Volunteers and the Federal Fair Labor Standards Act
New Hampshire communities have a rich history of volunteerism. Whether it is experienced tradesmen donating their time to rewire the town hall or install new bathrooms in the library, teenagers helping out at the recreation summer program or the people who staff the table at the transfer station “swap shop," volunteers are an integral part of a community. The current economic environment, challenging town officials to provide services with budgets that have been cut to the bone, will no doubt result in an increase in volunteerism as citizens rise to the occasion to help their communities weather this storm.
It is critical that local officials understand the laws that apply to the services provided by volunteers because mislabeling people as “volunteers" when they are actually “employees" will result in the assessment of back wages, taxes and penalties against the municipality. This article will examine what volunteers are and what they are not, under the Fair Labor Standards Act (FLSA).
The word “volunteer" can mean different things to different people. In some contexts, a volunteer may mean someone who provides a service and receives no compensation. A volunteer can also refer to someone who receives compensation but who voluntarily agrees to perform the service. For example, we proudly refer to our armed services as an “all volunteer force." We don’t mean that the men and women of our armed services work for no compensation; we mean that the men and women “volunteer" to join a branch of our armed forces. The Town of Mayberry Volunteer Fire Department may actually have a full-time fire chief and paid firefighters supplemented by a pool of “call firefighters" who receive stipends for attending training and answering fire calls. The use of the word volunteer to describe someone who provides a service can be misleading, at least with respect to treatment under labor laws—just because someone is referred to as a volunteer doesn’t necessarily mean that state and federal labor laws with respect to payment of wages and overtime do not apply.
Generally, we tend to think of volunteers as individuals who donate their services to a municipality; who don’t expect to be paid for those services; and who receive no compensation from the municipality. However, as the discussion that follows indicates, there is more to being a volunteer than offering free services and not getting a paycheck.
Fair Labor Standards Act
According to the U.S. Department of Labor (DOL), Employment Standards Administration, the “Fair Labor Standards Act, 29 U.S.C. §201 et seq., recognizes the generosity and public benefits of volunteering, and does not pose obstacles to bona fide volunteer efforts for charitable and public purposes." See Wage and Hour Opinion Letter FLSA2005-51 (November 10, 2005). In enacting these laws, Congress sought to ensure that volunteer activities were neither impeded nor discouraged while, at the same time, minimizing the potential for abuse by employers who might seek to avoid the payment of wages by pressuring employees to “volunteer" their services. 29 C.F.R. §553.101(b). Thus, while volunteerism is to be encouraged, federal regulators will be on the lookout for employers who classify individuals as volunteers when they should really be treated as, and compensated as, employees.
The FLSA provides that the individual is a volunteer, not an employee of a public agency, when the individual meets the following criteria: (1) they provide their services for civic, charitable or humanitarian reasons without promise, expectation or receipt of compensation for the services rendered, although a volunteer can be paid expenses, reasonable benefits or a nominal fee to perform such services; (2) they offer their services freely and without coercion, direct or implied, from the employer; and (3) they are not otherwise employed by the same public agency to perform the same services as those for which they propose to volunteer; in other words, individuals can qualify as volunteers if they either volunteer for a different public agency or perform services for the same agency different from those they are otherwise employed to perform. FLSA Section 3(e)(4)(A) and 29 C.F.R §553.101, .104 and .106.
Criterion # 1
The first of the three criteria provides that a volunteer cannot receive any compensation but may be paid expenses, reasonable benefits or a nominal fee. It has long been a tradition in New Hampshire towns for some sort of payment to be made to volunteer firefighters. These payments are usually called stipends and are mainly meant to cover the expenses of the firefighter to drive to an emergency scene in his or her own vehicle, or to attend training activities, and to reward in a modest financial way the important services provided by the volunteer firefighters. This practice is consistent with the regulations, even when the stipend is paid on a “per call" basis, so long as the nominal fee is not a substitute for compensation or tied to productivity. 29 C.F.R. 553.106(e). The DOL indicates that a key factor in determining if a payment is a substitute for compensation or tied to productivity is “whether the amount of the fee varies as the particular individual spends more or less time engaged in the volunteer activities." Wage and Hour Opinion Letter FLSA2008-15 (December 18, 2008). Thus, paying a firefighter on a “per call" basis is acceptable so long as the amount does not change based on the amount of time spent at the emergency scene or training activity. Similarly, an individual volunteering at the transfer station may be paid so long as the payment is not related to the number of hours worked or how many barrels of cans were crushed, or bales of newspapers processed.
The factors that will be used in determining whether the fee is actually “nominal" include: 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; and whether the volunteer provides services as needed or throughout the year. An individual who volunteers to provide periodic services on a year-round basis may receive a nominal monthly or annual stipend without losing their volunteer status. 29 C.F.R. 553.106(e).
