Volunteering is an effective way for organizations to maximize their impact on the community while minimizing costs. In recent years, as corporate social responsibility has received increased attention in academia and from the media, corporations have begun 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 such as Deloitte and popular business publications such as Forbes laud volunteering as beneficial for company morale, productivity, and brand perception.
However, employers that institute a volunteering initiative can risk running afoul of the Fair Labor Standards Act (FLSA), which specifically excludes individuals who “volunteer” from its definition of “employees” to whom the minimum wage and overtime requirements apply. On March 14, 2019, the U.S. Department of Labor (DOL) issued an opinion letter addressing the issue. Let’s take a closer look.
FLSA and Volunteering
The FLSA provision pertaining to volunteering was intended to prevent employers from skirting minimum wage and overtime requirements by exerting “coercion or undue pressure” on employees to volunteer, not to discourage volunteering.
According to the FLSA, a “volunteer” performs services without any promise, expectation, or receipt of wages for those services. By contrast, an “employee” acts in the interest of his employer and is subject to its direction and control. Keeping that distinction in mind, promoting civic engagement through volunteering remains a valuable way for employers to enhance corporate culture and maximize their impact on the community.
DOL Opinion Letter
In its recent opinion letter, the DOL addressed whether participation in an employer-sponsored community service program would be considered “hours worked” under the FLSA. The program at issue provides opportunities for employees to volunteer for activities sponsored by their employer or to pursue volunteer activities they select themselves. The employees who choose to participate are compensated only to the extent that their volunteer activity takes place during normal work hours.
At the end of the year, the employer awards discretionary bonuses to employees who made the greatest community impact through the program, taking into consideration how many hours each employee volunteered. The employer also proposed tracking volunteer hours through an app on employees’ mobile devices. The DOL determined the program didn’t result in hours worked under the FLSA, even with the use of a tracking application.
Notably, the opinion letter confirms 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:
- The volunteering must be optional;
- Employees who don’t volunteer cannot suffer any adverse impact on their working conditions or employment prospects; and
- A bonus for choosing to volunteer isn’t guaranteed.
In other words, an employee who chooses not to participate in her employer’s volunteering initiative must be able to earn the same discretionary bonus by satisfying other criteria. If an employer incorporates 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 doesn’t destroy the rule that volunteer time, by definition, entails a lack of any expectation of compensation. Although compensation isn’t required for volunteer time that occurs outside 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 volunteering initiative should take care. Occasional sponsorship of volunteering is a safer approach, as is choosing volunteer opportunities that are unrelated to employees’ duties.
Volunteers also commonly receive nonpecuniary benefits for their services. In some cases, providing benefits to volunteers in return for their services can weigh in favor of classifying them as “employees.” In such cases, courts will apply an “economic realities” test to determine whether the particular circumstances of the arrangement favor classifying workers as volunteers.
Public-sector and nonprofit employers seem to be more frequent targets of litigation involving this issue, perhaps because there are more likely to be opportunities for governmental or nonprofit employees to “volunteer.” Although for-profit employers are less frequently involved in such litigation, the rules apply equally to them.
Legal consequences aside, you can encourage employees to volunteer in a variety of ways, including, as the DOL recently confirmed, by factoring their volunteer time into a discretionary bonus plan. Research has shown that volunteering is effective in developing leadership and communication skills and has been proven to help individuals and organizations succeed. As a result, volunteering may give your organization a competitive edge in attracting and retaining talent, especially from the younger generation.
Before launching a volunteer initiative, however, you should consider an array of civic engagement opportunities and evaluate which ones are appropriate for your business and your workforce. Consulting with an employment attorney is an effective way to ensure that you address any risks for your particular business at the outset while maximizing your impact on the community and avoiding potential legal exposure.