Some time ago, we queried whether punitive enforcement action against duty holders was the best approach for improving health and safety outcomes for Australian workers.

Since then, Australian Parliaments have been busy creating yet more offences for the statute books, that carry even more serious penalties. Industrial manslaughter is just one example. Cynics might interpret this as an attempt by Australian Governments to “be seen to be doing something” in respect of high work-related traumatic injury fatalities data.

Perceived (and actual) failures in numerous regulatory settings have been laid bare over recent years. The Financial Services Royal Commission and the ongoing Royal Commission into Aged Care Quality and Safety are just two examples of this. Those lessons have arguably informed current practices of Australian workplace safety Regulators.

As it is with the majority of the criminal law, discretion also underpins Australia’s patchwork of workplace health and safety laws. Just because something can legally be done, does not mean it should be done from a public policy perspective. As the old adage goes, ‘bad facts make bad law’.

Responsive regulation underpins most regulatory programs in Australia. It is an approach where a Regulator escalates or deescalates its response to duty-holders or issues on a sliding scale from ‘persuasive’ efforts to explain or encourage compliance, to a ‘mid-range’ of issuing notices, through to applying the ‘full force of the law’ – including commencing criminal prosecutions or revoking licences and permits. Responsive regulation is synonymous with the Enforcement Pyramids that form the basis of most Australian Regulators’ regulatory and enforcement policies.

As Professor Jeroen van der Heijden from the Victoria University of Wellington recently observed “[r]esponsive regulation asks regulators what it means to be responsive at different levels of the regulatory system, and how to be responsive”.

Those questions are devilishly tricky to answer. As Professor van der Heijden alludes to, those questions require Inspectors to be given adequate training and guidance to facilitate them exercising their discretion in an appropriate and consistent way. They also require Regulators to explain clearly to their stakeholders what “responsiveness” means under their regulatory and enforcement or prosecution policies.

The field of responsive regulation theory and practice is too vast to cover in this short blog.

No one denies the importance of enforcement action in the Courts for seriously deficient conduct that exposes persons to risk to their health and safety, as part of a broader regulatory response toolkit. The general and specific deterrent principles of the criminal law do have a proper application in a WHS context.

However, surely there is much to be gained through an informed discussion about:

  • how much “value add” specific categories of regulatory conduct contributes to improved health and safety outcomes in Australian workplaces, or furthers the statutory functions and roles of Regulators under WHS legislation; and
  • what different regulatory programs or approaches (aside from prosecutions) might be developed with limited tax-payer funds that better improve the health and safety of Australians at work.

The starting point may be asking the questions:

  1. what does “responsive regulation” in the safety space look like in 2020 and beyond; and
  2. how is that to be achieved?

A more pointed observation may be whether the current political climate in Australian jurisdictions sufficiently enables safety Regulators to ‘engage with risk’ and discuss these important questions in a meaningful way with their stakeholders.

 


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Seyfarth is excited to announce that Penny Stevens has joined the firm as a partner in Melbourne. Penny is a leading health and safety lawyer with more than 25 years’ experience advising on all aspects of work health and safety and criminal law.

Penny is known nationally for her expertise in both proactive risk mitigation as well as responding when an incident has occurred. Clients turn to Penny when it matters for representation and advice on prosecutions, coronial inquests and investigations.

“Penny is acknowledged as a market leading workplace health and safety lawyer who further enhances our reputation for high stakes litigation and advisory work for leading employers”, said Australia Managing Partner and co-chair of the International practice, Darren Perry.

“Penny’s extraordinary capability is well known to many of us at Seyfarth and to our clients. Her knowledge and experience in workplace health and safety is a fantastic addition to the firm as we continue to focus on responding to the complex workplace law needs of our Australian and international clients.”

Joining Penny at Seyfarth is Gina Carosi as a Senior Associate. Both Penny and Gina will work closely with the dedicated workplace health and safety team that includes partners Paul Cutrone and Sarah Goodhew, who was promoted to partner earlier this year.

 


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The novel coronavirus pandemic has put a spotlight on the mental health of workers.

The crisis posed immediate and acute challenges for organisations and workers. In an extremely short period of time, we have all had to navigate periods of isolation and loss of social interactions, new ways of working, constantly changing health messages and much more. The situation is unprecedented in our lifetime. One “silver lining” of the crisis, however, seems to be an uptick in awareness about and action taken in relation to mental health in the workplace.

