extend national system employer coverage to most other employers that employ individuals. The main organisations outside the national system are state and local government bodies that state laws have specifically declared out.
• Small business status: If your non-profit employs fewer than 15 employees, some obligations are scaled down, for example in unfair dismissal and in how often you must re-issue the casual employment information statement. The small business threshold is not a licence to ignore the rest of the FW Act.

Classifying your workers: employee, contractor or volunteer

Before any obligation bites, you need to know which of the three worker categories each person falls into. The categories are not interchangeable, and the label you put on a relationship does not decide it:

• Employee: performs work under your direction and control, usually on an ongoing basis, cannot delegate the work to someone else, and is paid for time worked.
• Independent contractor: performs work under a contract for services, generally controls how the work is done, can delegate, and is paid for a result rather than for hours.
• Volunteer: provides services without an enforceable right to payment. Volunteers are not employees and are largely outside the FW Act, but they are still owed WHS protections and state laws protect them in other ways.

The FW Act has tightened how this classification is done. Since 26 August 2024, s 15 of the FW Act defines an employee by the ordinary meaning of the term, and the courts look at the real substance of the relationship, not the wording of the contract. The Fair Work Ombudsman's unpaid work fact sheet reflects the same shift. The Australian Taxation Office also draws the same three-way distinction, because employees and contractors are treated differently for tax, superannuation and payroll purposes.

Misclassification is expensive. Passing off an employee as a contractor can trigger sham contracting penalties, back-pay claims for entitlements, and unfair dismissal exposure. Treating a paid worker as a "volunteer" to save money is the same trap in another costume. The line that matters most for a non-profit is the one between volunteers and employees: a person who works regularly under direction in return for payments that look like wages will usually be an employee, however the relationship is described.

The National Employment Standards

The NES in Part 2-2 of the FW Act is the floor that no employer can go below. Section 61 says plainly that these are minimum standards that cannot be displaced, even by an enterprise agreement. The standards cover:

• maximum weekly hours and reasonable additional hours;
• requests for flexible working arrangements;
• casual employment rights, including the pathway to permanent employment;
• parental leave and related entitlements;
• annual leave;
• personal/carer's leave, compassionate leave and paid family and domestic violence leave;
• community service leave;
• long service leave;
• public holidays;
• superannuation contributions;
• notice of termination and redundancy pay; and
• the Fair Work Information Statement.

Two obligations in the NES trip up non-profits because they are administrative and easy to miss. Under s 125 of the FW Act you must give every new employee the Fair Work Information Statement before, or as soon as practicable after, they start. Under s 125B you must give casual employees the separate Casual Employment Information Statement when they start, and again at six and twelve months of employment, although the six-month repeat does not apply to small business employers.

Modern awards and enterprise agreements

On top of the NES, most employees are covered by a modern award that sets minimum pay rates and conditions for their industry or occupation. There are more than 100 modern awards, so the first task is to identify which one covers your organisation. Award coverage turns on the award's coverage clause and the work actually performed, and the Fair Work Ombudsman's list of awards and the Fair Work Commission's award finder are the places to start. Many funded community-services organisations, for example, sit under the Social, Community, Home Care and Disability Services Industry Award, while an op-shop's retail staff will usually fall under a retail award. If no industry award covers the work, the Miscellaneous Award operates as a catch-all.

Award rates are not static: the Fair Work Commission reviews minimum wages each year, and award rates are adjusted from 1 July. Paying below the applicable award rate is an underpayment, whatever your funding situation.

An alternative is a registered enterprise agreement. Where an enterprise agreement covers employees, it displaces the award for them, but the agreement must leave each employee better off overall than the award would, and it still cannot go below the NES. Negotiating and approving an enterprise agreement is a substantial project, and for most small non-profits the simpler path is to apply the right award and pay above it where the role demands.

Work health and safety

WHS is governed by the model WHS laws, which Safe Work Australia developed and every jurisdiction except Victoria has enacted as its own legislation; Victoria retains its own OHS Act. The key concept is the person conducting a business or undertaking (PCBU), and s 5 of the model Work Health and Safety Act 2011 (NSW) makes clear that it does not matter whether the business or undertaking is run for profit or gain. A non-profit with staff is a PCBU.

