When volunteers at a nonprofit are really paid employees

Last week we discussed the rules for unpaid interns in a business. The rules are different for volunteers at a nonprofit organization.

The Fair Labor Standards Act (FLSA) recognizes that there is great public benefit to people volunteering with religious, charitable, civic, humanitarian, or similar nonprofit organizations.

Generally speaking, nonprofit organizations are not subject to the federal wage and hours laws of the FLSA. This is true, as long as volunteers are volunteering without expectation of any kind of payment or in-kind benefit. Volunteers can be provided with uniforms or transportation in furtherance of the nonprofit’s mission. Nonprofits can more freely use interns than for-profit entities, because the interns would be considered volunteers.

There are, of course, exceptions.

Organizations that have both for-profit and nonprofit activities in furtherance of the mission also need to be careful. For example, a nonprofit animal shelter provides free veterinary care, adoption services, and shelter for homeless animals (charitable activities). It also provides veterinary care for a fee to customers (commercial activities). If the revenue generated from the organization’s commercial activities is at least $500,000 in a year, the employees engaged in the commercial activities are subject to wage and hours laws of the FLSA. Employees of the organization’s charitable activities are not covered on an enterprise basis, since those activities do not have a business purpose.

Paid employees cannot also donate their services on their off time, such as a paid delivery driver volunteering to make deliveries on the weekends. Volunteers cannot volunteer to work in a commercial activity of the nonprofit, such as a gift shop, thrift store or farm. Finally, volunteers cannot be used to perform the work of people who would ordinarily be paid employees.