The government has recognised that Australians need additional resources and support to “flatten the curve” of a mental health crisis while tackling the virus and has implemented a number of measures to achieve this goal.

In the context of work, there has long been an obligation on organisations to ensure, so far as is reasonably practicable, the mental health of workers. Officers of organisations have a duty to take reasonable steps to exercise due diligence to ensure that the organisation complies with its health and safety obligations. Workers themselves also owe a duty to take reasonable care for their own health and safety, and to take reasonable care that their acts or omissions do not adversely affect the health and safety of others. Current guidance from SafeWork Australia points to several psychosocial hazards relating specifically to Covid-19 that need to be considered, including isolated work.

With this in mind, many organisations have stepped up their mental health and wellbeing programs and tailored them to the situation at hand during the Covid-19 lockdown, based on expert guidance and in consultation with workers. We have seen organisations implement some great initiatives including:

  • enhanced Employee Assistance Programs and counselling sessions;
  • free or discounted online meditation, resilience training or yoga;
  • sharing information about the best mental health resources to deal with particular issues affecting workers; and
  • finding new ways to regularly share and “connect” with team members via technology.

Here at Seyfarth, the firm has implemented a range of measures to combat isolation, stress and anxiety. For instance, partnering with the Resilience Project to deliver a 10 part digital wellbeing series. As employees of the firm, we have found the evidence based practical strategies about nutrition, exercise and stress extremely useful and will continue to apply them as “normal” life resumes.

As restrictions ease and the return to work process begins, many risks to health and safety may remain. Until there is a solution to the health crisis in the form of a cure or vaccine, those that can work from home will likely continue to do so and office spaces will not look or operate in the way they did previously. However, every workplace has a different risk profile. It will be important to adopt a risk management based approach and continue to innovate and tailor solutions to the needs of your workforce even as we return to “normal” work. We are excited to see how Australian workplaces continue to lean into this challenge.

The Prime Minister has recently made an announcement about the process of “re-opening” the Australian economy, and a critical part of that being retraining and investment in skills development. Chris Gardner has also touched on the importance of HR in a crisis. This gave us reason to ask whether, even though some employers are going to need to be focussed on simply surviving, this might be a perfect opportunity to identify and target development of your emerging talent?

Like the “battlefield promotions” of past times, if you look to the longer term, the complex challenges coming out of COVID-19 could provide a unique chance to identify and accelerate your core group of emerging leaders so they’re ready to help take your organisation forward once the economy re-opens.

This is not just a “rapidly-changing environment” – it’s fair to say it’s been chaos. Managers are gaining decades worth of invaluable leadership experience in mere months. Leaders have had to learn overnight how to do business in a lockdown, and as restrictions begin to ease around Australia and other parts of the world, they will need to learn how to do business in a COVID-safe way.

While still in the middle of the scrum it may be difficult to spot your star players, but difficult times can draw out the best in natural leaders. There are a few things that will be worth starting to think about now:

  • looking “outwards” is important in the current environment, but don’t forget the development of the team itself, and the skills that future managers will need to succeed;
  • at least for the foreseeable future, managers will probably need to be adept at managing information flows, relationships, and culture in a socially-distanced but virtually-connected way – are your future leaders getting opportunities to practice? Many organisations are looking for ‘project’ work to keep teams productive and engaged whilst normal operations are interrupted. Is there scope to allocate stretch projects to your high-performers, backed with autonomy and accountability? It may be worth reminding senior managers to look out for chances to bring emerging leaders off the bench and give them a run;
  • all business leaders need to develop a level of comfort working in uncomfortable, uncertain circumstances, and that will continue to hold true. Less-experienced leaders will need to become skilled at strategic scanning – constantly looking to the future with an eye out for the best opportunities. To be future-fluent they’ll also need to hone a keen interpretive ability, to make sense of evolving situations and catch the curveballs.

Do you have a plan in place for supporting less-experienced leaders to develop the skills, confidence and agility needed to quickly action good decisions, without being frozen trying to reach ‘perfect’ decisions? And can you find ways to create rapid-cycle feedback loops to accelerate the learning process? Taking steps now to coach your talented team-members will help cultivate trusted leaders who have form in super dynamic environments, and can rise to the occasion when there is so much uncertainty ahead. With intentionality and some well-invested time, senior leaders can make big gains on one of the toughest challenges of all – building the next generation of leaders.