To determine whether the amount paid to an individual will prevent him or her from being considered a volunteer under the FLSA requires an examination of “the total amount of payments made (expenses, benefits, fees) in the context of the economic realties of the particular situation." 29 C.F.R. 553.106(f). To help with this examination, the DOL has announced a guideline to be used, referred to as the “20 percent test." That is, the fee paid (apart from expenses) is “nominal" as long as it does not exceed 20 percent of the amount that otherwise would be required to hire a permanent employee for the same services. Wage and Hour Opinion Letter FLSA2008-15 (December 18, 2008). If the municipality does not employ anyone as a permanent employee in this category and thus does not have a figure to use in the 20 percent calculation, the DOL suggests that sufficient information to complete a good faith determination may be available by looking to neighboring towns, the state, or ultimately, from the nation by using data from the DOL Bureau of Labor Statistics.
Municipal officials can offer some financial compensation to volunteers as a way to off-set the out-of-pocket expenses of the volunteer without fear of inadvertently subjecting the town or city to the expenses associated with employees (primarily wages, taxes and benefits) so long as the payment is nominal and is not tied to hours worked or to productivity. Note, however, that although volunteers are not paid wages, and thus are not given W-2 forms at the end of the year, there may be other Internal Revenue Service reporting requirements to consider (for example, Form 1099-MISC) to report miscellaneous income. Ensuring that all federal regulations are followed will require careful planning on the part of municipal officials and department supervisors when any amount of compensation will be offered to volunteers.
Criterion # 2
An employer must not coerce the employee to volunteer his or her services to the town. Coercion may be subtle as in the following statement by a supervisor to an employee: “I think that a super way to show taxpayers that you appreciate your job is to volunteer at the upcoming town hall painting project. But understand, you aren’t required to volunteer, I’m just saying that it would look really good. Don’t you agree?" The more obvious form of coercion occurs when an employer requires an employee as part of the condition of his or her employment to volunteer to the town. Supervisors should be made aware of the laws regarding employees who volunteer who may volunteer for the municipality to ensure that there is no coercion, whether direct or implied.
Criterion # 3
Employees may not volunteer to do the same job they get paid to do as an employee for the same employer. For example, a person employed in the highway department doing road maintenance activities cannot volunteer to plow roads in order to help keep the budget expenses down. However, that same highway person could offer to volunteer his or her services to plow roads for another town. This example is fairly clear-cut, but what about an employee volunteering for an organization that provides volunteer services to the town—would that organization be considered to be “the same public agency"? It’s possible. Some of the factors to be considered are whether the organizations are separate and independent legal entities with their own bylaws and boards controlling their decisions; which entity establishes the licensing and certification standards; who determines eligibility of volunteers; who schedules the volunteer shifts and determines the rates and methods of compensation; who controls the volunteer duty assignments and provides supervision for the work; and who has the authority to discipline the volunteers. Wage and Hour Opinion Letter FLSA2008-13 (December 18, 2008)(citing Benshoff v. City of Virginia Beach, 180 F.3d 136 (4th Cir. 1999)). The DOL will look to see what level of control the public agency has over the volunteer organization to determine whether it is actually an instrumentality of the public agency and, thus, whether employees would not be considered volunteers.
An employee could be a volunteer in the municipality of employment so long as the volunteer services are not the same as or similar to the services provided for pay. For example, a highway department employee could volunteer his or her services as a coach for a recreation department baseball team—coaching kids is not “the same as or similar to" the job duties of a highway department worker.
Successfully Working with Volunteers
Volunteers can be extraordinary assets to a municipality both in terms of financial benefits in wages not expended and the enhancement of the positive sense of community that volunteerism fosters. Thus, it is a worthy goal to encourage volunteers and to expand the opportunities for all members of the community to pitch in and volunteer. To ensure these valuable assets do not become liabilities as a result of assessment of back pay, taxes and penalties, municipal officials, department supervisors and human resource personnel must be cognizant of the legal characteristics of a “volunteer" for purposes of the FLSA. Because employment issues are often complex, we encourage you to seek the assistance of local counsel in managing your employees and volunteers.
For more information on this topic, visit the U.S. Department of Labor website at www.dol.gov. Additional information on the issue of volunteers and employees in general is available in the chapter that summarizes municipal employment in the LGC publication Knowing the Territory: A Survey of Municipal Law for New Hampshire Local Officials. To explore the issues of volunteers and liability, you may want to review an article titled “Volunteers and Liability: An Overview of the Legal Protections and Municipal Exposure," published in the March 2007 issue of New Hampshire Town and City magazine.
Kim Hallquist is a Staff Attorney with the New Hampshire Local Government Center’s Legal Services and Government Affairs Department.