Caution: Payments to Volunteers Can Lead to Trouble

By: Phyllis Katz. This was posted Wednesday, January 15th, 2014

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Nonprofit organizations and governmental entities are permitted to use volunteer labor.  In many instances, the work performed mirrors that performed by paid staff.  Employers may want to recognize the time and efforts of the volunteers through cash payments.  There is much danger in providing such financial rewards in that you may convert the volunteer into an employee.

The City of Gibraltar, Michigan was sued by a discharged employee, Paul Mendel, for violating his Family and Medical Leave Act rights.  The City had fewer than 50 employees and argued that its employees were not eligible for FMLA.

The City’s workforce was comprised of 41 employees plus approximately 30 volunteer firefighters.  The volunteer firefighters were paid $15 per hour for the time spent on responses to emergencies or for maintaining equipment.  Mendel introduced evidence to show that the prevailing rate of pay for firefighters in other localities was between $14 and $17 per hour and the part-time Fire Chief averages $19.23 per hour.

In determining whether volunteer firefighters fall within the FMLA definition of an employee, the 6th Circuit Court of Appeals looked to the Fair Labor Standards Act definition of employee. The court first concluded that the firefighters fall within the FLSA’s broad definition of employee in 29 U.S.C. § 203(g) (they are “suffered or permitted to work”).  The court then concluded that the firefighters are not volunteers because the FLSA regulations (29 C.F.R. § 553.106) preclude the receipt of compensation for services rendered, other than just nominal compensation.  The Court concluded that the firefighters did not receive a “nominal amount on a ‘per call’ or similar basis” but each time a firefighter responds to a call, “he knows that he will receive compensation at a particular hourly rate – which happens to be substantially similar to the hourly rates paid to full-time employed firefighters in some other neighboring areas.”  Thus, the court held that Mandel was an “eligible” employee under the FMLA and sent the case back to the trial court. Mendel v City of Gibraltar, 6th Circuit Court of Appeals, (No. 12-1231, August 15, 2013)

The Court distinguished this case from a case decided by the 4th Circuit Court of Appeals. In Purdham v Fairfax City School Board, 637 F. 3d 421, 433-434 (4th Cir. 2011), the court held that “the school board’s payment of a fixed stipend to a golf coach was a nominal fee where (1) the stipend amount did not change based on either how much time and effort the coach expended on coaching activities or how successful the team was; and (2) the approximate hourly rate to which the coach’s stipend could be converted was on a fraction (less than ¼) of the hourly rate of pay he received as a full-time security assistant employed by the School Board.”

The Fair Labor Standards Act regulations permit certain payments to be made to volunteers.  First, the individual volunteering the services, must be doing so for charitable or public service reasons and without the expectation of compensation. These volunteers may without jeopardizing their volunteer status receive nominal fees, reasonable benefits, and expenses such as tuition payments for training, clothing and uniform expenses, relief and retirement benefits, life and health insurance, travel reimbursements, and workers compensation benefits.  Any payment for services performed cannot be based on productivity. See 29 C.F.R. 553.106

 

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