The Fair Labor Standards Act (FLSA) is one of a handful of laws that has a tremendous impact on fire departments across the United States. Many in the volunteer fire service have paid little attention to the FLSA, assuming it is only a concern to career departments because it addresses compensation and overtime pay. But the FLSA has the potential to impact volunteer fire departments in a very big way.
To understanding the problem, let’s begin with a simple question: What is a volunteer firefighter? Consider three examples:
- Firefighter A receives no compensation for his time, is under no duty to respond to alarms, and is free to respond to alarms when available.
- Firefighter B works a set shift during which time she is under a duty to respond, and receives no compensation. Firefighter B is not required to remain at the fire station, but if she fails to respond to a run within 15 minutes while on duty, she could be disciplined.
- Firefighter C works a set shift, wears a uniform while on that shift, and is under a duty to respond when on-duty, but receives no compensation. He is required to remain at the fire station during his shift.
What makes any of the above firefighters a volunteer? Is it the voluntary nature of the service? Is it the willingness to provide the service without compensation? Does the existence of a duty to respond play a role? And why does it matter?
Under the FLSA, an employee must receive at least minimum wage for all hours worked. Also, once a person qualifies as an employee, he or she cannot volunteer to perform the same work for the same employer without compensation. However, a person who is truly a volunteer need not be compensated even if they work a set shift and/or wear a uniform.
Under U.S. Supreme Court case law dating back to 1947, the key factor that distinguishes an employee from a volunteer is the understanding of the parties. If the fire department and the firefighter agree that the services are to be provided without compensation, then the firefighter is a volunteer for FLSA purposes. Providing uniforms, training or even requiring mandatory shifts does not transform a volunteer into an employee. However, what if the parties disagree over their understanding about compensation? Let’s leave that one for a moment.
What is the impact to each of the above scenarios if the firefighter receives a small stipend for his or her time? Is the firefighter still a volunteer or does the stipend change the parties’ understanding? Is the stipend a form of “compensation”? Does the amount of the stipend matter? And now do things like the mandatory uniform, set shift and duty to respond take on added significance? And, again, what if the parties disagree?
In a not-so-hypothetical hypothetical, what if a volunteer firefighter who receives a stipend claims that he is actually an illegally undercompensated employee? What if his understanding is that the stipend is compensation for the hours he puts in? Often such cases arise shortly after the firefighter is terminated.
The bad news for volunteer fire departments is if the stipend is tied to “hours of work or productivity” OR if it does not meet certain FLSA requirements, the believed-to-be volunteer firefighter may be ruled an undercompensated employee. If that is the case, the firefighter would be entitled to at least minimum wage for all hours worked/volunteered, plus overtime when his hours exceed the applicable threshold.
Let’s consider one more type of firefighter often referred to as a volunteer: Firefighter D receives a token hourly compensation of $2 per hour for her time when she responds. Firefighter D has no set shift and is under no duty to respond. She only responds when available.
Under the U.S. Department of Labor’s (DOL) interpretation of the FLSA, a fee paid to a volunteer in such a way that it is tied to “hours of work or productivity” is considered to be compensation. That means Firefighter D would be considered an employee for FLSA purposes. Firefighter D would thus be entitled to at least minimum wage for all hours worked and overtime when her hours worked exceeds the applicable maximum hours threshold.
Realizing what is at stake, Congress provided some clarification for volunteer firefighters, enacting the following in 1985:
29 U.S.C. §203
(e) (4) (A) The term “employee” does not include any individual who volunteers to perform services for a public agency, which is a State, a political subdivision of a State, or an interstate governmental agency, if—
(i) the individual receives no compensation or is paid expenses, reasonable benefits, or a nominal fee to perform the services for which the individual volunteered; and
(ii) such services are not the same type of services which the individual is employed to perform for such public agency.
While helpful, §203 (e) (4) (A) raises almost as many questions as it answers:
- Does a volunteer fire company that is a 501(c)(3) nonprofit qualify as a public agency? If not, will the DOL and the courts apply the same logic to a volunteer fire company?
- What benefits are considered reasonable?
- What is a nominal fee?
The answers to each of the above questions could easily fill an entire article. The short answers to the questions above are as follows:
- The DOL has taken the position that 29 U.S.C. §203 (e)(4)(A) will apply to nonprofit organizations such as volunteer fire companies. There are no cases challenging this interpretation, so as of now it is just the DOL’s interpretation.
- According to the DOL: “Benefits would be considered reasonable … when they involve inclusion of individual volunteers in group insurance plans (such as liability, health, life, disability, workers’ compensation) or pension plans or “length of service” awards, commonly or traditionally provided to volunteers.” 29 CFR 553.106.
- The US DOL has taken the formal position that the term nominal fee means payments that are less than 20 percent of what a full-time employee would cost, provided the payments are not tied to hours of work or productivity. Any payment that is based upon a per hour basis will be considered to be compensation thereby creating an employee. On the other hand, per-call or even per-shift stipends are treated differently.
Trying to rationalize why the DOL treats nominal fees that are paid per hour differently than those that are paid per call or per shift is of little use. This is how the DOL interprets 29 U.S.C. §203 (e)(4)(A). Nominal fees paid on a per-call and per-shift basis are permissible provided they do not exceed 20 percent of what a full-time employee would cost. Per-hour stipends, even if otherwise nominal, are considered to be compensation.
Let’s now apply this to one of the most common patterns we see in the fire service.
A volunteer fire department is struggling to get enough personnel to respond during weekday hours. They decide to pay personnel $5/hour to stay at the station from 7 a.m. to 5 p.m., Monday through Friday. Members are allowed to volunteer for up to three shifts per week and the shifts are rotated among 20 members with each working between one and three shifts per week. The members remain volunteers the rest of the time.
What are the consequences of the $5 per hour payment? Because each of the 20 members is paid an hourly rate, each is an employee and entitled to at least minimum wage (or their normal hourly rate, whichever is greater) for all hours they work. Their work time includes not only their week-day shift work, but all of their volunteer hours including time spent responding to alarms after their shifts, attending training, completing reports, checking equipment or any other fire department-related activity in which they engage. In other words, it is the nightmare scenario for the fire department.
What if instead of being paid $5/hour, they received $50/shift? That seeming slight difference can change the members’ status. The new question becomes: What would it cost the fire department to hire a full-time person to work the shift? If the department could establish that $50/shift is less than 20 percent of the cost of a full-time person to perform the same work, the employees would be eligible under 29 U.S.C. §203 (e)(4)(A) to still be considered volunteers.
The safer solution for the department would be to determine the average cost of a full-time firefighter in the area, and work backward to establish what can be paid. For example, if it is determined that a career firefighter in that region costs an average of $25/hour, and the cost of a 10-hour shift is $250, the maximum per shift stipend for the volunteer should be less than $50.
As discussed at the beginning of the article, volunteer fire organizations need to be just as concerned about the FLSA as career and combination departments, as FLSA has the potential to impact volunteer fire departments in a big way. State wage and hour laws may also place additional burdens on fire departments that must be considered.
As with any legal issue, check with your local legal counsel before taking any action that impacts wages and benefits. FLSA mistakes are easy to make and can be very costly.