Is That Volunteer Really An Employee?

Thursday, October 16, 2014 - 13:31

A neighborhood church offers to send a group of volunteers to your company’s local retail branch to wrap Christmas presents for shoppers. As a token of thanks, your company will donate a set amount of money to the church for every wrapped gift.

Does this sound to you like the perfect partnership?

If so, you are not alone. Many businesses – eager to get involved in seemingly benign community projects – neglect to consider the application of wage and hour laws to volunteer workers.

Although the church gift-wrappers may think of themselves as volunteers, federal wage and hour laws and the U.S. Department of Labor have their own definition of the term “volunteer,” and it is narrower than one might expect.

Before organizing a company-wide volunteer effort or teaming up with a nonprofit group for a charitable program this holiday season, consider the guidance below – and avoid the potential penalties and government scrutiny that can turn a well-intentioned charity effort into a very expensive proposition.

Defining Volunteer

The definition of employee under the Fair Labor Standards Act (FLSA) is more expansive than the common law concept of “master” and “servant.”[1] The FLSA defines an employee as “an individual employed by an employer.”[2] To “employ” under the FLSA is “to suffer or permit to work.”[3] This means that if an employer allows or requires an individual to work, the hours spent by the individual must be paid pursuant to the minimum wage and overtime requirements of the FLSA.

A volunteer, according to FLSA regulations, is “an individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered.” 29 C.F.R. 553.101(a).

Courts have held that an individual’s status as volunteer or employee is a question of law, and they generally utilize a “totality of the circumstances” approach to determine the appropriate designation. This analysis can take into account elements such as whether the individual was motivated by civic or humanitarian purposes or some other reward, and whether other individuals performing the same function view themselves as volunteers. One element that is rarely given weight is how the employer and the individual have agreed to characterize their arrangement; the fact that an individual is given and accepts the title “volunteer” is not dispositive.

Volunteers And For-Profit Employers

In the context of individuals performing tasks for not-for-profit organizations, it is usually clear who is a volunteer and who is an employee. Individuals who volunteer for a public agency (such as a city government) or nonprofit organization are not employees and therefore are not entitled to be paid under the FLSA. This is true provided three conditions apply. First, the volunteers must perform their services for civic or charitable reasons without the expectation of being paid anything beyond expenses, benefits, and/or a nominal fee. Second, they must offer their services uncoerced. Finally, they cannot be otherwise employed by the same agency to provide the same services that they are volunteering.[4] For example, a soup kitchen server cannot volunteer to spend additional hours serving food, but can volunteer to paint the cafeteria. 

When the line between work and volunteer efforts is blurred, application of the wage and hour laws gets more complicated. For example, if a company runs a Habitat for Humanity program and sends a memo from the CEO encouraging employees to participate outside of normal working hours, must the employees be compensated for their time spent on the program? The answer is no, even if the participating employees receive some promotional items that are of minimal value.[5] In general, employees do not have to be paid for volunteer activities encouraged by their employer, so long as the activities are not performed during working hours on the employer’s premises, and the employees are not coerced to participate or penalized in any way if they decline.

If the community program involves employees assisting a nonprofit organization during work hours, the answer changes. According to 29 C.F.R. §785.44, “[t]ime spent for public or charitable purposes at the employer’s request, or under his direction or control, or while the employee is required to be on the premises, is working time.”

No Good Deed Goes Unpunished?

The U.S. Department of Labor has twice addressed questions regarding the wage and hour implications of having community groups volunteer with for-profit companies in exchange for a charitable donation. Both times the Department of Labor has concluded that under such an arrangement, the “volunteers” must be treated as employees for wage and hour purposes.

One scenario involved the church gift-wrapping example discussed above. In a 1996 opinion letter, the Department of Labor responded to a query from a mail-order company that had in the past hired temporary workers to gift-wrap catalog orders during the holiday season.[6] The company was planning on offering gift-wrapping services again, but this time had offers from nonprofit community groups to provide volunteer members to do the wrapping. The groups had expressed a hope that the mail-order company would donate a sum of money to their charities, and some groups suggested that the donation reflect a per-package amount. The mail-order company planned to provide general rules of conduct for the volunteers, and give them access to restrooms and breakroom facilities, but otherwise did not plan to control the volunteers’ hours or supervise their work.

