Second Circuit Court of Appeals Addresses FLSA’s Public Agency Volunteer Exception, But Withholds Comment on Private Sector Volunteers

Written by Michael Arnold

For the first time the Second Circuit Court of Appeals tackled the Fair Labor Standards Act’s public agency volunteer exception. In Brown v. New York City Board of Education, the Court outlined the contours of the exception and affirmed a lower court decision finding that the individual at issue was a volunteer and not an employee entitled to minimum and overtime wages. This opinion however, does not alleviate the concerns of private sector employers susceptible to wage and hour class/collective action lawsuits by volunteers.

Background

Brown had “worked” around 40 hours a week for more than three years at Banana Kelly High School in the Bronx. Specifically, Brown performed various services, including lunchtime supervision, detention, parent contact and student escort services. He answered phones and handed out report cards and progress reports. Near the end of his stint he began mentoring students.

Brown acknowledged that he never had to submit “qualifications for employment” to the school, nor did any school official indicate that it would pay him for his services. Instead, he admitted that accepted the job to build his resume, become a better person and help the students. He did ask for a paid position on various occasions, but was rebuffed because of budget constraints and his lack of higher education degree. From time to time, the school’s Principal and Director of Student Life gave Brown small amounts of cash (between $40-60), subway fare and paid for his meals. He was never disciplined in any way if he failed to show up to the school.

Brown eventually sued the NYS Department of Education claiming that it violated the FLSA when it failed to pay him for his services. The District Court dismissed the FLSA claim finding that under the “totality of the circumstances,” Brown was a “volunteer” and not an “employee” as defined by the FLSA, and therefore he could not seek minimum or overtime wages. Brown appealed.

FLSA’s Public Agency Volunteer Exception

The FLSA does not specifically define the term “volunteer.” Instead, it says that the term “employee” does not include individuals who volunteer to perform service for a public agency where two conditions are satisfied:

1. the individual does not receive compensation for his or her services and is not paid expenses, reasonable benefits or a nominal fee to perform services for which he or she volunteered; and
2. the services the individual performs are not the same type of services the public agency employs the individual to perform.

The DOL, the agency that administers the FLSA, does affirmatively define “volunteer” in its interpreting regulations. Volunteer means a person that performs services for a public agency

1. for a civic, charitable or humanitarian purpose,
2. has not been promised or does not expect or receive compensation for the services rendered;
3. performs such work freely and without pressure or coercion, direct or implied, from such employer; and
4. is not otherwise employed by the public agency to perform the same type of services for which the individual volunteers.

The regulations also note that there is no restriction on the types of services that one can volunteer to perform. They also note that the agency can pay expenses, reasonable benefits and a nominal fee or any combination of those three without jeopardizing the individual’s volunteer status so long as those payments are incidental to the volunteer services (i.e. to pay for the cost of meals or transportation and/or not tied to the individual’s performance).

The Second Circuit Agrees with the District Court That Brown Was a Volunteer

The question on appeal of course was whether Brown qualified as a “volunteer” – not entitled to minimum wage and overtime, or as an “employee” – entitled to minimum wage and overtime.

The Court first held that this was a question of law for a court, not a jury, to decide, and its decision should be made based on the totality of the circumstances viewed most favorably to the individual. It then analyzed the DOL’s volunteer definition’s four factors. In doing so, it made several important holdings.

1. An individual need not be solely motivated by civic, charitable or humanization purpose to volunteer; he or she can be motivated by other purposes as well (e.g. to build one’s resume).
2. The court must apply an objective not subjective reasonableness test to determine whether the individual expected compensation for his or her services.
3. The court should look at the “economic realities” to determine whether the individual was promised, reasonably expected or received compensation. No specific “economic realities” test applies however; instead the court must identify, from the totality of the circumstances, the economic (and other) factors most relevant to resolving this issue.

The Second Circuit then went on to affirm the District Court’s decision holding that the totality of the circumstances demonstrated that Brown qualified as a “volunteer” under the FLSA’s public agency exception and that he was not entitled to minimum or overtime wages.

In reaching its decision, the Second Circuit noted that the public agency exception is a bit unique. FLSA’s exemptions are typically to be construed narrowly against employers, but Congress did not want the volunteer exception to be construed in a way that would discourage people from volunteering; they only wanted it to be construed in a way that stopped employers from coercing individual to volunteer their services to avoid paying them. The Court kept that in mind throughout its analysis, which certainly helped the Department of Education here, and it should encourage other public agencies that utilize volunteers elsewhere.

But What About Volunteers for Private Employers?

Excellent question. The Court was quite clear that its opinion did not extend to private sector volunteers – an important distinction. The FLSA says nothing about private sector volunteers. Again, it’s the DOL that offers guidance: individuals can volunteer: (1) for charitable and public purposes, usually on a part-time basis, at a religious, charitable, civic, humanitarian or similar non-profit organization, and (2) under certain circumstances when a for-profit employer asks an employee to do so for a charitable or civic purpose.

To “volunteer” at a non-profit means that the individual does so freely and without any expectation or receipt of compensation, and the individual cannot displace paid workers or perform work that would otherwise be performed by employees. In interpreting this standard, courts often look at whether the individual engaged in “ordinary volunteerism,” which comprises the following factors:

1. Does the individual volunteer at an organization that needs volunteer services? (i.e. a local soup kitchen)
2. Does the individual volunteer his or her services on a part-time basis? (i.e. I volunteer there on Saturdays)
3. Does the individual volunteer his or her services without any pressure or coercion? (i.e. I can skip any Saturday I want)
4. Does the individual volunteer services that are typically associated with volunteer work? (i.e. I help prepare food at the soup kitchen)
5. Does the individual displace other employees in order to volunteer? (i.e. no, I’m not doing the work they would have any employee perform) and
6. Does the individual receive or expect any compensation from the non-profit? (no, I show up simply to help feed the hungry)

You cannot volunteer services to a for-profit employer, but as an employee of a for-profit employer, it may ask you to perform volunteer services as long as:

1. the volunteer work is for civic or charitable purpose;
2. the volunteer work occurs outside of your normal working hours;
3. you can decline to participate without being penalized;
4. you do not expect nor do you receive compensation for the volunteer work; and
5. the volunteer services differ from your normal job duties.

For example, you’re an accountant at a large accounting firm and your division head encourages, but does not require, your group to volunteer at the soup kitchen on an upcoming coming Saturday. In this situation, your employer does not have to pay you for the time you spend volunteering.

Problems typically arise when employers at non-profits require individuals to act more like employees than volunteers – for example, when they require an individual to show up forty hours per week to help with the charity’s business functions (i.e. perform back office functions). And they arise at for-profits when they require employees to work on corporate-sponsored opportunities during working hours and subject them to discipline for failing to do so – for example, they require employees to help plan, execute and participate in a corporate-sponsored charity run. It is problems like these that may lead to the much feared wage and hour class/collective action lawsuit. Thus, employers should ensure that their efforts to promote volunteerism fall in line not only with FLSA's requirements, but also with other state laws that may define “volunteer” even more narrowly.

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