Organizations that use volunteer labor can breathe a sigh of relief. With the latest decision from the Sixth Circuit Court of Appeals, Acosta v. Cathedral Buffet, Inc., 6th Cir., Case No. 17-3427, (April 16, 2017), the Appellate Court clarified that use of unpaid labor, was not a violation of the minimum wage requirement of the Fair Labor Standards Act where there is no expectation of compensation.
Cathedral Buffet was a restaurant organized as a for-profit corporation in Ohio, yet solely owned and subsidized by Grace Cathedral, Inc., a 501(c)(3) non-profit religious organization. The restaurant organized its workers into two separate categories: employees and volunteers. Volunteers performed many of the same tasks as the employees; employees received an hourly wage, while volunteers did not.
The volunteers were recruited by the Reverend from the Grace Cathedral pulpit on Sundays. The restaurant manager would inform the Reverend of what positions they needed, and the Reverend would ask church members to volunteer. Ushers passed out slips of paper to interested parishioners, and those interested would then submit their name and phone number.
The Department of Labor (DOL) filed suit in 2014, after it concluded that Cathedral Buffet violated the FLSA by using unpaid volunteers and by failing to keep records of the hours they worked. The trial court found that Cathedral Buffet’s religious affiliation did not exempt it from the FLSA because the restaurant was a for-profit engaged in commercial activity. It further found that applying the economic realities test, the church member volunteers were employees under the FLSA. Finding that the Buffet’s constant solicitation of volunteer labor, the Reverend’s admissions that the use of volunteer labor was intended to save money, and the volunteers’ feelings of pressure and coercion to provide the labor all demonstrate the volunteers were actually employees.
The Court of Appeals reversed, distinguishing it from the Supreme Court case Tony & Susan Alamo Found. v. Sec’y of Labor, that the DOL relied upon. In the Alamocase, the “volunteers” were mostly rehabilitated “drug addicts, derelicts or criminals” that did not receive compensation but relied upon the Foundation for food, clothing and shelter. When religious organizations undertake a commercial endeavor, its workers are only covered under the FLSA if they engage in those activities in expectation of compensation. That was the case in Alamo.
In Cathedral Buffet, the court found that the volunteers did not expect to receive any type of compensation. They were not working in “expectation of compensation” which is the threshold inquiry that must be satisfied before the court moves to the economic realities test. They were not economically dependent on Cathedral Buffet in any way; they did not receive any tips; nor any in-kind benefits in exchange for their service. Therefore, the court found no economic relationship between the church and member volunteers – and they were outside the protections of the FLSA.
Organizations that provide some type of compensation however, in kind compensation, or in cases where the volunteer is sometimes wholly dependent on the organization should continue to tread carefully, as theAlamocase still holds. Any type of compensation could render the organization back into the FLSA minimum wage standards.
Furthermore, the Court made clear in some cases of coercion, a volunteer’s lack of expectation of compensation could bring the case back within the protections of the FLSA. For example, allowing workers to “opt out” of FLSA protection would open the door to coercion. “[A] showing of coercion might be sufficient to overcome a volunteer’s lack of expected compensation and bring [the worker] within the protections of the FLSA.” Therefore, employers should be careful in requiring workers to sign waivers of the FLSA.
Should your organization require counsel on this is issue, please contact the attorneys of Dalton & Tomich, PLC.