We work with human resources professionals everyday, and at all levels.

They have been at the forefront of dealing with the most dramatic change of our time felt directly in the workplace.

Overnight, most employers have had to confront not only change but the question of how growth, if not survival will look from here. This reality remains for most.

The role of HR has been key for employers who depend on the discipline. As perhaps the first global crisis in the modern HR era, HR’s value has shone in ways that will become more apparent as brighter days return.

If finance managers have provided valuable data and insight, human resources managers have proven invaluable, providing leadership in areas such as:

  1. A pillar for the SLT: because people are the business for many a business
  2. A cultural vanguard: because the way and ‘how’ a business responds is a test of culture, amongst other things
  3. A communication expert: because without it, a leadership vacuum is exposed
  4. Organisational glue: because every part of the business is touched in a crisis
  5. An architect and implementer of what’s next: because this is very necessary now
  6. Balancing competing interests: the present versus the future, financial versus workplace well-being
  7. Health and safety and employee welfare: for obvious reasons

HR has been at the forefront here, and rightly so necessitating: hard and fast decision making; assessing the balance of consequences; a call for deft judgment with the knowledge that uncertainty can be crippling for the human condition.

The “how’’ of getting people back to work is the next big rock for many as the balance between operating, but safety remains in sharp focus.

 


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As you will recall, the view of many is that enterprise bargaining in Australia has run its course. Essentially the view is that there’s little incentive for an employer to bargain (beyond avoiding harm to the business through a tumultuous bargaining campaign) nor for employees who, for some time, have only managed to extract very modest pay increases.

Modest wage growth has been a feature for some years as shown below (and note, by the way, the post GFC period 2008-2010).

Wage growth 1999-2019

The trend is similar under enterprise bargaining outcomes as the following reveals (with the 2019 growth similarly remaining flat).

Wage growth in public and private sectors

Pre COVID-19, there has been various commentary about the reasons for low wage growth with the best analysis recognising this as a worldwide phenomenon.

And now the wage outlook is worse. As the Governor of the Reserve Bank, Philip Lowe, recently stated, “With many firms delaying or cancelling wage increases, year-ended wage growth is expected to decline to below 2 per cent.”

Having worked with employers during and following the GFC, we can readily discern the following impact on enterprise bargaining:

  1. Bargaining will be stifled: there’s no or little cash out there in the private sector. So claims for job security for nominal wage outcomes will be common.
  2. Or not stifled: where a modest pay increase is agreed on a quick “rollover basis”.
  3. Short deals: particularly in the roll-over scenario. Single year deals will be seen again and often reached, informal MOU/agreements to continue the status quo.
  4. Variations to enterprise agreements: we’re seeing this now. Where employers are paying comfortably above award rates, some employers are looking for employee support to avoid the next wage increase.
  5. Terminations of agreements: less common, but for employers in distress, an option they’ll consider.
  6. Refusals to bargain: by employers, for obvious reasons.
  7. Co-operation: for a time, a greater willingness in some areas and by some unions to work in a genuinely collaborative way to ensure business and in-turn job survival.

Clearly, enterprise bargaining in the new world will be different for many. Accordingly, new thinking must follow.

 


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Last week I declared that most cases of employee underpayments are inadvertent and that businesses, especially large employers, are working on compliance measures.

Subsequently, we have seen more reports of underpayments by large employers. These are businesses who are conducting audits, reviewing their processes, and rectifying inadvertent errors. This is not wage-theft. They are doing the very things “asked” of them and are being pilloried nonetheless.

