LIABILITY TO VOLUNTEERS UNDER THE FAIR LABOR STANDARDS ACT

LIABILITY TO VOLUNTEERS UNDER THE FAIR LABOR STANDARDS ACT Presented and Prepared by: Stacy E. Crabtree scrabtree@heylroyster.com Peoria, Illinois 309.676.0400 Heyl, Royster, Voelker & Allen PEORIA CHICAGO EDWARDSVILLE ROCKFORD SPRINGFIELD URBANA 2015 Heyl, Royster, Voelker & Allen B-1

LIABILITY TO VOLUNTEERS UNDER THE FAIR LABOR STANDARDS ACT I. INTRODUCTION... B-3 II. WHO IS A VOLUNTEER?... B-3 III. THE COURTS INTERPRETATION... B-3 IV. PERMITTED PAYMENTS... B-4 V. MENDEL V. CITY OF GIBRALTAR... B-5 VI. WHAT TO DO (OR NOT!)... B-6 The cases and materials presented here are in summary and outline form. To be certain of their applicability and use for specific claims, we recommend the entire opinions and statutes be read and counsel consulted. B-2

LIABILITY TO VOLUNTEERS UNDER THE FAIR LABOR STANDARDS ACT I. INTRODUCTION Volunteers are an integral part of operations for some organizations including some government agencies. Despite the altruistic intent, however, volunteers can pose a significant risk to an organization or agency as an employer. The Fair Labor Standards Act of 1938, 29 U.S.C. 201, et seq., as amended, (the Act) governs certain aspects of an employer s obligations related to its employees, including minimum wage, overtime pay, record keeping, and limitations on youth employment. Although the Act does not apply to every organization, it does apply specifically to federal, state, and local government agencies and schools. See, e.g., 29 U.S.C. 206(a) & 203(b), (r). As a result, many government agencies may be at risk of having to pay wages, including overtime, to supposed volunteers if the organization fails keep the employee versus volunteer distinction intact. II. WHO IS A VOLUNTEER? To address volunteers, courts have interpreted the definition of employee in the Act such that an employee does not include an individual who without promise or expectation of compensation, but solely for his personal purpose or pleasure, worked in activities carried on by other persons either for their pleasure or profit. Tony & Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 295 (1985). Regulations promulgated by the United States Department of Labor provide a specific definition of volunteer in the context of services performed for state and local government agencies. See 29 C.F.R. 553.101. As defined, volunteers for state or local government agencies are those who perform services for civic, charitable, or humanitarian reasons of their own free will, without pressure or coercion from their employer and without the promise, expectation, or receipt of compensation for the services. 29 C.F.R. 553.101(a). Further, state and local government agencies employees may not perform the same type of services that those employees perform as part of their job on a volunteer basis. 29 C.F.R. 553.101(d). III. THE COURTS INTERPRETATION Unfortunately, whether a government agency labels an individual as a volunteer rather than an employee makes little difference. Even if an employee volunteers for an activity does not mean that the activity is non-compensable services. In Graham v. City of Chicago, 828 F. Supp. 576 (N.D. Ill. 1993), the court found in favor of police officers who sought compensation under the Act for time transporting police dogs to and from work regardless of whether the police officers volunteered for the activity. B-3

