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Legal risks

    THE TAKEAWAY: Whatever your organisation type, whatever your mission, there are a large number of laws you need to adhere to. You won't get special indulgence from the courts because you're a not-for-profit.


Everybody in this country exists in a web of mutual legal responsibilities. There are laws, regulations, and customs we are bound to follow; there are contracts we have entered into that we must observe; there are duties to our fellows that we cannot avoid.

Any person or group operating in this web takes on its own legal obligations.

Note, too, that organisations can in some circumstances also be held liable for the acts of employees, even in circumstances where the employee (which also covers volunteers) has not deliberately contributed to the act. This is known as 'vicarious liability'. If, for instance, a volunteer from your organisation harasses a member of the public, you too (as an organisation) may be held liable.


Incorporation

The first question to consider is whether you are a group of individuals or a recognised organisation. A group can have its own rules, its own members, and its own constitution and still not really exist in the eyes of the law.

This does allow you to be flexible and fast-moving, but it can have its drawbacks, particularly where money is involved. And it means that your members may be liable as individuals if something goes wrong.

In order to become a legal entity your group needs to register under one of the available legal forms - to become an incorporated association, or a company, or a co-operative. For the pros and cons of these forms, look here.

All these legal forms are attached to certain legal responsibilities to report regularly to the relevant authority.

The laws governing incorporation also regulate to some extent how you run your group, covering issues like annual general meetings, financial reporting and accountability, and conflicts of interest.

Incorporation details and requirements and procedures vary from state to state, so look up the applicable details here.


General laws

There are a lot of laws - a lot of laws - in Australia, and you're supposed to observe all of them.

It goes without saying that you're not supposed to defraud people, or discriminate against or harass them, or hit them, or rob them, or breach the general prohibitions applying to everybody.

As well as these, there are some laws that apply particularly to not-for-profit organisations:

Some laws regulate how you raise funds - see the details for your state at Our Community's Funding Centre website.

Some laws regulate how you deal with workplace safety - check with the relevant agency in your State (Google "workcover" or "workplace practice").

You also must comply with Tax Office and Australian Charities and Not-for-Profits Commission (ACNC) rules, as well as the rules relating to incorporation in your state.

Your board will need to be satisfied that the organisation is in compliance with all relevant legislation.


Discrimination

There are a number of pieces of legislation that govern discrimination. All organisations (and individuals) are obliged to meet this legislation.

As an example, under Victoria's Equal Opportunity Act, it is against the law to discriminate against or harass someone who is a member of a club or applying to become a member of a club because of a personal characteristic protected by law. This includes sexual harassment.

The law covers members and boards. A club could be legally liable for an individual club member's discrimination if that member acted on the club's instructions or with its authority.

Some exemptions to the law may be provided including where the club is set up to:

  • prevent or reduce disadvantage by a particular group;
  • preserve a minority culture; or
  • provide benefits for people of a particular age;

In such a case the club may lawfully exclude people who are not members of the relevant group, minority culture or age.

Situations do differ across the country so ensure that you comply with the relevant legislation in your state or territory. Google "equal opportunity" or "discrimination laws" and your state.

A great deal of information relating to this topic is available from state and federal bodies including:


Privacy

Privacy is a hot topic in Australia, particularly in the light of technological advancements that have made it easier than ever before to breach people's privacy.

This is an area of law that's in flux so you need to be regularly checking back to ensure your organisation's processes and procedures are up to date.

Visit the Commonwealth Government's Office of the Australian Information Commissioner website to find out more.


Contracts

If you have any financial dealings with your suppliers, your staff, and the public - a property lease, a computer rental agreement, an agreement to supply services - then this places specific responsibilities on your shoulders.

Don't take them lightly. Contracts of all sorts should always be in writing and you should ensure that all details are included in any contract that is developed.

Seek legal advice wherever there is ever a slightest bit of doubt about a contract you are considering entering into.


Liability and negligence

One of the major risks faced by your group is your exposure if someone gets hurt.

In this context, it's important to understand the concepts of 'liability' and 'negligence'. An organisation is liable when it is financially responsible for its actions or failure to act. One of the most common reasons why not-for-profit organisations are found to be liable is that they have demonstrated negligence, or the failure to act as a reasonable person would under similar circumstances.

It's important to remember that not-for-profits get no special indulgence from the courts because of the good they do. They are expected to find a way to do good that does not involve damaging third parties, and if they don't then the law treats them just as it would any other corporation.

Every not-for-profit organisation, regardless of the type of work you do, must exercise the level of care necessary to protect people from harm. Injuries may arise from things like vehicle accidents, workplace hazards, a client's participation in one of your regular programs, or something going wrong at a special event.

A successful claim alleging negligence has to prove that:

  1. A duty exists - an organisation cannot be found negligent unless it first had a duty to exercise care.
  2. The duty is breached - an organisation that does not meet its duty of care may be found negligent.
  3. An injury occurs - negligence will not be found unless someone is hurt or something is damaged (physically, mentally or financially).
  4. The breach of duty caused the injury - in order for an organisation to be found negligent, the injury must be tied directly to the entity's breach of its duty of care.

If those four elements exist in a particular case, a court may hold your organisation liable for damages. Your failure to provide the requisite level of care required under the circumstances will have exposed your organisation to very serious consequences.

What, then, you ask, is my duty, and what constitutes negligence? Unfortunately, the answer is that it all depends on the circumstances of the matter or activity at hand. The required standard of care varies with the situation, the people involved, the nature of your work, and the community in which the incident takes place.

Not-for-profits serving children or other vulnerable populations must exercise a higher level of care than if the agency serves adults. A circus school teaching students to juggle with chainsaws will have to meet higher standards than a meditation class.

As a general rule, take a pessimistic view of this. Assume that the standard is very tough indeed, and then some. Ask yourself:

  • "What's the worst that can happen?"
  • "Have we got a risk management strategy in place?"
  • "If I could foresee the future, would I be able to sleep tonight?"

For more information about the types of risks common to not-for-profit organisations, refer to this help sheet.

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