A r c h i v e d I n f o r m a t i o n

Negotiating the Legal Maze to Volunteer Service - 1998

Wage and Hour Laws

Wage and hour laws are designed to prevent the exploitation of workers. These laws prohibit employers from paying too little, and from forcing laborers to work in unsafe conditions or for an inordinate number of hours. Federal and state laws set minimum wages and require higher rates for overtime hours of employment.

Wage and hour laws also contain certain safeguards that prevent employers from displacing salaried personnel with those willing to forgo compensation in exchange for their services. As with most laws, the wage and hour laws were drafted with broad provisions designed to dissuade those bent on circumventing the prohibitions. These broad provisions sometimes prove burdensome to individuals who wish to volunteer their services.

Federal Fair Labor Standards Act

For nonprofit organizations, the determination of Fair Labor Standards Act applicability depends upon the answers to a series of questions. These questions, set out below, test the nature of the organization's activities and its relationship with those providing service:

In addition to its educational, charitable, or religious functions, does the nonprofit organization operate any commercial activities that involve commerce or the production of goods for commerce?

Do the individuals who serve in these commercial activities financially depend, as a matter of economic reality, upon the nonprofit organization that they serve?

Do the individuals who serve the educational, charitable and/or religious functions of the organization engage in activities that involve interstate commerce or the production of goods for interstate commerce?

Affirmative responses to any or all of these three questions will subject either the nonprofit organization as a whole, or select groups of its personnel, to Fair Labor Standards Act (FLSA) provisions. The following materials will offer a more detailed explanation of this federal employment law, its accompanying regulations, and the manner in which these provisions are currently being applied by the U.S. Department of Labor.

"Enterprise" Coverage

The Fair Labor Standards Act sets the maximum number of hours an employer can require workers to serve (without overtime compensation) and the minimum wage the employer can pay those workers. The applicability of FLSA protections may depend on the program or organization as a whole, and upon the nature of the work being performed by individual personnel within that organization.

Employment may be covered under the FLSA pursuant to either "enterprise" or "individual" coverage. "Enterprise" coverage requires the satisfaction of two conditions. First, the entity must be an "enterprise engaged in commerce or in the production of goods for commerce." Second, the personnel in question must be "employees" within the meaning of the FLSA.

To be an "enterprise," or to be engaged in commerce, the organization must employ at least two employees engaged in commerce, or in the production of goods for commerce. Alternatively, the organization must have at least two employees handling, moving, or selling goods that had previously moved in interstate commerce. Take, for example, an organization that runs a mail order division in which it sells and ships logo embossed T-shirts, mugs, and bumper stickers to supporters around the country. This mail order division will constitute an enterprise, so long as two or more of the organization's personnel staff this division. FLSA coverage also depends upon whether the organization satisfies a dollar amount of sales made or business done annually.

FLSA Applicability to Nonprofit Service Organizations

In drafting the FLSA, Congress provided no broad exception for nonprofit charitable, religious and educational organizations. In fact, the drafters of the legislation, when expanding the FLSA in 1961 to cover "enterprises," made clear their intent to include nonprofit organizations within the legislation's definition of "employer" or "enterprise." On two separate occasions, Congress explicitly rejected proposals to exempt nonprofit organizations from FLSA coverage. In fact, the FLSA definition of "enterprise engaged in commerce or in the production of goods for commerce" specifically includes many entities commonly considered to be charitably motivated. The definition extends coverage to any enterprise that

is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill or defective who reside on the premises of such institution, a school for mentally or physically handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such hospital, institution, or school is public or private or operated for profit or not for profit);

While nonprofit organizations are not generally exempt, some of their activities may fall outside FLSA coverage. The educational, eleemosynary, religious, and similar activities of a nonprofit organization are not subject to FLSA enterprise coverage. However, if the same organization conducts commercial activities, such activities will trigger FLSA protection.

