'Groundbreaking' case highlights importance of properly classifying employees
But a recent class-action settlement highlights another area of concern: volunteers.
Labelled “novel” and “groundbreaking” by justice Edward Morgan, Montaque v. Handa Travel Student Trip Ltd. is the first volunteer misclassification class action in Canada, “and will have a significant impact on employment law going forward,” he said in his June 27, 2022 settlement approval.
When the first misclassification class-action cases were brought forward in the independent contractor context, that was also considered groundbreaking, says Paul Boshyk, a partner at McMillan in Toronto.
“And now we have an expansion of the courts’ willingness to look at other types of service relationships… and this is really one of the first notable decisions involving volunteers,” he says.
“Organizations that are using that type of business model, where they do engage a large number of volunteers, their antennas have to be going up.”
While a $450,000 settlement might not move the needle for a bank or a large IT company, it certainly is going to move the needle for a nonprofit or other type of organization that relies on volunteers to be successful, says Boshyk.
“In that context... it's going to be a very scary thing for a lot of organizations to have to grapple with in the future.”
Trip leaders labelled volunteers
Certified a class action in October 2020, the case involved more than 1,000 people who worked for a company that sells vacation tours to student-age travellers. Referred to as “trip leaders,” the individuals claimed that they had been misclassified as volunteers instead of employees. They also claimed wages and benefits commensurate with their proper classification.
Their job duties and responsibilities include performing the type of tasks that tour chaperones, organizers and other employees would typically perform at the company. The trip leaders were also required to follow detailed procedures and protocols set out in a Destination Staff Manual related to pre-trip planning and procedures, travel organization, airport and flight procedures, emergency and on-site procedures, briefing sessions, hotel check-ins and check-outs, and return trip organization.
The individuals were paid a small honorarium, which was less than the province’s minimum wage, but did not receive the benefits that employees are required to receive under Ontario’s Employment Standards Act.
These would include liabilities such as compliance with hours of work, overtime, vacation pay, notice of termination and severance pay, and leaves of absence, says Boshyk.
“All of the rights and entitlements under the Employment Standards Act apply to a volunteer, a misclassified volunteer, who's truly an employee, regardless of whether they've worked for [Handa Travel] or if they're at a summer camp or working for a not for profit.”
In the end, the judge decided on a total settlement of $450,000. In addition, Handa Travel committed to behaviour modification by reclassifying the class members and other destination staff as employees for all future trips.
Case law on volunteers v. employees
There's not a lot of legal decisions out there that talk about the distinction between an employee and a volunteer, says Boshyk, citing one important decision, in 1981 in Ontario involving Consumer Liability Discharge Corporation.
It talks about what makes a volunteer versus an employee, with primarily three things: Is there an economic imbalance between the two parties? What were the circumstances pursuant to which the arrangement was initiated? And how does the person actually performing the services view the relationship, pursuant to their pursuit of a livelihood versus the organization receiving a benefit from those services?
“In most cases, I think the answer is going to be the purported volunteer is actually in an employment relationship,” he says. “There almost always exists an economic power imbalance between the organization on the one hand and the purported volunteer on the other hand… with some exceptions, I'm sure, for some smaller nonprofits and so forth.”
And in most cases, “pretty unequivocally,” whether or not someone's paid is by no means determinative of their volunteer status, says Boshyk.
“The organization might say, ‘Well, this person didn't receive the salary, they didn't receive benefits, and they … did receive a benefit of sort, which is the ability to go on this trip.’ Or maybe another organization will say it was the experience of volunteering for this organization that they'll be able to put on their resume and show to prospective employers,” he says.
“But if you look at the factors as part of the test, those don't seem to be things that decision-makers are willing to put too much weight on.”
Trip leaders integrated into day-to-day operations
The laws still in the volunteer sphere are somewhat unsettled but, in this case, the “volunteers” were integral to the operation of the trip — their labour wasn't just needed for a few hours here and there, says Jody Brown, a lawyer at Goldblatt Partners in Toronto who represented the plaintiff in this case.
“Once you start to integrate volunteers in the day-to-day operations, I think that would raise some alarm bells, potentially.”
With all sorts of employee classification cases, a good, general legal test is to take the complete environment that they're working in — such as the degree of supervision and degree of responsibility — and apply those factors, he says.
In this case, the most important one that stuck out was: “Is this really, truly a one-off event or is this a company using people to replace what would otherwise be an employment-based labour force?” says Brown.
“The allegation was that the volunteers were effectively integrated into the necessary operation, the day-to-day business,” he says, which is different than someone who may volunteer for a bake sale at a school, as an example.
“It's both the consistency of the volunteer’s task and the role which they play in the organization in terms of generating revenue that you would normally see from an employment relationship… That was a really important factor that caught our eye, at least, was this idea that you have volunteers doing the same thing as employees, on the same trips, side by side.”
While the class-action members in this case did sign a volunteer agreement, decision-makers are always more interested in the actual relationship that exists between the parties, says Boshyk.
“So [it’s about] what's actually happening on the ground, as it were, as opposed to being confined by the four corners of the contract. It's all well and good for the parties to enter into an agreement that says, ‘You're providing services to us as volunteer’ but if, in actual practice, the person is an employee, then they're an employee.”
The “volunteers” in this case were also required to follow detailed procedures and protocols set out in a staff manual.
“I think that hurt the organization… to the extent a purported volunteer has to follow policies, procedures, policies and procedures of an organization, then that's definitely going to be indicative of an employment relationship,” he says.
“The more layers that you add, the more policies that you introduce to the relationship, the more rules and parameters that are interjected, the more trouble the organization is going to be getting itself in if it wants to use this type of business model.”
Getting it right
This case reinforces the importance of distinguishing between those two categories, says Megan Conway, president and CEO of Volunteer Canada.
“Anytime those categorizations get muddled, I think, is where there can be problems,” she says.
“We really strongly encourage employers, organizations, our partners to be very clear on the distinction between what qualifies as an employee and what qualifies as a volunteer and not to muddle those two categories in any way, shape, or form.”
At the beginning, it's important for both the individual and the organization to be clear on what that relationship will look like, she says.
Also important: What does the individual understand about their relationship to that organization?
“It's one thing for an employer or for an organization to have a certain perspective, but is that the perspective of the individual who is also doing those duties or that role or that volunteer task?”
But overall, there’s a real shift with organizations who are being mindful of people's life circumstances, and trying to think creatively around how to engage them to do the kinds of tasks they might need to have done as a volunteer, says Conway.
“I would definitely say that we're not seeing individuals who volunteer doing it on a 40-hour-a-week basis. Some might be but that's on a very individualized basis.”
And as seen with the Handa decision or controversies around the use of student interns, “nobody should be profiting off of youth labour in any way, shape, or form,” she says.
Volunteer Canada worked with the Ontario Nonprofit Network to release a report in early 2022, Volunteers and Decent Work: What’s the connection? to clarify the line between volunteering and employment in the nonprofit sector.
It mentions the ongoing concerns that volunteer labour might somehow displace nonprofit jobs to help them meet demand for programs and services under tight budgets. A 2007 survey of 661 nonprofits across Canada found that 25.5 per cent agreed that “some activities carried out by volunteers today were performed by paid staff in the past,” according to the study “The Interchangeability of Paid Staff and Volunteers in Nonprofit Organizations.”
This also raises questions about the ethics of having paid and unpaid staff working side-by-side, sometimes performing similar functions, says the report, which delves into the spectrum of ways people are engaged by the nonprofit sector, both in forms of paid and unpaid labour.