Dear <<First Name>>
We are pleased to bring you this update on the latest legal developments affecting not-for-profit organisations. In this issue, we cover:
Click here if you would prefer to read this in a print friendly .pdf version.
The federal election and its potential impact on the not-for-profit sector
New governance standards for charities
A new DGR category for ethics classes in government schools
Changes to the Privacy Act
A case showing how UK discrimination laws are affecting adoption practices of religious organisations
Recent changes to the Fair Work Act
David C Ford and Luke Scandrett
The federal election and its potential impact
on the not-for-profit sector
The current Government has undertaken a number of reforms in the not-for-profit sector over the last six years. These include the creation of charity governance standards and financial reporting requirements and the implementation of a statutory definition of charity (which did not previously exist).
The most significant reform has been the establishment of the Australian Charities and Not-for-profits Commission, which opened its doors on 3 December 2012 as it sought to be a "one-stop-shop" for regulatory compliance among other things. The ACNC was the result of a lengthy consultation program conducted by the Government with the not-for-profit sector as a whole.
As we approach the imminent election, it is worth considering in what direction the major parties are proposing to take the sector. Labor has stated that it will continue on its current path of reforms as the statutory definition of charity commences operation on 1 January 2014 and the ACNC consolidates its place as the national regulator of the not-for-profit sector. The Coalition has announced that it will seek to repeal the statutory definition of charity and abolish the ACNC.
Labor has argued that its reforms are in line with the not-for-profit sector's needs. It points to its consultation program with the sector as evidence of this assertion. The Coalition claims that the statutory definition is not necessary and that the ACNC serves no greater function than entangling the sector in further unnecessary red tape. The Coalition would prefer the sector to return to the position it was in prior to the commencement of the ACNC.
The election may serve as an important turning point for the not-for-profit sector. It will therefore be of great importance to continue to closely monitor any changes made to the laws governing the sector following the election.
New governance standards for charities
New governance standards are now in effect for charities that are registered with the ACNC. These governance standards will need to be met on an ongoing basis in order to maintain registration with the ACNC.
The standards are expressed as minimum requirements for governance of a charity; they do not cover all aspects of governance. It is expected that charities will have governance practices that go beyond these minimum standards. Also, the ACNC will generally apply the standards as a set of general principles, rather than as precise words. In other words, a charity can generally choose how to comply with the standards, as long as it can demonstrate its approach is appropriate taking into account its situation.
The standards are:
Standard 1: Purposes and not-for-profit nature of a registered entity
Charities must be not-for-profit and work towards their charitable purpose. They must be able to demonstrate this and provide information about their purpose to the public.
Standard 2: Accountability to members
Charities that have members must take reasonable steps to be accountable to their members and provide their members adequate opportunity to raise concerns about how the charity is governed.
Standard 3: Compliance with Australian laws
Charities must not commit a serious offence (such as fraud) under any Australian law or breach a law that may result in a penalty of 60 penalty units (currently $10,200) or more.
Standard 4: Suitability of responsible persons
Charities must check that their responsible persons (such as board or committee members or trustees – called ‘responsible entities’ under the ACNC Act) are not disqualified from managing a corporation under the Corporations Act) or disqualified from being a responsible person of a registered charity by the ACNC Commissioner. Charities must take reasonable steps to remove any responsible person who does not meet these requirements.
Standard 5: Duties of responsible persons
Charities must take reasonable steps to make sure that responsible persons understand and carry out the duties set out in this standard.
New DGR category for ethics classes in government schools
To be endorsed as a deductible gift recipient in Australia, an organisation or fund must fall into one of the categories prescribed by legislation. These categories include public hospitals, higher education institutions, school building funds and animal welfare charities.
The list of categories is a relatively static one so it is of note that legislation has been passed to add a new category. This new category will enable eligible providers of ethics education in government schools to receive tax deductible donations. The new category is now available for organisations who wish to apply for it.
This new category is in addition (but separate) to an existing category which allows a public fund established for the purpose of providing religious instruction in government schools to receive DGR endorsement.
This change will be of particular importance in New South Wales, where government schools are required to provide at least one special religious education class per week to its students. If students elect not to attend the special religious education class, they must attend a special education in ethics class instead.