Here’s a shortlist, by no means comprehensive, of what employers grapple with in the quest for compliance:

  1. Multiple awards and enterprise agreements, causing uncertainty about which applies.
  2. Identifying which award actually applies as the “most appropriate” when two are capable of applying.
  3. Whether a common law contract provides for an adequate “set off” clause, such that the contract covers all payments under the award, as and when due.
  4. Monitoring casual work to ensure it is indeed “casual” work, and even then being uncertain that it is.
  5. Introducing “Bundy”-type clock-on / clock-off systems to accurately capture hours of work, only to be challenged about their legality, lest they invade “privacy”.
  6. Ensuring employees “work to the clock” and don’t self-regulate working hours (which is particularly difficult when dealing with highly motivated, outcome-­focused managers and professionals).
  7. Classifying employees correctly under an award or enterprise agreement.
  8. Ensuring salaries incorporate adequate amounts for fluctuating hours of work e.g. overtime, weekends, shift work and meal breaks.
  9. Managing payroll systems to deal with record-keeping requirements for different types of employees.
  10. Keeping records of any formal or informal agreements as to working arrangements.
  11. Ensuring external payroll providers have their systems correctly configured.
  12. Addressing flow on effects of award / enterprise agreement payment errors to other entitlements e.g. leave accruals and superannuation.
  13. Documenting employee agreement to change working arrangements on a day-to-day basis (or pay penalties under an award).
  14. Calculating personal/carer’s leave based on an average of hours worked when the law apparently requires something different.
  15. Keeping up to date with changes to awards and then interpreting the changes correctly: for example, there have been over 70 changes to the Retail Modern Award alone since 2015.

The list does not end here.

Almost daily, we read about employer failure to comply with award or enterprise agreement obligations. Opportunistically and in keeping with the sport of “business bashing”, the failure is termed “wage-theft”, as if to brand every failure deliberate and deserving of criminal sanction and as if to assume that compliance is easy.

I’m not here to condone such failures. The law is the law and it should be observed.

And it’s quite possible that in many organisations compliance has been taken for granted relying on payroll systems, often outsourced, to ensure employees are paid that which they are due.

The vast majority of failures will be inadvertent. I say this without the benefit of any data, but relying on anecdote and experience. And I’m speaking here of larger employers, being the end of the market we represent. Much of the business-bashing is from the ill-informed, or the well-informed but politically-motivated.

They might arise because a manager does what’s needed to do a job and her hours aren’t properly recorded. Or because the question of whether overtime is payable together with a shift loading is not understood. Or because employees working as casuals are not casual employees, after all. Indeed there are many opportunities for failure.

The due diligence needed by larger employers to best ensure compliance (and I stress “best ensure”) is no small exercise, demanding an understanding of which obligations exist, what they mean, and how they apply to a myriad of different ways employees might actually work. A root cause analysis for each is a major project. The controls needed to monitor compliance are extensive.

What is apparent, is that larger employers are heeding the need to be better. They are recognising that good governance demands and is demanding of better compliance.

They are reviewing their systems and processes.

They are conducting audits and typically with the help of a third party specialist together with legal support. They are rectifying shortfalls where these are identified.

Indeed there are all the hallmarks of business taking an approach to workplace compliance as they do occupational health and safety – embedded as part of everyday business.

It’s become a Board and C-suite issue, and rightly so.

 

Click here to see part 2 to this post.

 


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At first blush, time-honoured investment principles and the principles to be applied in getting good legal outcomes seem worlds apart. But after practicing law for eighteen years, and observing the financial markets, I have seen many parallels that run between the two.

The principles I touch on have been established by the greats, such as Warren Buffett (Berkshire Hathaway), Barbara Corcoran (real estate, and Shark Tank fame), Ray Dalio (Bridgewater Associates), George Soros (Soros Fund Management), Jim Simons (Renaissance Technologies) and others.

Although these great investors do not share the same methods, styles or work in the same markets, they do share common principles that are adaptable across a range of disciplines.

Harnessing successful principles from disciplines other than law provides an opportunity to shape better outcomes by looking through different paradigms. Rather than reinventing the wheel, adopt proven principles to make good decisions in complex situations.

Compound interest – the eighth wonder of the world

What Albert Einstein famously described as the eighth wonder of the world, compound interest is a game changer. Think about it like this, interest on interest is “free money” – an investor who earns a compounding return of 8% per year will double their capital every nine years, rather than 12.5 years for a non-compounding return. A 10% compounding return will double capital every seven years, rather than ten years for a non-compounding return.

This is a game-changer because it demonstrates how strong business decisions can have an exponential impact without added burden.

Strong businesses have strong foundations. These foundations are the product of many decisions, many small and some profound, which compound into building and maintaining a competitive advantage over time. The foundations of the business are made of steel. The same can be said about success in litigation. For example, strong underlying merits, front-end legal advice, clear well-drafted pleadings, foresight around how to prove an evidentiary case, and utilising the art of court-craft to present the evidence and law persuasively all lead to exponentially better results. While each small part may not seem important, dozens of well-executed decisions compound to generate an excellent result. If one or more of the elements is missing the results pull back to average.

