OVERTIME UPDATE: The Potential High Costs of Volunteer Labor, Ten Record-Keeping Requirements, and the DOL’s New Smartphone App
Employers have come to understand that being sued by a former employee (particularly a disgruntled former employee) is a fact of life. But few employers anticipate being sued by a volunteer. Yet, these lawsuits happen.
Consider the predicament that The Huffington Post faced. The Huffington Post is an American news website (www.huffingtonpost.com) launched several years ago as a for-profit enterprise. The website grew in popularity and, at one point, reportedly generated more than 26 million unique visitors per month. The website’s content was derived from a combination of paid staff members and unpaid bloggers, the majority of whom were professional or semi-professional writers. In lieu of monetary compensation, The Huffington Post offered the unpaid bloggers exposure to a wider audience. But when The Huffington Post was acquired in a business deal (for a purchase price of $315 million), a group of the unpaid bloggers filed a putative class action lawsuit seeking $105 million as their contribution to the Huffington Post’s purchase price. Ultimately, the district court rejected the bloggers’ claims and determined that neither the principles of equity or fairness nor state law required them to be compensated for their work. In December 2012, the federal court of appeals affirmed that dismissal.
Employers haven’t always gotten off the hook with these claims. In contrast to The Huffington Post lawsuit is the case of Alamo Foundation v. Secretary of Labor. The facts of that case are simple. The Alamo Foundation, a nonprofit religious organization, operated with the help of "associates," many of whom were identified as "drug addicts, derelicts or criminals" before the Foundation rehabilitated them. Instead of cash, the Foundation provided the associates with food, shelter and other benefits. The associates did not consider themselves employees. Nonetheless, the Department of Labor sued the Foundation, citing alleged violations of the Fair Labor Standards Act (the FLSA). The case eventually proceeded to the United States Supreme Court, which held that the associates were, in fact, employees, not volunteers, because they worked in contemplation of compensation. The court concluded it was "immaterial" that the compensation provided was in the form of benefits, reasoning that those benefits were another form of wages. In so doing, the Supreme Court looked at the "economic reality" of the relationship and concluded that the associates were employees.
But what if the associates in Alamo Foundation received no compensation of any kind? Could they have been properly treated in that scenario as volunteers and not employees? Possibly. In applying the economic reality test, courts may consider several factors including whether the alleged employer:
- had the power to hire and fire the workers,
- supervised and controlled the workers’ work schedules or conditions of employment,
- determined the rate and method of any payment made, and
- maintained employment records.
In short, merely labeling workers who donate their services as "volunteers" doesn’t make them so, particularly if benefits or stipends are provided in lieu of wages. Accordingly, employers need to consider the legal risks before utilizing "volunteers" in lieu of "employees" to run their businesses.
For employers interested in avoiding an unfavorable investigation by the Department of Labor and other adverse consequences, there is another point worth mentioning here: the FLSA has detailed record-keeping requirements. Every covered employer must keep certain records for each non-exempt worker. No special form for the records is required. However, the records must be accurate. The basic records that an FLSA-covered employer must maintain are as follows:
- Employee’s full name, social security number, and complete mailing address,
- Birth date, if younger than 19,
- Sex and occupation,
- Time and day of week when employee’s workweek begins,
- Hours worked each day and total hours worked each workweek,
- Basis on which employee’s wages are paid (e.g., $15 per hour, $600 a week) and regular hourly pay rate,
- Total daily or weekly straight-time earnings,
- Total overtime earnings for the workweek,
- Total wages paid each pay period (including all additions or wage deductions), and
- Date of payment and the pay period covered by the payment.
How Long Should Those Records Be Retained?
For payroll records, collective bargaining agreements, sales and purchase records, at least three years. Records on which wage computations are based should be retained for two years. The records may be housed at the employee’s work site or in a central records office.
Need an Incentive to Comply?
Some courts relax plaintiffs’ burdens to show damages under the FLSA if the employer fails to keep accurate records. Further, the Department of Labor can assess penalties. According to the DOL’s website, in January 2013, it fined a construction company over $36,000 in penalties, plus back wages, for repeat violations of the FLSA and failure to maintain proper records.
Do Workers Really Keep Their Own Records?
Yes, some do. Notably, the Department of Labor now has a smartphone application (app), available in English and Spanish, to help employees independently track the hours they work and determine the wages they are owed. The app allows the tracking of regular work hours, break times, and overtime hours. The Labor Department’s apps are available for employees at http://www.dol.gov/dol/apps.
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