‘Volunteers’ at for-profit companies: Should they be paid?

Traditionally, volunteers donate their time to nonprofit groups, like the American Red Cross, without an expectation of being paid. Such true volunteers aren't covered by wage and hour requirements of federal or state law.

But what about so-called "volunteers" at for-profit companies? This is a relatively new legal puzzle and can pose risks for employers.

How? Employees may offer to work "off the clock" at your company to get in on special projects, earn training or demonstrate their commitment. Or may-be friends of the company volunteer their time to gain a reference or simply to grab a benefit, like discounts on products.

In today's economy, such arrangements can be attractive. But don't jump on the bandwagon without clearing a few legal hurdles.

Volunteering at for-profit organizations is generally frowned upon under the Fair Labor Standards Act (FLSA). And the practice has spurred some new legal challenges.

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Case in point: A class action lawsuit was brought against America Online Inc. in 1999 on behalf of thousands of present and former volunteers. The suit claims the company's 16,000 volunteer "community leaders" who helped lead chat rooms were actually employees, meaning they are entitled to be paid under federal and New York law. Potential cost: $1 billion in wages. (Hallissey and Williams v. America Online Inc., No. 99-3785, S.D., N.Y., 1999)

Deciphering the law

The Labor Department doesn't offer much guidance in distinguishing "employees" from "volunteers." It simply acknowledges a category of workers who donate their services, usually part time, for public service, religious or humanitarian objectives.

The courts have strictly limited employers' use of volunteers. Virtually all employers have to pay at least the minimum wage to individuals whom the employer "permits to work." Translation: Even people who have absolutely no expectation of payment could be considered employees under the FLSA and state law if they perform "work."

If a volunteer is deemed an employee, he can't perform the same type of services he normally performs for the employer. For example, a secretary can't volunteer her time to do clerical work for the company, but she can volunteer in a soup kitchen supported by her employer.

On top of that: A company's volunteer work can't replace or block employment opportunities for others and has to be provided without pay, promise of future employment or any other "tangible benefit." For example, if a spouse volunteers in a for-profit health facility in exchange for a waiver of her husband's medical fees, the spouse is not considered a volunteer.

Interns are a little different story.

If an intern secures education, class credits and experience from the work, the "flow of benefits" is equal, so the company isn't required to pay the intern. However, if the employer profits too much from the arrangement, the Labor Department says this would suggest an employment relationship, meaning the worker must be paid.

Bottom line: Under the FLSA, a person must be paid for time spent at job-related activities that benefit the employer, regardless of how the job is classified.


Putting a price tag on volunteerism

  • The U.S. volunteer work force represents the equivalent of more than nine million full-time employees.
  • Its combined efforts are worth $225 billion.
  • The value of the work would be $14.30 per hour.

Source: Points of Light Foundation

Volunteer work: Paid or unpaid? A six-part test

More for-profit companies are using "volunteers" to help in their normal course of business, a legal gamble.
In general, exempt employees can volunteer without pay because their vol- unteer activities are considered an extension of the work for which they're ordinarily paid. Example: A school could allow its administrators or teachers to volunteer to help on field trips.
However, nonexempt employees can't voluntarily perform tasks for which they're normally paid. Example: The school should pay its bus drivers if they volunteer to drive buses for weekend field trips.
To determine whether the Fair Labor Standards Act (FLSA) requires you to pay nonexempt workers who volunteer, ask yourself the following six questions. If any one of your answers is "no," your company is
on the hook to pay the employees for time worked.
1. Will the employee perform the activity without expecting any form of pay or substantial benefit?
2. Are the services performed without employer coercion, threat of penalty or promise of benefits?
3. Are the activities performed predominantly for the employee's
own benefit?
4. Is the activity conducted at times other than during normal working hours?
5. Is the time spent on the volunteer activity insignificant when compared with the employee's normal working hours?
6. If a volunteer weren't available, would the position be one not normally filled by a paid staffer?