When determining whether services are in fact, of the volunteer nature, courts apply a reasonableness standard and look at the objective facts surrounding the services performed to determine whether the totality of the circumstances establish volunteer status,... or whether, instead, the facts and circumstances, objectively viewed, are rationally indicative of employee status. Okoro v. Pyramid 4 Aegis, 2012 U.S. Dist. LEXIS 56277, *23 (E.D. Wis. Apr. 23, 2012). Courts will look at the economic reality of the situation, the relationship of parties, and the goals of the Act. IV. PERMITTED PAYMENTS Consistent with the above, the Act does not completely prohibit agencies compensating volunteers. 29 C.F.R. 553.106 expressly permits certain compensation while allowing an individual to maintain his or her volunteer status, as set forth in part below. 553.106 Payment of expenses, benefits, or fees. (a) Volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers. (b) An individual who performs hours of service as a volunteer for a public agency may receive payment for expenses without being deemed an employee for purposes of the FLSA. A school guard does not become an employee because he or she receives a uniform allowance, or reimbursement for reasonable cleaning expenses or for wear and tear on personal clothing worn while performing hours of volunteer service. (A uniform allowance must be reasonably limited to relieving the volunteer of the cost of providing or maintaining a required uniform from personal resources.) Such individuals would not lose their volunteer status because they are reimbursed for the approximate out-of-pocket expenses incurred incidental to providing volunteer services, for example, payment for the cost of meals and transportation expenses. (c) Individuals do not lose their status as volunteers because they are reimbursed for tuition, transportation and meal costs involved in their attending classes intended to teach them to perform efficiently the services they provide or will provide as volunteers. Likewise, the volunteer status of such individuals is not lost if they are provided books, supplies, or other materials essential to their volunteer training or reimbursement for the cost thereof. (d) Individuals do not lose their volunteer status if they are provided reasonable benefits by a public agency for whom they perform volunteer services. Benefits would be considered reasonable, for example, when they involve inclusion of individual volunteers in group insurance plans (such as liability, health, life, disability, workers' compensation) or pension plans or length of service awards, B-4

commonly or traditionally provided to volunteers of State and local government agencies, which meet the additional test in paragraph (f) of this section. (e) Individuals do not lose their volunteer status if they receive a nominal fee from a public agency. A nominal fee is not a substitute for compensation and must not be tied to productivity. However, this does not preclude the payment of a nominal amount on a per call or similar basis to volunteer firefighters. The following factors will be among those examined in determining whether a given amount is nominal: 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 or fee without losing volunteer status. State and local agencies should proceed cautiously, though, with the permissions granted above. Notably, the regulations later provide that a volunteer may lose his or her status as such when the total expenses, benefits, and/or fees paid are examined in context with the economic realities of the particular situation. 29 C.F.R. 553.106(f). V. MENDEL V. CITY OF GIBRALTAR In Mendel v. City of Gibraltar, 727 F.3d 565 (6th Cir. 2013), the plaintiff argued the city s volunteer firefighters were in fact employees. Mendel, 727 F.3d at 567. There, the volunteer firefighters could respond to calls whenever they chose to do so, but if they did respond to a call, the volunteers were paid $15 per hour. Id. The volunteer firefighters did not otherwise receive compensation for training or any benefits and did not have a set schedule. Id. at 567-68. The court considered the economic realities of the situation and held that the firefighters received more than a nominal fee when responding to calls. Id. at 570-71. Interestingly, the hourly wage paid to volunteer firefighters was substantially similar to that paid to the employed firefighters. Id. As a result, the court held the volunteer firefighters were in fact employees and ruled in favor of the plaintiff. Id. at 572. Mendel also serves as a caution to government agencies in that whether a volunteer is truly an employee has implications outside of the Act. Specifically, in Mendel, the plaintiff s underlying suit alleged the city violated the Family Medical Leave Act. Id. at 567. The city was not obligated to comply with the Family Medical Leave Act as complained of by the plaintiff, though, unless the city s volunteers were counted as employees to bring the city s total employee count above the minimum statutory amount. Id. As a result of the court s finding that the volunteers were employees based on the Act, the city subsequently faced potential liability under the Family Medical Leave Act as well. B-5

VI. WHAT TO DO (OR NOT!) Despite the somewhat ambiguous totality of the circumstances or economic realities of the situation test applied by courts under the Act, there are a number of steps every organization or agency can take to minimize its liability to volunteers. 1. Do not promise wages to volunteers. If at all possible, limit payments to volunteers solely to reimbursement of expenses incurred by that volunteer for the agency. 2. Do not promise future employment to volunteers. 3. Do not require volunteers to abide by the employee handbook, but instead consider creating a separate volunteer handbook. If a volunteer handbook is desired, agencies should consult with an attorney as to the appropriate language in the handbook to ensure it does not otherwise imply an employer-employee relationship. 4. Do not allow employees to volunteer to perform services for their employer similar to those services performed as part of their job duties. Following these basic steps will at least start an organization or government agency on the right path of avoiding financial liability to volunteers under the Act. B-6

