It is well known that the federal Fair Labor Standards Act and various state laws mandate that employees receive a minimum wage and that non-exempt employees receive overtime for work in excess of a set number of hours per week or day. What is not as well known is that this generally includes students and volunteers. The federal Department of Labor (DOL) has issued several opinion letters detailing when volunteers and students are in fact “employees” and subject to the minimum wage and overtime laws. Although beyond the scope of this article, employers must also pay attention to state law requirements, such as those in California, where the rules for using unpaid workers may be even stricter.
Overall, the DOL has stated that whether an employer must pay students or trainees depends on the facts in a particular case and all circumstances surrounding a student’s or trainee’s activities. In particular, the DOL has established the following test, all of whose requirements must be met, for when an employer is not required to pay a student:
- the training provided to the student, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;
- the training is primarily for the benefit of the trainees or students;
- the trainees or students do not displace regular employees, but work under their close observation;
- the employer derives no immediate advantage from the activities of the trainees or students; and on occasion, operations may actually be impeded;
- trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
- all involved – the employer, trainees and students – understand that the students will not be entitled to wages for the time spent.
Moreover, whether a student obtains school credit is relevant to whether he or she must be paid. If the student is receiving school credit (and paying for it), it is more likely that the individual meets the above factors. In contrast, if an employer derives revenue or profits from the student’s work, it is likely that the student must be paid.
The DOL has also spelled out when an organization does not have to pay a volunteer. DOL has stressed that it wants to encourage volunteerism, but not at the expense of undermining the minimum wage and overtime laws. Thus, the following test has been established for treating an individual as a bona fide volunteer:
- The individual is working without contemplation of receipt of compensation (although reimbursement for expenses is allowed); and
- The individual is performing the services for civic, charitable or humanitarian reasons without coercion or undue pressure;
Moreover, when employees volunteer their time, such as at fundraising dinners, walk-a-thons or other public functions, additional standards come into place. In such circumstances, an employer must show that:
- the volunteer’s hours are outside of the employer’s normal working hours;
- the services performed are not the same type normally performed by the employee when working; and
- no benefits or penalties are based on whether an individual participates in the volunteer activities.
Employers should not assume that federal and state minimum wage and overtime requirements do not apply to students or volunteers. To the contrary, employers should examine the specific requirements for whether unpaid work is allowed. To do otherwise, could subject the employer to costly wage and hour claims and penalties.