Commercial activities generally constitute business endeavors that place the nonprofit organization in competition with ordinary commercial enterprises. As a rule, the Department of Labor and the courts interpret the law very broadly when determining whether an activity constitutes a commercial enterprise. The FLSA defines "commerce" simply as:

trade, commerce,transportation, transmission, or communication among the several States or between any State and any place outside thereof.

In applying this definition, the courts have not limited commerce to refer to transactions where there are actual commercial sales of the goods produced and transported. Nor do courts restrict FLSA application to situations where large amounts of goods are sent outside the state where produced. If, for example, a charitable organization operates a printing and publishing plant, employees involved in these activities will find themselves under the protections provided by the wage, hour, and child labor provisions of the FLSA.

Not all the businesses operated by nonprofit organizations automatically constitute commercial enterprises. For example, federal courts have held that neither a group home for troubled juveniles, nor a shelter that provided food, clothing, and housing to the victims of domestic violence, qualified as commercial enterprises for the purposes of the federal employment law.

Individual Coverage

Even in the absence of a commercial enterprise, individual employees of a nonprofit organization may be covered by the FLSA. Employees are individually covered if, in the performance of their duties, they are engaged in interstate commerce or in the production of goods for interstate commerce. If, for example, employees of a nonprofit organization regularly handle interstate mail and telephone calls, or receive merchandise from out-of-state sources, they must be paid the appropriate minimum wage and must receive overtime for all hours worked in excess of 40 hours per week.

Employee vs. Volunteer

Neither "enterprise" coverage nor "individual" coverage arises unless the worker in question qualifies as an "employee." The FLSA does not offer much in the way of a definition for the crucial term "employee." An employee is generally defined as "any individual employed by an employer." The term "employ" is defined only as "to suffer or permit to work." Neither of these definitions offers the U.S. Department of Labor much guidance for the task of distinguishing "employees" from "volunteers." The Department does acknowledge the existence of a category of workers beyond the coverage of the employment law, as follows: Individuals who volunteer or donate their services, usually on a part-time basis, for public service, religious or humanitarian objectives, not as employees and without contemplation of pay, are not considered as employees of the religious, charitable and similar nonprofit corporations which receive their services.

In addition, the United States Supreme Court has cited approvingly the Department of Labor's position that altruistic citizens who volunteer to "minister to the comfort of the sick, elderly, indigent, infirm, or handicapped, and those who work with retarded or disadvantaged youth" are exempt from minimum wage and maximum hour laws in almost every circumstance.

Volunteers at Public Agencies

For the most part, the Department of Labor is left to its own devices to distinguish between employees and volunteers in each individual scenario. The Department receives some guidance from the statutory exception carved out by Congress for individuals who choose to volunteer their services to public agencies. Both public employees and private individuals who perform service for a public agency (a unit of a state or local government), for civic, charitable, or humanitarian reasons without promise, expectation or receipt of compensation for services rendered, are not considered employees under the FLSA. The law severely restricts public employees as to the nature of the service they may provide. The employee of a public agency may not simply waive compensation in exchange for performing his or her ordinary employment services. To volunteer legally at his or her agency of employment, a public employee must perform a service for his or her employer that is distinctly different from his or her ordinary activities. The following examples illustrate permissible volunteer activities for public employees:

A city police officer who volunteers as a part-time referee in a basketball league sponsored by the city,
An employee of the city parks department who serves as a volunteer city fire fighter; and
An office employee of a city hospital or other health care institution who volunteers to spend time with a disabled or elderly person in the same institution during off duty hours.

Public employees who wish to volunteer services identical to those they normally provide in exchange for salary, may offer these services only to a public agency different from the one in which they are employed. Thus, a receptionist at a county tax office could offer telephone answering services at a fund raising event run by a state agency. In contrast, a nurse at a state hospital might not be able to volunteer her nursing services at a state run neighborhood health clinic, since both the hospital and clinic could be considered parts of the same public agency.

