Nonprofit Volunteer vs. Employee Classification

The Volunteer Classification Challenge

Nonprofit organizations frequently rely on volunteers to advance their missions, but misclassifying workers as volunteers when they should be treated as employees creates significant legal liability. The Fair Labor Standards Act (FLSA) permits individuals to volunteer for charitable, religious, and humanitarian organizations, but only under specific conditions.

The Department of Labor has established clear guidelines distinguishing lawful volunteer relationships from employment relationships that require minimum wage and overtime pay. Understanding these distinctions is essential for every nonprofit employer.

FLSA Volunteer Standards

Under the FLSA, individuals may volunteer their services to public agencies and nonprofit organizations where the individual volunteers freely, without coercion or undue pressure. The volunteer cannot be employed by the same organization to perform the same type of services they volunteer to do. Additionally, the volunteer may receive no compensation or only nominal fees, reasonable benefits, or reimbursement of expenses.

The Department of Labor considers whether the volunteer received anything of value, whether there was any coercion, and whether the services performed are the same as the volunteer's regular employment duties. If an employee of a nonprofit is asked to volunteer for the same organization performing substantially similar work, that time is likely compensable.

Key Factors in the Analysis

Courts examine the totality of circumstances when determining volunteer status. Relevant factors include the degree of control the organization exercises over the individual, whether the individual has the ability to decline assignments without consequence, whether the individual receives regular compensation or only nominal perquisites, and whether the individual's participation is truly voluntary.

Stipends present particular challenges. While small stipends intended to cover incidental expenses generally do not convert a volunteer into an employee, stipends that approximate what the individual would earn as an employee suggest an employment relationship. The DOL considers stipends exceeding 20 percent of what an employee would earn for similar work to be potentially problematic.

State Law Considerations

State wage and hour laws may impose additional restrictions on volunteer arrangements. Some states define employees more broadly than the FLSA, potentially capturing individuals who would qualify as volunteers under federal law. California, for example, applies the ABC test for worker classification under certain statutes, which can be difficult for volunteer arrangements to satisfy.

Nonprofit employers should research the specific volunteer laws in each state where they operate, as state laws may require additional protections such as workers' compensation coverage for volunteers or limits on volunteer working hours.

Best Practices for Nonprofits

Nonprofits should maintain clear written volunteer agreements that describe the voluntary nature of the relationship, the services to be performed, and any nominal benefits or reimbursements provided. Organizations should avoid scheduling volunteers for mandatory shifts, imposing discipline for missed commitments, or providing compensation that could be characterized as wages.

Tracking volunteer hours separately from employee hours and ensuring that paid staff members do not volunteer for their same employer performing the same duties are essential compliance practices. Regular audits of volunteer programs help identify arrangements that may have evolved into employment relationships over time.