Navigating Federal Volunteer Compliance Rules for Nonprofit Organizations

Nonprofit organizations often depend on the services of both employees and volunteers, who are equally integral to the organization’s success. But proper worker classification is crucial, as it determines the scope of work each can undertake.  

Incorrect classifications, misunderstandings by volunteers, or actions that jeopardize classifications can lead to serious consequences for the organization, including costly compliance issues, reputational harm, and questions of the organization’s financial viability.  

Therefore, having a firm understanding of federal employment laws, such as the Fair Labor Standards Act (FLSA), can help address common volunteer-based questions. 

What Should Nonprofits Know About Volunteers and the Law?

The FLSA provides several essential details regarding the different types of work arrangements available to U.S. employers, including federal minimum wage, overtime regulations, child labor limitations, and timekeeping requirements. The Department of Labor (DOL) has rulemaking authority over the FLSA and enforces FLSA volunteer rules accordingly.  

For example, under the FLSA, employees can’t volunteer for for-profit, private-sector employers. Instead, they can only volunteer for public-sector and nonprofit organizations. Furthermore, the DOL has stated that compliance with FLSA employee guidelines is generally based on whether the activities individuals perform are for a business purpose (i.e., not for the organization’s charitable activities). However, certain individual activities involving interstate commerce can also be considered, such as:

• Making or receiving interstate phone calls
• Shipping material to another state
• Transporting people or property into another state

The FLSA, however, isn’t the only federal law governing volunteers and nonprofits. The Volunteer Protection Act of 1997 (VPA), for instance, limits a nonprofit organization’s liability for the actions taken by a nonprofit organization volunteer acting in an official capacity.  

How Does the Law Define Volunteer? 

Federal law generally defines a volunteer as someone who donates their time and services to a nonprofit (e.g., religious, charitable, civic, or humanitarian) organization without receiving compensation and with no expectation of being compensated. Certain exceptions (e.g., reimbursements for out-of-pocket expenses) are sometimes permitted, but they can risk confusion with other workers or tax agencies. 

Furthermore, the Supreme Court of the United States (SCOTUS) decision in Alamo Foundation v. Secretary of Labor held that to determine if an individual is an organization’s “employee,” there must be an employment relationship between both parties based on various economic factors (i.e., the Economic Reality Test).

In other words, is the individual economically dependent on the organization for work, or is the individual doing business for themself? 

With this in mind, the DOL broadly describes volunteer jobs as typically being part-time in nature, without displacing or performing the work of regular employees. Moreover, nonprofit volunteer opportunities may not include work related to the commercial activities of a nonprofit organization. A nonprofit volunteer, for example, can’t work the organization’s gift shop. 

Do Volunteers Count as Employees? 

Volunteer FLSA rules clearly state that volunteers are not the same as employees, and therefore don’t count as employees for nonprofit organizations. Furthermore, a hired nonprofit employee isn’t permitted to provide their same services to the organization when acting as a volunteer.  

Employees can, however, participate in volunteering opportunities that donate other services and time to the organization. According to the DOL Wage and Hour Division’s Field Operations Handbook, permissible employee volunteer examples include: 

• A hospital office administrator volunteering to spend off-duty hours sitting with and comforting patients as an act of charity. 
• A church office employee volunteering to provide non-clerical assistance in the church’s preschool before starting work.  

Nevertheless, due to the potential legal complications and risks, nonprofit organizations should be cautious when considering internal opportunities for volunteer work by employees.  

Do FLSA Volunteer Work Rules Apply to Public Servants? 

Public sector employees can perform nonprofit volunteer work if they offer their services freely (i.e., without pressure or coercion).  

Moreover, if the volunteer opportunity is provided by an employee’s public-sector employer, the volunteer work must be different from the type of services the individual performs as an employee. The only time the employment and volunteer services can be the same is when the volunteer job is in a different jurisdiction that doesn’t employ the individual. 

A city police officer, for instance, can volunteer for different, non-law enforcement-related work in their city’s parks or schools. That same city policy officer can only volunteer to perform law enforcement activities for a different public agency that isn’t their employer. 

What Are Some Nonprofit Volunteer FLSA Best Practices? 

Following FLSA volunteer guidelines for nonprofit organizations is critical for avoiding several compliance and tax issues. Fortunately, there are a few best practices nonprofit organizations can use for volunteer organizing and classification. 

FLSA Volunteer FAQs 

Does FLSA Apply to Nonprofits?

According to DOL Fact Sheet 14A, the FLSA applies to a nonprofit’s commercial activities (i.e., Enterprise Coverage) and doesn’t extend to its charitable activities. 

However, even where the FLSA doesn’t broadly apply to a nonprofit, it may still apply to individual nonprofit employees whose activities involve interstate commerce (i.e., Individual Coverage). These can include shipping materials to another state or making interstate phone calls. 

Can Nonprofit Employees Volunteer for Their Employer? 

Nonprofit employees can volunteer for their employer so long as the volunteer services they offer aren’t the same as those they’re employed to provide, nor are they related to the organization’s commercial activities.  

The volunteer opportunity also shouldn’t come with an expectation of compensation, and the individual shouldn’t receive compensation for any volunteer work they complete.  

Does Volunteer Work Count as Employment? 

Under the FLSA, volunteer opportunities don’t count as employment if the volunteer isn’t compensated and offers their services freely for public, humanitarian, or religious purposes, without the intent of receiving compensation. 

Protect Your Mission with Paylocity 

Misclassifying employees or volunteers can put any organization in a difficult situation. Costly penalties, damage to public reputation, and increased legal scrutiny are just the tip of the iceberg. Not to mention the potential strain on donor relationships.  

By partnering with Paylocity, nonprofit organizations gain access to proven HCM tools and resources that support efficient and responsible workforce management, including: 

• A robust document management platform for uploading, editing, and retrieving important forms or policies.  
• A user-friendly compliance dashboard that centralizes training courses, document acknowledgements, and work authorization tracking. 
• A fully integrated talent management suite that simplifies recruitment and onboarding from initial job posting to final agreement acceptance.  

Request a demo today to learn how our HCM solutions can help reduce administrative burden and keep your organization confidently focused on its mission.