The regulations also provide a specific exemption for individuals, not employed in any capacity by state or local government agencies, who wish to volunteer their services at a public agency for civic or humanitarian reasons. These individuals retain their volunteer status as long as they are provided with no promise, expectation or receipt of compensation, except for reimbursement for expenses, reasonable benefits and nominal fees. The FLSA places no limitations or restrictions on the types of services that these private individuals may render. The regulations provide the following list of examples of permissible service activities for private individuals:

helping out in a sheltered workshop;
providing personal services to the sick or elderly in hospitals or nursing homes;

assisting in a school library or cafeteria;

driving a school bus to carry a football team or band on a trip;

volunteering as firefighters or auxiliary police;

working with children with disabilities or with disadvantaged youth;

functioning as camp counselors in youth programs;

soliciting contributions;

participating in civic or charitable benefit programs;

performing services to carry out charitable or educational programs.

Volunteers at Private Nonprofit Organizations

In the absence of any statutory or regulatory exemption, the Department of Labor has utilized statutory precedent to formulate an exemption for the employees of charitable entities who wish to perform volunteer work for their nonprofit employers. The Department has drafted a set of six criteria that will qualify nonprofit organization employees for an FLSA exemption. Volunteer status will be granted under the following circumstances:

The services are entirely voluntary, with no coercion by the employer, no promise of advancement, and no penalty for not volunteering;
The activities are predominately for the employee's own benefit;
The employee does not replace another employee or impair the employment opportunities of others by performing work which would otherwise be performed by regular employees;
The employee serves without contemplation of pay;
The activity does not take place during the employee's regular working hours or scheduled overtime hours;
The volunteer time is insubstantial in relation to the employee's regular hours.

In addition, although not specified within the aforementioned criteria, the Department of Labor appears to require that nonprofit employee volunteers offer their uncompensated services in activities distinct from their normal employment duties. Thus, the following would constitute permissible volunteer situations for the employees of a nonprofit public broadcasting television station:

an administrative assistant or janitor who volunteers to work as a member of the production crew;
a secretary or bookkeeper who offers to do some announcing and air work.

Compensation

Although true "volunteers" may expect no compensation in exchange for service, some may still receive reasonable benefits, a nominal fee, or any combination thereof, without losing their volunteer status. No specific amount of compensation separates an employee from a volunteer. The U.S. Department of Labor regulations address this issue in relation to some of the questions raised for volunteers at public agencies. These regulations offer a number of examples of payments, reimbursements, benefits and awards that will not deprive an individual of his or her volunteer status, including:

A uniform allowance or reimbursement for reasonable cleaning expenses paid to volunteers requiring a uniform to perform their duties;

Reimbursements for out-of-pocket expenses incidental to providing volunteer services, including costs of meals and transportation;

Reimbursements for tuition, transportation and meal costs involved in attending classes to learn how to effectively perform volunteer services;

Reimbursements for books, supplies and other materials essential to volunteer training;

Reasonable benefits including inclusion in group liability, health, life disability and workers' compensation insurance plans and pension plans;

Awards such as "length of service" awards.

The regulations also permit volunteers to a public agency to receive nominal fees that are neither a substitute for compensation nor tied to productivity. To determine whether a payment constitutes a "nominal fee" that will not result in a volunteer's loss of FLSA exempt status, the U.S. Department of Labor will examine the following:

the distance traveled and the time and effort expended by the volunteer;

whether the volunteer has agreed to be available around-the-clock or only during certain specified time periods;

whether the volunteer provides services as needed or throughout the year.

The regulations specify that an individual who volunteers to provide periodic services on a year-round basis may receive a nominal monthly or annual stipend or fee without losing volunteer status.