Cover the downside – buy insurance

In the spirit of working smarter rather than harder, insurance is key to celebrating problems avoided rather than problems solved. Often we wonder whether insurance is really worth it, but for professional investors, it is the necessary cost of low risk business.

For example, an investor who spends $100 million on company shares betting they will go up has a lot to lose if they go down. The investor will typically “hedge” their position by shorting the same stock (essentially, a trading strategy using leverage that bets the value of the shares will go down) so that if the investor is wrong, the downside is covered at an acceptable price. This is a form of insurance bought because wise investors know the future is uncertain. However confident one is of an outcome, the opposite is always possible. An 80% chance of success still involves a 20% chance of failure, which can’t be dismissed with a wave of the hand.

Smart businesses buy insurance, whether for land or buildings, the use of auditing systems or use of subject matter professionals. In litigation, well thought through offers of compromise that take into account the right reference points can be worth millions. The same goes for obtaining award and enterprise agreement audit compliance advice. The cost of obtaining advice is trivial compared to the financial and non-financial costs of making wrong assumptions or failing to stress test decisions around compliance. For example, we recently provided advice for a major employer on compliance with eight different modern awards and three separate enterprise agreements. Whilst the exercise was considered costly by some, this was a smart decision as they have six separate lines of business, thousands of staff and hundreds of different roles, meaning a wrong assumption or decision can multiply on the downside before even considering the cost of reputational damage.

Another way to think about it is the front-end insurance or advice can save many multiples of its cost. Hypothetically, say front end advice or insurance costs $20k but the cost of an underpayment issue can easily reach $5m – factoring in Regulator investigations, legal costs and penalties. That is a 24,900% return on investment (ROI). Plus, insurance (such as legal costs) is a deductible tax expense, meaning the $20k turns into $12.8k “out of pocket”, lifting the ROI to 38,962%. Buying that insurance is a great decision delivering an outstanding ROI.

Ignore sunk cost

A sunk cost is one that cannot be recovered or changed, and is independent of any future costs a business may incur. If you are deciding whether to start operating a mine, the only thing that matters is whether future cash flows will exceed the costs incurred from starting to operate the mine today. Past costs incurred are irrelevant – you can’t get them back whether you start operating the mine or not. The same is often true in litigation. Deciding whether to keep investing in litigation depends on the return being sought (financial and non-financial) relative to the costs incurred from today. Particularly in a limited costs jurisdiction, sunk costs can rarely, if ever, be recovered and must be discounted from analysis. This is often a mistake that plaintiffs make – to keep doubling down and incurring additional costs long after litigation has become uneconomic.

Invest in what you know

The great Charlie Munger (the less well-known business partner of Warren Buffett) said, “Knowing that you don’t know is more useful than being brilliant”. Many investors fall into the trap of investing in things they do not understand or letting persuasive salespeople sell them a product without understanding the product or the risks involved. Professional investors avoid risk by knowing their circle of competence and staying inside it.

When it comes to legal services, it changes from “invest in what you know” to “invest in specialists that know how to solve the problem you are confronting”. In doing so, depth of expertise, track record, trust and client referrals based on personal experience are all relevant to making that decision.

Don’t worry about day-to-day market movements – it’s the trajectory that matters

Successful investors know that to manage capital, first you need to manage your emotions. When the market moves against you in the short term, you should not react negatively. In fact, if you are convinced the market is wrong and you are right, double down on your investment. Investors like Ray Dalio and George Soros have made billions backing themselves against the consensus view of a company, commodity or currency, which is always baked into its price.

The same is true in litigation. Typically, short term wins or losses in litigation don’t end up having decisive significance to the outcome, so you should not attach emotion to them. It is the underlying merits of the case, well prosecuted, that matter. Even an ultimately negative outcome, which is not based on foundational principles, can usually be corrected on appeal. As Ray Dalio says “a system optimises for the whole”. This is true for the legal system – one small part of the system may not work, or may not work on some occasions, but overall it does work well.