The Department of Labor advised the company that the volunteer wrappers were in fact employees, regardless of whether payment would be made to a nonprofit entity. Specifically, the Department of Labor stated: “[i]t makes no difference that the groups have agreed to contribute an amount of money, not services, to their organizations. The groups are selling their services to your client in order to earn that money.”

In 2002, a school principal posed a similar question to the DOL. The principal’s school had participated in a charity grocery bagging fundraiser program at local supermarkets. Under the program, students spent time over the weekend bagging groceries and carrying bags to customers’ cars. They got tips and donations from customers, but no wages from the supermarkets. The principal sought guidance from the DOL after one supermarket discontinued the program out of concern that it violated minimum wage, record-keeping, and child labor provisions of the FLSA.

As in the gift-wrapping case, the DOL concluded that the “volunteer” baggers were in fact employees for the purposes of the FLSA. The DOL noted that the supermarket is a commercial enterprise that competes with other commercial enterprises. As for the charity aspect of the program, the students’ “services were not in themselves devoted to their community programs, but instead were being provided directly to a commercial for-profit business enterprise that derived an economic benefit from their services.” Further, the view that the supermarket benefited from the students’ help was informed by the fact that the supermarket had reduced the working hours of some of its employees in order to have the students bag groceries, which meant that “the bagging activities were an integral part of the employer’s provision of customer service.”

Notwithstanding the guidance provided by the FLSA and the Department of Labor, a cursory search of the Internet reveals that many employers run or support programs similar to the wrapping and bagging scenarios discussed above. These employers, unless they compensate their “volunteers,” as opposed to the charity, leave themselves open to significant potential liability. In fact, as the legal world continues to focus on cases involving the classification of interns and independent contractors, there are signs that volunteer programs may be another growing source of litigation and/or administrative review. In fact, last year, Major League Baseball faced a class action lawsuit brought by individuals who volunteered to work at the five-day-long MLB All-Star Fanfest and later claimed they were entitled to be compensated at minimum wage. While the case was dismissed on unrelated grounds without reaching the classification issue[7], it nonetheless serves as reminder to the corporate world that when it comes to wage and hour law, there is usually no such thing as free labor.



[1] DOL Field Operations Handbook §10b01.

[2] 29 U.S.C. §203(e)(1).

[3] 29 U.S.C. §203(g).

[4] 29 U.S.C. §203(e)(4)(A).

[5] DOL WH Opinion Letter (January 27, 2006).

[6] DOL WH Opinion Letter (July 18, 1996).

[7] The court dismissed the complaint on the grounds that the FLSA exempts from its minimum wage provisions individuals who perform services for an “amusement or recreational establishment” that operates fewer than seven months a year.  

 

James R. Hays is a Partner in the Labor & Employment Practice Group in Sheppard Mullin’s New York office and Co-Chairs the firm's Traditional Labor Law Team. Mr. Hays' practice focuses on management labor and employment law. He advises employers on strategies for handling workplace harassment, internal investigations, reductions in staff, discipline and termination actions, and wage and hour issues. Mr. Hays devotes significant time to the defense of complex wage and hour class action litigation.  He regularly counsels clients on preparation and administration of personnel policies and employment strategies and compliance with WARN, FMLA, ADA, COBRA and other federal and state labor statutes. He also represents clients in collective bargaining negotiations, labor arbitrations, and all stages of the labor election process, including election campaigns and hearings before the National Labor Relations Board. He also represents clients in employment litigation in federal and state courts, as well as various arbitration forums, and in proceedings before various administrative agencies, including the Equal Employment Opportunity Commission, the United States Department of Labor, and state agencies throughout the United States. Mr. Hays advises and has represented clients in litigation concerning breach of non-compete agreements and theft of trade secrets.

Shira Forman is an Associate in the Labor and Employment Practice Group in the firm's New York office. Ms. Forman focuses her practice on the full spectrum of labor and employment disputes in areas including breach of contract, breach of fiduciary duty, wrongful termination, retaliation, wage and hour claims, and claims of discrimination based on disability, sex, pregnancy, age, race, and national origin. She also advises employers on day-to-day personnel matters, including hiring and separations, performance management, wage and hour compliance, drafting employee handbooks and policies, employee privacy issues, internal investigations, social media policies, and human resources best practices.

Please email the authors at jhays@sheppardmullin.com or sforman@sheppardmullin.com with questions about this article.