A volunteer who receives any or all of the payments, benefits and fees identified within the regulations does not automatically qualify for an FLSA exemption. The Department of Labor reserves the right to examine each case on an individual basis, explaining:

Whether the furnishing of expenses, benefits, or fees would result in individuals' losing their status as volunteers under the FLSA can only be determined by examining the total amount of payments made (expenses, benefits, fees) in the context of the economic realities of the particular situation.

Courts also look at the "economic realities" of a particular situation to determine an individual's employment status. Using the "economic reality" test, some courts have ruled that an employee is one who is dependent for sustenance upon the business to which he or she renders service. Thus, if a worker expects to receive compensation, whether as cash or as in-kind benefits, in exchange for the services rendered, the services constitute "employment." Even the expectation of food and shelter in exchange for labor can create an employment relationship that will place the individual within the protections of the federal labor law.

An individual's motivation, such as whether he or she expects compensation for his or her labor, factors greatly in the determination of whether he or she qualifies as a volunteer. Nonetheless, a worker may not simply waive his or her right to FLSA coverage in order to enable his or her employer to escape the wage, hour and child labor provisions. According to the U.S. Supreme Court, FLSA protection may not be waived since:

If an exception to the Act were carved out for employees willing to testify that they performed work "voluntarily," employers might be able to use superior bargaining power to coerce employees to make such assertions, or to waive their protections under the Act.

Other Significant Factors

In addition to compensation, the Department of Labor looks at other benefits flowing from the relationship. If the employer/organization profits too greatly from the service rendered, his or her gain suggests an employment relationship. In contrast, if the worker secures education and experience at the expense of or even to the detriment of the employer, the flow of benefits suggests an exempt arrangement.

Competition is yet another factor that influences the Department of Labor's evaluation. A volunteer should never displace or replace a member of the workforce. If his or her service jeopardizes the employment of another individual, the Department of Labor is unlikely to grant volunteer status.

Trainees

Trainees, like volunteers, fall outside the FLSA definition of "employees" and are therefore exempt from FLSA coverage. The Department of Labor has drafted six criteria that distinguish "trainees" from "employees." Because some similarities exist between "trainees" and "employees," this list offers nonprofit organizations additional guidance in discerning the employment status of their service personnel. According to the Department of Labor, if all of the following criteria apply, the trainees or students are exempt from FLSA coverage:

the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
the training is for the benefit of the trainees or students;
the trainees or students do not displace regular employees, but work under their close observation;
the employer that provides the training derives no immediate advantage from the activities of the trainees or students; and on occasion his operations may actually be impeded;
the trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
the employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

FLSA Penalties

Violation of FLSA wage and hour standards can result in liability for the amount of the unpaid wage or overtime as well as severe financial penalties. Repeat violators can be fined up to $1,000 for each violation.

FLSA Summary

The following list summarizes the forgoing materials and identifies the crucial points that will factor in the U.S. Department of Labor's determination as to the nature of the employment relationship between a service organization and its volunteer personnel:

The FLSA offers no general exception for nonprofit organizations.
The strictly charitable, educational and religious activities of a nonprofit organization will be exempt from FLSA coverage.
The activities of a nonprofit organization that cause its personnel or products to compete with ordinary employees or business entities will qualify the organization's employees for FLSA coverage.
Only the "employees" of a nonprofit organization will receive FLSA protection.
"Employees" are those who depend upon the nonprofit for economic sustenance in the form of cash or in-kind benefits.
"Volunteers" expect no compensation in exchange for service, but may receive nominal fees and benefits while serving.
An "employee" may not waive FLSA protection.
The more the relationship benefits the employer, the less likely the worker is to be a "volunteer."
A "volunteer" must never compete with another employee by replacing, displacing, substituting for an employee, or by performing work that would otherwise be performed by other employees.
Where an "employment" relationship exists, as "employee" can be individually covered by the FLSA even where the nonprofit organization neither constitutes nor operates a "commercial enterprise."

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["Employee" or "Volunteer?"]

[State Wage and Hour Laws ]