Compensated Volunteers Ruled Employees under FLSA and FLMA

The 6^th Circuit handed down a ruling last week holding that volunteer firefighters who receive hourly compensation of $15 are employees for purposes of the Fair Labor Standards Act (FLSA) and Family Medical Leave Act (FLMA).

The ruling arose in a rather peculiar way: an FMLA suit brought by a former police dispatcher, Paul Mendel, against the City of Gibraltar, Michigan. 

The city claimed it was exempt from the FMLA because it did not have 50 employees. Gibraltar had only 41 employees… 9 short. However, Gibraltar had 25 to 30 “volunteer” firefighters who were compensated $15 per hour for responding to alarms.

Mendel argued that when you add the volunteer firefighters to the 41 employees, the city of Gibraltar had 50 employees and thus the case should go forward. The issue was: are volunteer firefighters who receive compensation of $15 per hour considered to be employees?

The 6^th Circuit concluded they are. In the court’s own words:

• Specifically, the question before us is whether the wages paid to the firefighters constitute “compensation” or merely a “nominal fee.” If the hourly wages are compensation, then the firefighters are employees under the FLSA. Conversely, if the wages are merely a nominal fee, then the firefighters are volunteers expressly excluded from the FLSA’s definition of employee. …

• The regulations define “volunteer” as “[a]n individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered.” 29 C.F.R. § 553.101(a)….

•  The regulations proceed to recognize, “Volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof, for their service without losing their status as volunteers.” 29 C.F.R. § 553.106(a). The specific provision addressing nominal fees provides, in part, “A nominal fee is not a substitute for compensation and must not be tied to productivity. However, this does not preclude the payment of a nominal amount on a ‘per call’ or similar basis to volunteer firefighters.” 29 C.F.R. § 553.106(e). …

• “Whether the furnishing of expenses, benefits, or fees would result in individuals’ losing their status as volunteers under the FLSA can only be determined by examining the total amount of payments made (expenses, benefits, fees) in the context of the economic realities of the particular situation.” 29 C.F.R. § 553.106(f). …

• Gibraltar firefighters are paid a regular wage for whatever time they choose to spend responding to calls. These substantial hourly wages simply do not qualify as nominal fees. …

• In the context of the economic realities of this particular situation, we hold thatthe hourly wages paid to the Gibraltar firefighters are not nominal fees, but are compensation under the FLSA. The firefighters do not receive “a nominal amount on a ‘per call’ or similar basis.” 29 C.F.R. § 553.106(e). Rather, they render services with the promise, expectation, and receipt of substantial compensation.

Incidentally, the definition of employee for the FMLA and FLSA are nearly identical – so if someone is an employee for one her/she is an employee for the other. The court did not discuss the 20% rule, which is the US Department of Labor’s position that if a purported volunteer receives benefits totaling more than 20% of the prevailing wage, he or she is an employee. I have to admit, I am a bit perplexed how the 20% rule was not discussed. Here is a link to additional information on the DOL’s  20% rule.

Formal adoption of the 20% rule would seemingly settle the matter while providing fire departments with clear guidance for future cases… something that neither the courts nor the DOL seem to care too much about (probably because they do not have fire department clients to worry about….  but I digress… )

Here is a copy of the 6^th Circuit’s decision. 13a0232p-06

No word yet on the implications of the ruling for the city of Gibraltar, but obviously fire departments in the 6^th Circuit (and beyond) who compensate their firefighters in a manner similar to Gibraltar need to consider both the FLSA and FMLA implications of the ruling (if they have not already been doing so). Once volunteer firefighters are considered employees, they must be compensated for all hours worked, including training, meetings and equipment maintenance activities. And then there's the IRS witholding obligations… workers comp… oh… and of course the right to organize….