There is one genuinely important carve-out for community organisations. Under s 5(7) and (8) of the NSW Act, a volunteer association does not conduct a business or undertaking for WHS purposes, and a volunteer association is defined as a group of volunteers working together for community purposes where none of the volunteers employs any person. The moment your group employs its first paid worker, that exemption ends and the full PCBU duties apply.

The duties that then attach are:

• the primary duty to ensure, so far as reasonably practicable, the health and safety of workers and others affected by the work;
• the duty on officers to exercise due diligence to make sure the organisation complies. Under s 27 of the NSW Act, a director or board member of an incorporated charity is an officer and is personally exposed, even if unpaid. The volunteer exemption in s 34 is narrower than it sounds: it excuses volunteers from most duties but not from the duties every worker owes, and an officer of an unincorporated association can still be liable even though the association itself cannot be prosecuted.

WHS breaches are criminal offences, not civil fines. The most serious category, engaging in conduct that exposes someone to a risk of death or serious injury with gross negligence or recklessness, carries imprisonment as well as fines, and in NSW the maximum is 10 years' imprisonment, with companies exposed to penalties of millions of dollars. A practical WHS program for a non-profit covers hazard identification (including lifting and manual handling, which causes many charity injuries), training, consultation with staff and volunteers, incident reporting and regular safety reviews.

Discrimination and the general protections

The FW Act's general protections make it unlawful to take "adverse action" against an employee, prospective employee or contractor because of a protected attribute. Section 351 of the FW Act lists the attributes: race, colour, sex, sexual orientation, breastfeeding, gender identity, intersex status, age, disability, marital status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction and social origin. Section 342 defines adverse action to include dismissing someone, injuring them in their employment, altering their position to their prejudice, and refusing to hire them.

The reverse onus is the feature that makes this area dangerous for employers. Under s 361 of the FW Act, once an applicant alleges that action was taken for a prohibited reason, it is presumed that it was, unless the employer proves otherwise. There is an exception where a protected attribute is an inherent requirement of the job, such as requiring a support worker of a particular background for a specific program, but the employer carries the burden of establishing it.

State and territory anti-discrimination laws apply at the same time, so conduct can be challenged under both regimes. The practical protections are the same ones a commercial employer should have: documented, merit-based recruitment and promotion processes, consistent performance management, and staff training so that decisions are made on demonstrated criteria rather than assumptions.

A compliance checklist for your non-profit

Work through each of these items to keep your obligations current:

• Classify every person who works for you as employee, contractor or volunteer, and review that classification against the substance of the arrangement, not the contract label.
• Give each new employee the Fair Work Information Statement, and casuals the Casual Employment Information Statement, at the right times.
• Identify the applicable modern award, pay award rates plus the NES entitlements, and review rates after each annual wage review.
• Treat WHS as applying from the day you employ your first paid worker, and make sure your board understands its officer duties.
• Put in place merit-based recruitment and management processes that can withstand a general protections claim.
• Keep the records the FW Act requires and seek advice before restructuring who does the work.

When you need a lawyer

The points at which a non-profit should bring in an employment lawyer are the same as for any employer, with one addition. Classification advice is the most common need: before you engage a worker as a contractor, or rely on volunteers to do what looks like paid work, it is worth having the relationship structure reviewed, because the cost of getting it wrong is back-pay plus penalties. A lawyer can also help identify the right award, draft employment contracts and workplace policies, prepare for a Fair Work Ombudsman investigation, and defend an unfair dismissal or general protections claim, where the reverse onus makes self-representation risky.

Start with an audit of who works for you

The single most expensive mistake a non-profit can make is to assume that goodwill solves legal problems. Regulators do not discount underpayments or safety failures because the organisation is a charity, and the FW Act's definition of employee now points firmly at the substance of the relationship. The first action to take this week is an audit: list everyone who works for your organisation, write down what each person actually does, whether they are paid, who directs their work, and whether they can delegate it. That one-page snapshot will tell you which of your obligations are live, and it is the document a lawyer will ask for first. Get the classification right, and the NES, award, WHS and discrimination obligations that flow from it become manageable. Get it wrong, and every other part of this article becomes an expensive cleanup.