Are you entitled to FLSA coverage if you are doing the Lord’s work? In March 2017, a federal district court in Ohio answered “yes” and awarded almost $400,000 to unpaid employees/volunteers of a church restaurant. The Cathedral Buffet and the Rev. Ernest Angley are now casting a wing and prayer to the Sixth Circuit Court of Appeals to reverse the large judgment against them.

“Volunteers” and the Church

Rev. Angley and his Grace Cathedral mega-church near Cleveland, Ohio, operated Cathedral Buffet, a for-profit restaurant owned by Grace Cathedral, Inc. (which closed its doors to the public after the trial court’s ruling). For most of its existence, the Cathedral Buffet relied on church “volunteers” to operate the restaurant. Angley, as president of Cathedral Buffet, was heavily involved in the management and operations, and actively recruited volunteers from the church.

The restaurant maintained two classes of workers: employees who were paid an hourly wage and unpaid “volunteers.” The volunteers constituted the bulk of the restaurant’s workforce and performed virtually all the same jobs as the paid workforce.

As we all know, under the FLSA, covered employers must pay covered employees the minimum hourly wage and overtime compensation. The FLSA’s requirements cannot be waived as the FLSA affects public interest and protects against unfair competition in the economy. Decades ago, in Tony & Susan Alamo Found. v. Sec. of Labor, the Supreme Court ruled that individuals working in commercial businesses operated by religious organizations are covered by the FLSA’s minimum wage and overtime protections. An employer cannot evade the FLSA’s requirements simply by labeling workers as “volunteers” (even if the individuals considered themselves volunteers), even if the business was “infused with a religious purpose.”

The Department of Labor filed suit against Cathedral Buffet in August 2015 seeking back wages, liquidated damages, and a permanent injunction. After a bench trial, the district court found that the Cathedral Buffet, as a commercial, for-profit business, was a covered employer under the FLSA. Angley was also found to be an employer and personally liable for the judgment as allowed under the FLSA. Considering the economic realities of the relationship, the court also held that the multiple “volunteers” were, in fact, employees and, thus, entitled to minimum wages. The court rejected the Cathedral Buffet’s First Amendment, Free Exercise argument, finding nothing in the FLSA to create an exemption based on the workers’ motivation, be it religious or otherwise. The restaurant was found liable for liquidated damages as well as for acting in bad faith because of previous citations. In the end, the judgment totaled $388,507.

Calling on a Higher Authority

Angley and the church have appealed the decision to the Sixth Circuit, contending that because the restaurant was owned and subsidized by a tax-exempt church, did not make a profit even though it was a for-profit entity, and operated with the charitable intention of providing low-cost meals to the community through church volunteerism, the FLSA should not apply. Further, they argued that the volunteers did not expect to be paid and did not feel coerced to volunteer as shown by 134 affidavits submitted to the district court – a claim of questionable credibility, according to the DOL’s impeachment of several affiants. Testimony at trial suggested that Angley would personally exert pressure and influence upon would-be volunteers by threatening spiritual harm and God’s displeasure if they did not work at the restaurant when asked.

The DOL responded sharply in its recent briefing that the Cathedral Buffet was not a public agency to qualify for the FLSA’s narrow statutory exclusion and that, even if it were, such public agencies cannot use coercion or pressure to procure volunteers. Finally, the DOL emphasized that the FLSA prohibits the use of volunteer labor at for-profit businesses.

Takeaways

Commercial enterprises that are operated by religious or charitable organizations should take careful note of the district court’s ruling and stay tuned for the outcome of the appeal. Generally speaking, individuals who are part of a for-profit employer’s business, even if performed for a charitable purpose, will be deemed to be employees under the FLSA rather than volunteers, and businesses should act accordingly.