Stacy E. Crabtree - Associate Stacy focuses her practice on commercial and governmental transactions and litigation. Stacy assists her clients with the negotiation and drafting of a wide range of contracts including purchasing, consulting, equipment finance, and license agreements, and she also assists her clients with corporate governance and compliance issues. Her clients range from large to small businesses, non-profits and local units of government. Stacy works regularly onsite with a Fortune 50 manufacturing company assisting its inhouse counsel with vendor agreements, open-source software and freeware licenses, and compliance issues. The company has touted the relationship as helping it actually lower the company's legal costs while increasing its efficiencies. In the public sector, Stacy serves as general counsel to a local municipality and has represented governmental entities in various contract disputes. Prior to attending law school, Stacy worked for a major insurance company for three years in auto claims and then commercial underwriting. During law school, Stacy served as a law clerk for United States District Court Judge Timothy J. Corrigan and interned with the United States Attorney's Office for the Middle District of Florida. Stacy also participated on the school's Mock Trial team and was an editor for the Florida Coastal Law Review. Stacy started her career with Heyl Royster in the summer of 2010 as a law clerk and then joined the firm full time as an associate in February 2011. Publications "Payment of Attorney's Fees on Behalf of Employees Remains Discretionary for Local Public Entities under the Tort Immunity Act Despite Collective Bargaining Agreement," Illinois Defense Counsel Quarterly (2015) "When Employers Become Human Traffickers: An Overview of the Trafficking Victims' Protection Act," Illinois Defense Counsel Quarterly (2014) "Sender Beware: How Your Emails or Letters may be Ruled a Binding Contract," Heyl Royster Business and Commercial Litigation Newsletter (2014) "FOIA Update: When Texts and Emails on Your Cell Phone or Tablet Become Public Records," Heyl Royster Governmental Newsletter (2014) "Contract Considerations Before Sharing Company Information with Third Parties," Heyl Royster Business and Commercial Litigation Newsletter (2013) New Laws for the New Year," Heyl Royster Governmental Newsletter (2013) "You Paid for It, But You Didn't Buy It: The Question of Website Ownership," Heyl Royster Business & Commercial Litigation Newsletter (2013) Public Speaking Medical Cannabis: A Primer For Employers and Governmental Entities Heyl Royster Lunch & Learn Seminar/Webinar (2014) Risky Business of Accepting Credit Cards Heyl Royster Business & Commercial Litigation Seminar (2013) Social Media and Healthcare Professionals: Appropriate Uses versus Abuses Crawford Memorial Hospital Physicians Group (2013) Building Your Community's Future: Best Practices for Local Government Construction Projects Heyl Royster Governmental Seminar (2013) Business/Employee Record Retention and Production: Strategies for Effective and Efficient Record Retention Heyl Royster Business & Commercial Litigation Seminar (2013) Professional Recognition 40 Leaders Under Forty 2014 - Selected by InterBusiness Issues magazine Professional Associations American Bar Association Illinois State Bar Association Peoria County Bar Association (Young Lawyers Committee, 2011-present; Continuing Legal Education Committee, 2013-present; Special B-7 Learn more about our speakers at www.heylroyster.com

Committee on Mentoring, Vice Chair 2013- present) Greater Peoria Claims Association (Board of Directors, 2013-present) Illinois Association of Defense Trial Counsel (IDC Quarterly Recent Decisions columnist) Illinois Association of Museums Court Admissions State Courts of Illinois United States District Court, Central District of Illinois Education Juris Doctor (summa cum laude), Florida Coastal School of Law, 2010 Bachelor of Arts Risk Management and Insurance (summa cum laude), Bradley University, 2005 B-8 Learn more about our speakers at www.heylroyster.com