Recently, the Sixth Circuit Court of Appeals (which covers Ohio, Michigan, Kentucky and Tennessee) held that a church, which ran a for-profit restaurant, did not need to pay its volunteers under the Fair Labor Standards Act (FSLA) (also known as the federal wage and hour law). This is a surprising reversal of a district court case that held the church owed back wages in excess of $380,000.

The Grace Cathedral Church in Cuyahoga Falls, Ohio, is led by the televangelist Rev. Ernest Angley. The church owned and operated a for-profit restaurant, Cathedral Buffet, where it has paid employees and unpaid volunteers performing the same type of work side-by-side. If the restaurant was shorthanded, the church solicited volunteers during its service and, on at least one occasion, Rev. Angley reached out directly to a church member for his volunteer service at the restaurant.

The Department of Labor (DOL) (who brought the case on behalf of the volunteers) attempted to argue that the church’s “coercion” of its members to volunteer at the restaurant created an employment relationship based on the “economic realities” test under the FLSA. The Sixth Circuit, however, rejected this argument.

Instead, the court focused on whether the volunteers had an expectation of compensation, which the court held that they did not. As a result, the volunteers were not employees of the restaurant and were not entitled to compensation under the FLSA.

What is most surprising about this case is the fact that the restaurant was a for-profit entity owned by the church, and the volunteers were performing identical work as the paid employees. Moreover, the breadth of this opinion is striking as well for its primary focus on whether the volunteers had any expectation of pay.

Prior to this opinion, it would have been a very risky proposition to not pay these individuals under those circumstances. It is still too early to see how other federal courts react to this decision or if the DOL intends on appealing this decision to the Supreme Court. In the meantime, however, employers who use volunteers should contact their employment counsel to evaluate how this case may help.