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Unpaid helper or official employee? Beware blurry line

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in Compensation and Benefits,Human Resources

If you allow someone to perform work yet you never officially hire the person, don’t think you can avoid paying by calling her a volunteer. She’s your employee and must earn at least minimum wage. No formal or even informal agreement or documentation is necessary.

Reason: The federal Fair Labor Standards Act (FLSA) defines an employee as one who “suffers or is permitted to work.” So if someone comes in as a favor to help out around the office, it’s best to pay her the minimum wage. Otherwise, it may come back to haunt you in court.

Recent case: Kim Casey’s husband worked at the C&B Garage. At his urging, Kim helped out around the garage. She answered inquiries about auto part prices, wrote out receipts, prepared checks and took payments from customers. C&B never officially hired her.

After an apparent falling-out, the Caseys sued C&B for Kim’s wages. The trial court sided with her, concluding that she was an employee since she’d been “permitted to work.” Because the company had paid her nothing, the court calculated her wages at 40 hours per week at minimum wage and ordered the garage owners to pay her $11,742.

C&B appealed, but the 11th Circuit upheld the award. No actual agreement was necessary. If an employer allows someone to work, that person is due at least the minimum wage. (Casey v. Looney d.b.a. C&B Garage and Auto Parts, No. 05-1477, 11th Cir., 2006)

Final tip: This isn’t just a small-business problem. Several class-action lawsuits against Wal-Mart claim that independent contractors working on cleaning crews were actually employees, as were the contractors’ relatives whom they brought in to help clean the stores.  

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