DOL Endorses Volunteer Treatment of Certification Exam Graders

by Pillsbury Winthrop Shaw Pittman LLP
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DOL Opinion Letter confirms that volunteer status not jeopardized by nonprofit payment of expenses.

Takeaways

  • Department of Labor Opinion Letter endorses non-employee classification of member volunteers at nonprofit, without requiring 501(c)(3) status.
  • DOL confirms that payment of travel, meal, lodging, and other expenses incidental to volunteer service do not negate volunteer service.
  • Nonprofit organizations must ensure that volunteers neither receive nor expect compensation for services.

The U.S. Department of Labor (DOL) recently issued an Opinion Letter endorsing the decision of a nonprofit credentialing organization to classify the graders of its examinations as volunteers, rather than as employees or independent contractors. The August 28, 2018, Opinion Letter, issued by the Wage and Hour Division of the DOL, stated that the organization could “pay for Graders’ travel, lodging, meals, and other expenses incidental to volunteering without negating their volunteer status.” This Opinion Letter provides important legal protection for nonprofit professional certification or accreditation organizations to accept volunteer services from members or subject matter experts, regardless of whether the organization is a 501(c)(3) charitable organization or a 501(c)(6) professional society or trade association.

Background on Employee versus Volunteer Classifications

The practice of unpaid “volunteers” providing services without compensation is permitted only for governmental or nonprofit organizations. The federal Fair Labor Standards Act (FLSA) requires payment of wages to any individual that an employer “suffers or permits to work.” The FLSA statute and implementing regulations recognize volunteers only in the context of public employers (e.g., volunteer firefighters or public school coaches). Those regulations allow for payment of nominal amounts to the public agency volunteer without jeopardizing the individual’s status as a volunteer. (See 29 CFR § 553.106(a) – “Volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers.”) These regulations do not apply, however, to any non-governmental employer.

For non-governmental employers, the exemption of volunteers from FLSA coverage stems from two U.S. Supreme Court decisions. In the 1947 decision Walling v. Portland Terminal Co., 330 U.S. 148 (1947), which addressed whether railroad trainees were entitled to minimum wage payments, the Court held that the definition of employee was “not intended to stamp all persons as employees who, without any express or implied compensation agreement, might work for their own advantage on the premises of another.” Subsequently, in its 1985 decision in Tony and Susan Alamo Foundation v. Secretary of Labor, the Court held that workers who participated in the commercial portions of a nonprofit religious organization and who received no cash salary, but were provided with food, clothing and shelter, were employees under the FLSA due to the economic realities of the situation. The Court held that, even in the absence of an agreement for or expectation of cash compensation, “the purposes of the [FLSA] require that it be applied even to those who would decline its protections.”

Relying on these cases, the DOL has recognized a “volunteer” category that applies to individuals who “volunteer time to religious, charitable, civic, humanitarian, or similar nonprofit organizations as a public service.” (See DOL Wage & Hour Fact Sheet #14A.) The DOL takes the position at individuals generally cannot be classified as volunteers “in commercial activities run by a non-profit organization such as a gift shop,” but that a “volunteer generally will not be considered an employee for FLSA purposes if the individual volunteers freely for public service, religious or humanitarian objectives, and without contemplation or receipt of compensation.”

Opinion Letter Provides Clarity

While volunteer service to charitable organizations in support of non-commercial activities has clearly been excluded from FLSA coverage, prior case law and guidance was thin with respect to volunteer service for 501(c)(6) tax-exempt organizations and other nonprofits outside of public charities. The DOL had not previously opined on whether volunteering for a trade association qualifies as a “public service,” “civic,” or “humanitarian” objective. Although the Opinion Letter does not specify the specific tax-exempt status of the organization to which it was issued, the organization is not characterized as a charity. Rather, it is described only as a “nonprofit organization that administers professional examinations necessary to obtain professional designations (credentials)” and that has members who volunteer as examination graders.

The graders described their stated motivation for their service (as indicated in survey responses) as the “professional achievement of being selected for this role,” the opportunity to “[promote] the highest standards of ethics, education, and professional excellence,” the opportunity to “[gain] the personal and professional” benefits of being a grader, and “giving back to the profession and giving back to [the nonprofit membership organization].” The Opinion Letter deems these motivations sufficient “service-oriented reasons” to qualify the graders as volunteers, in combination with evidence that the graders “offer their services freely and without pressure or coercion.” The Opinion Letter notes that the graders “continue to receive their regular salaries from their primary employers, … travel from their home locations to serve as Graders, and do so only once per year for no more than two weeks.” In addition, the graders would receive no fee for their services, but would be paid for travel, lodging, meals, “and other expenses incidental to volunteering.”

In issuing this Opinion Letter, the DOL has endorsed the common practice among membership organizations and professional certification organizations of having members of the organization or subject matter experts in their field offer their time and expertise to the organization without compensation. Although the Opinion Letter addressed the practice of volunteer graders, its reasoning would seem to apply equally to volunteer committee members, test-item writers, conference organizers, and volunteers serving in other capacities that support the mission of the organization.

Practical Considerations

Nonprofit organizations should remain mindful that these services must be provided without expectation or receipt of compensation to avoid a finding that the individuals have been misclassified and are entitled to wages and statutory employee benefits. Neither reimbursement of expenses nor provision of incidental benefits, such as free food at events that are also open to other members of the organization’s community or clothing with the organization’s logo to help identify the volunteer as working for the organization, will convert a volunteer into an employee. Other financially valuable benefits, however, will disqualify the individual from volunteer status. Benefits that jeopardize volunteer status include discounted tuition or exam fees awarded in exchange for volunteer service, or free or discounted housing that is not necessary for the volunteer to perform his or her responsibilities.

Nonprofit organizations would be prudent to review their policies and procedures for volunteers to ensure that they are following DOL guidance and best practices. Recommended steps include:

  • The organization should pay directly for volunteer expenses or have the volunteer submit documentation of the expense reimbursement request, rather than paying a stipend intended to cover expenses. If the stipend exceeds the volunteer’s actual expenses, the excess can be considered compensation to the volunteer.
  • Permitted reimbursement or payment of travel, meal, and lodging expenses allows nonprofit organizations to show appreciation for volunteers’ service by selecting pleasant locales for volunteer service. Organizations may wish to avoid selecting venues that strain the organization’s budget, however, or that give the appearance of an extravagant junket.
  • The organization should develop volunteer policies and a volunteer participation agreement. Volunteers should acknowledge that they are serving as volunteers without compensation, and, as applicable, the agreement should also address the organization’s expectations as to conflicts of interest, maintaining confidentiality and data security, and adherence to ethical and conduct rules.
  • If the volunteers are creating written or other copyrightable material for the organization, the organization should obtain a written assignment of “all rights” in the material. The “works made for hire” doctrine, which confers authorship rights on an employer for works created by employees and by independent contractors commissioned to create the works, does not apply to volunteers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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