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eLABORate: How Employers Can Implement Community Service Initiatives While Avoiding FLSA Liability

April 23, 2019

These days, corporate social responsibility is not just a buzzword for employers—it’s a sincere undertaking. From the proliferation of benefit corporations to Volunteer-Time-Off policies, employers are constantly seeking new ways to engage in charitable work. Employers must tread carefully, though. Employers who encourage their employees to volunteer could face liability under the Fair Labor Standards Act (FLSA). Some volunteer time can be considered hours worked under the FLSA, thus subjecting well-meaning employers to minimum-wage and overtime payments to the “volunteering” employees.

On March 14, 2019, the United States Department of Labor Wage and Hour Division (DOL) issued an opinion letter (FLSA2019-2) in response to an employer’s request for guidance on its employee-volunteer program. Under the program, employees could volunteer for a charitable organization of their choice during non-working hours, and the employer would award a bonus to certain participating employees at the end of the year. The employer sought the DOL’s guidance to determine whether the employees’ volunteer time constituted hours worked under the FLSA. The DOL concluded that the volunteer time did not qualify as hours worked under the FLSA because the employer’s program was voluntary.

Voluntariness is thus key. And it is measured by whether the employer (1) pressures employees to volunteer, (2) imposes negative consequences for failing to participate, or (3) directs or controls the volunteering. The DOL’s letter, for example, states: “Congress did not intend for the FLSA ‘to discourage or impede volunteer activities,’ but rather to ‘prevent manipulation or abuse of minimum wage or overtime requirements through coercion or undue pressure upon individuals to volunteer their services.’” (quoting 29 C.F.R. § 553.101).

Voluntariness, however, is not the only relevant consideration. The type of entity for which an employee volunteers is also important—under the FLSA, an individual cannot volunteer for a for-profit entity. That is to say, volunteering is recognized under the FLSA only if an employee volunteers for a charitable, civic, humanitarian or public-interest organization. (The DOL’s letter does not address whether nonprofit employers can accept “volunteer” services from their employees—that arrangement is best explored through consultation with legal counsel.)

Perhaps the most surprising revelation from the DOL’s letter is that an employer may consider an employee’s participation in a volunteer program as a factor for offering the employee a bonus or raise. The letter indicates that an employer can implement a financial incentive for volunteers (i.e., an annual bonus for a volunteer who makes the greatest community impact) as long as (1) volunteering is optional, (2) declining to volunteer will not result in a change in employment conditions, and (3) the financial incentive is not guaranteed.

If you are an employer with questions about implementing an employee-volunteer program or other charitable initiative, Phelps Dunbar can help.