Previously, there was inequality between organisations external to the government school system which wished to assist with the provision of special religious education versus those which wished to assist the provision of ethics education. The former were entitled to set up a public fund which could apply for DGR endorsement, whilst the latter had to make a special application to the government to be specifically named in the tax legislation. This new legislation redresses this imbalance.
Changes to the Privacy Act
On 12 March 2014, a series of amendments to the Privacy Act 1988 will take effect. The Privacy Act is one of many Acts which govern privacy in Australia. One of the key components of the Privacy Act is that it requires certain entities to comply with privacy principles.
The Privacy Act currently contains the National Privacy Principles (NPPs) and the Information Privacy Principles (IPPs). The NPPs apply to organisations. An organisation is:
(a) an individual; or
(b) a body corporate; or
(c) a partnership; or
(d) any other unincorporated association; or
(e) a trust;
that is not a small business operator, a registered political party, an agency, a State or Territory authority or a prescribed instrumentality of a State or Territory. If a not for profit organisation is an organisation under the Privacy Act, it must comply with the NPPs.
There are three key parts of the amendments that apply to not for profit organisations:
(a) the amended definition of personal information;
(b) the Australian Privacy Principles (APPs); and
(c) the updated enforcement options.
Please do not hesitate to contact us if you would like advice in relation to the amendments.
You might also like to read Nathan Croot's paper on the changes. This paper was written specificially for schools but has general application to all not-for-profits.
UK discrimination laws affect adoption practices of religious organisations
A recent case in the United Kingdom considered the extent to which a religious organisation was affected by discrimination legislation.
Catholic Care was a charitable organisation offering a variety of services and support to the wider community. It had operated an adoption service for over 100 years. The practice of the adoption service was only to place children with heterosexual adoptive parents – same sex couples were not eligible to apply to Catholic Care for adoption of a child.
This practice was made unlawful under sex discrimination legislation passed in 2008 and 2010. Catholic Care applied to the UK Charity Commission to change its Memorandum of Association in order to take advantage of some limited exemptions in the discrimination legislation. It wished to continue its practice of only placing children with heterosexual couples. Its application was ultimately rejected by the relevant Tribunal, which found that Catholic Care “had not provided sufficiently weighty reasons to justify the discrimination against same sex adoptive parents".
This decision is relevant to Australian religious organisations as their exemption from pieces of discrimination legislation has been considered by the government recently. It is essential for those organisations to consistently review their practices to ensure that they do not run afoul of discrimination legislation.
Changes to workplace arrangements
The recent passing of the Fair Work Amendment Act 2013 brings about significant changes requiring the attention of not-for-profit organisations, some of which have already taken effect.
The most significant element of the amendment package is the introduction of anti-bullying provisions. From 1 January 2014, workers (including employees and contractors) may apply to the Fair Work Commission where they reasonably believe that they have been bullied at work. The Commission must begin to process the application within 14 days of it being made and can make any order it considers appropriate, except for reinstatement or monetary compensation.
A worker is bullied at work if while working at a constitutionally-covered business (this includes most but not all independent schools) they are the recipient of repeated unreasonable behaviour that creates a risk to health and safety. However, a worker is not bullied under the new legislation if they are the recipient of reasonable management action carried out in a reasonable manner. If facing an application from a worker, the employer will have to incur the expense of arguing as a defence that it engaged in reasonable management action carried out in a reasonable matter.
Failure by an employer to adhere to an order by the Commission to stop bullying will expose it to fines of up to $51,000.
Until now, workers have sought protection from workplace bullying through anti-discrimination and work health and safety laws. These changes provide an alternative and potentially more flexible remedy.
Flexible working arrangements
The right of an employee to request to change their working arrangements has been expanded under the Fair Work Act. From 1 July 2013, employees having the right to request flexible working arrangements include parents or carers of school age children or younger, those with a disability, those aged over 55, those experiencing violence from a family member and a carer of an immediate family member who is experiencing violence from a family member.
An employer may only refuse a request on “reasonable business grounds” which the Act now specifies as including when the requested working arrangements would be too costly for the employer, there would be a significant loss to productivity and the new arrangements would be of significant detriment to customer service. The Act also brings changes to parental and special maternity leave.