About the Author
Since 2015, Joanne PHR, SHRM-CP has served as Senior Manager on Paylocity’s CGR team, guiding compliance strategy and legislative analysis across HCM products with over 25 years of experience in payroll tax and corporate compliance.
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.
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:
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.
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.
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:
Nevertheless, due to the potential legal complications and risks, nonprofit organizations should be cautious when considering internal opportunities for volunteer work by employees.
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.
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.
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Best Practice |
Details | Example |
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Distinguish Each Role |
Clearly define employee and volunteer roles, and adopt different operational or technical processes for each.
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Implement different onboarding and training programs tailored for each role. If an employee wishes to also be a volunteer, have them complete both programs to maintain the separation.
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Create Detailed Documentation |
Produce and maintain precise, detailed documents on how volunteers function within the organization. |
Adopt a separate policy, handbook, or work agreement that outlines the expectations and limitations for volunteer work. Include language outlining the unique training, support, and resources volunteers receive.
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Recognize Nonprofit Volunteer Work |
In place of compensation, publicly identify and celebrate volunteer efforts and accomplishments.
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Leverage social media to provide volunteer highlights and features, beneficiary testimonials, or fundraising benchmarks.
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Monitor FLSA Volunteer Compliance |
Regularly review organizational policies and procedures to ensure alignment with current FLSA volunteer work regulations.
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Establish a recurring cadence for auditing internal documents and practices on volunteer work. Compare results with the employee versions to identify instances of employee work displacement or involvement in the organization’s commercial activities.
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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.
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.
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.
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:
Request a demo today to learn how our HCM solutions can help reduce administrative burden and keep your organization confidently focused on its mission.
Since 2015, Joanne PHR, SHRM-CP has served as Senior Manager on Paylocity’s CGR team, guiding compliance strategy and legislative analysis across HCM products with over 25 years of experience in payroll tax and corporate compliance.
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