Does the FLSA Require Paying Employees for Employer-Sponsored Volunteerism?

By Karuna Dave

Volunteerism is an effective way for governmental and non-profit organizations to maximize their impact while minimizing costs. In recent years, as corporate social responsibility has received increased attention in academia and the media, corporations have grown to play a larger role in global, national, and local efforts to remedy broader societal issues. Corporate volunteering initiatives have grown exponentially over the last decade, as consulting groups and popular business publications, including Deloitte and Forbes, continue to laud corporate volunteerism as beneficial for company morale, productivity, and brand perception. However, these organizations also incur risk, as employers, of running afoul of the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA), which specifically excludes individuals who “volunteer” from its definition of “employees” to whom the wage requirements apply.

            To avoid an obligation to pay wages for hours worked, the proposed initiative must be truly voluntary. The FLSA was intended to prevent employers from skirting minimum wage and overtime requirements through “coercion or undue pressure” to volunteer, not to discourage volunteering. For the purpose of the statute, a “volunteer” is without any promise, expectation, or receipt of wages for services rendered. In contrast, an “employee” acts in the interest of his or her employer and is subject to its direction and control. Keeping this distinction in mind, promoting civic engagement through volunteering remains a valuable way to enhance corporate culture or maximize community impact.

            On March 14, 2019, the Department of Labor (DOL) addressed whether participation in an employer-sponsored community service program would be considered “hours worked” under the FLSA, in an opinion letter. The program at issue provided opportunities for employees to volunteer for activities sponsored by their employer or which they themselves selected. The employees who chose to participate were compensated only to the extent their activity took place during normal work hours. At the end of the year, the employer awarded discretionary bonuses to the employees who made greatest community impact through the program, considering how many hours each employee volunteered. The employer proposed tracking volunteer hours through a mobile device application. Even with a tracking application, the opinion letter found the program did not result in hours worked under the FLSA.

            Notably, the opinion confirms that employers may provide a financial incentive for volunteering, within reason. The DOL identified three mandatory criteria for any discretionary bonus awarded as a result of time spent volunteering: (1) the volunteering must be optional; (2) an employee that does not volunteer will not suffer any adverse impacts on his or her working conditions or employment prospects; and (3) a bonus for choosing to volunteer is not guaranteed. In other words, an employee who chooses not to participate in a volunteering initiative must be able to earn the same discretionary bonus by satisfying other criteria. Should an employer choose to incorporate volunteer time as a factor in a discretionary bonus program, it should ensure that the achievements of employees who choose not to volunteer will also satisfy its criteria for the bonus program.

            The recent opinion letter also clarifies that compensating employees during normal work hours does not destroy the rule that, by definition, volunteer time entails a total lack of any expectation of compensation. Though compensation is not required for volunteer time outside of normal work hours, other factors may trigger an obligation to pay wages. Employers that sponsor or partner with organizations as part of a social responsibility or volunteer initiative should take care—though not addressed in the recent opinion letter from the DOL, a relationship may qualify as a single enterprise under the FLSA. Occasional sponsorship is a safer approach, as is choosing volunteer opportunities that are unrelated to employees’ duties.

            Public entities and non-profit employers seem to be more frequent targets of litigation, perhaps because there are more likely to be opportunities for employees to “volunteer” for their employer. Volunteers commonly receive nonpecuniary benefits for their services. In some cases, providing benefits to volunteers in return for their services can weigh in favor an “employee” classification. In such cases, courts apply an “economic realities” test to determine whether the particular circumstances of an arrangement favor classifying workers as volunteers. Though less frequently litigated, these rules apply equally to for-profit employers too. Public entities and non-profits should take care to ensure that volunteer services are used effectively.

            Legal consequences aside, employers can encourage employees to volunteer in a variety of ways including, as the DOL has recently confirmed, factoring volunteer time into a discretionary bonus plan. Volunteering gives employers a competitive edge in attracting and retaining talent, especially for the younger generations. Research has shown that volunteerism is effective for the development of leadership and communication skills and is proven to help individuals and organizations succeed. Before launching a volunteer initiative, employers should consider an array of civic engagement opportunities and evaluate which are appropriate in light of its business and workforce. Consulting with an employment attorney is an effective means of ensuring the particular risks presented by the operations of an employer are addressed at the outset, to maximize community impact and avoid potential legal exposure.