Judgement is the decisive skill

According to investor Naval Ravikant, no amount of glossy brochures, sophisticated sales, or talk about “smart money piling in” will ever make the underlying fundamentals of an investment any better. Neither will supposed links to successful business people as have been seen in recent scams perpetrated through social media such as Instagram. Same goes for litigation and executing legally sound commercial decisions. No amount of street smarts, technical legal expertise, hard work or court-craft will ever be able to trump the ability to triage all of that information and make a wise outcome focussed decision considering all factors. There is no substitute for good front end decisions. Judgement, above all else, is the decisive skill.

 


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The line between lawful and unlawful unpaid work is not always clear.

Many companies are contacted by people offering to work on a voluntary basis.  It is often pitched as a “win-win” because the person is willing to work for free in exchange for experience and contacts, particularly in high demand industries such as sports, entertainment, media or fashion.

Unpaid work remains lawful provided the person is a genuine volunteer and not an employee. However, an error of judgment can have serious consequences.

What should a responsible employer do?  When is it OK to say yes and when do they need to say no?

In the last few years, we have seen an increasing number of cases in which employers have been criticised, investigated, sued and (in some instances) fined for relying on volunteering or training arrangements to defend claims that they have not provided the legally required employment benefits. For example:

  • A media company that agreed to provide unpaid work experience to two people (at their request) was fined. Although the volunteering was found to be legitimate at the outset, it continued for over 6 months and resulted in the two workers essentially being treated as part of the regular workforce.  The Court found that the relationship had changed; meaning the workers were employees and were entitled to be paid.
  • Another media company was fined after recruiting workers to perform unpaid internship positions instead of employing them as employees. The Court ordered penalties for breaching the relevant award.
  • At least one company has entered into an enforceable undertaking with the regulator after the Fair Work Ombudsman found that its “volunteers” were actually employees.
  • A farmworker claimed employment benefits under the applicable award. The company successfully resisted the claim by demonstrating that it had always been a volunteering arrangement, and that she had applied for and accepted the role on this basis.
  • A fashion start-up and its director were fined for engaging a graphic designer as an unpaid “intern” despite having completed a university degree and working 2 days per week for almost 6 months.

Unfortunately, the line between genuine volunteering and exploitative arrangements remains controversial – with brand risks for any company that is accused of exploiting inexperienced workers.

Recent headlines have alleged that paying reduced wages to trainees can be an exploitative way of cutting costs.

In the sporting arena, a young footballer provided with an unpaid trial has sued his club saying “You don’t trial for over three months, that is ridiculous”. The club is defending the claim on the basis that the unpaid work was a genuine volunteering opportunity.

A different football club also experienced an online backlash after advertising for a nine month ‘voluntary’ assistant role. In that case, although there was some suggestion that the ad wording hadn’t reflected the intention of the role, the CEO also made the point that many full-time club staff had started out as interns.

This raises a valid question: Is volunteering becoming too high risk?

Although each case is different, for employers wanting to support people seeking experience in their chosen field, there are a number of key questions that are useful to consider:

  • If the placement is to provide work experience or learning, what training, learning experience or other benefits will the worker receive? If it is a longer placement, is this because they will spend some time in different teams or be exposed to different kinds of work?  Are they shadowing someone on a project?
  • If the placement is to provide a ‘trial’ period, how long is reasonable to demonstrate the skills required for the job? What length is appropriate? (Workers and regulators may be less likely to dispute the legitimacy of a shorter placement.)
  • How does the worker fit into the business? The risk of a claim increases if the volunteer is essentially acting as free labour as part of a paid workforce, filling a role that would otherwise be given to a paid employee.
  • What additional administrative and legal protections are needed? There are a number of duties – safe work arrangements, for example – that employers owe to volunteers as well as employees and contractors.  When dealing with staff who do not have industry experience, additional safeguards should also be considered.
  • What are the terms of the volunteering arrangement? Setting out the details in writing can clarify the boundaries, ensure everyone is on the same page about what is being proposed and agreed, and help avoid misunderstandings.

Everyone has an interest in ensuring inexperienced workers are protected from exploitation, while genuine volunteer opportunities are provided for those who want them.  Despite the trend of increasing claims and the complex regulatory framework, the good news is that the law does not block legitimate volunteering.  With careful management, this can still be a “win-win” scenario that provides benefits for both a person seeking to volunteer and a company that wants to help them out.

 


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