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DOL Reaches Again Into the FLSA Twilight Zone (Part 1 of 2)

By: Jay M. Dade

So far in 2018, the U.S. Department of Labor (“DOL”) has issued more than 20 opinion letters navigating the murky waters of the Fair Labor Standards Act (“FLSA”). In late-August, the DOL issued several new opinion letters to which employers can refer for guidance when confronted with FLSA questions.  Herein, we address two important opinion letters.  Later this week, we will address two more.

1. FLSA Retail and Service Establishment Exemption Can Include The Sale of Tech Goods and Services to Commercial Entities

The line dividing qualifying (for example, grocery stores, hardware stores, restaurants, hotels, etc.) and non-qualifying “retail or service establishments” can be difficult to divine. For employers (1) selling mostly retail goods and services (in other words, retail, not wholesale, goods and services) and (2) employing individuals who primarily receive commissions – the DOL has addressed an issue of particular interest.

The employer requesting DOL’s guidance sold a technology platform to merchants that allowed those merchants to process their customers’ credit card payments via a mobile device, online or in-person. The DOL noted -- even though the employer’s primary customers were, themselves, commercial entities (and not the general public) – the employer still qualified for the FLSA retail or service establishment exemption.  The opinion letter further provides that the employer’s goods and services were not being resold to any other entities and, thus, fully met the exemption.

Wage and hour law is usually slower on the uptake regarding changing technologies. This DOL opinion letter is one means by which tech companies can seek guidance with respect to compliance with the FLSA.

2. Motivation is the Key to Any Volunteer

Generally, an individual’s time spent on charitable or public endeavors outside of his or her normal working hours is not compensable under the FLSA (though volunteers and interns with for-profit entities are analyzed differently).

Here, a nonprofit organization sought DOL guidance regarding whether individuals who volunteered to grade a professional examination should be paid for their grading time. The DOL noted volunteers must freely offer their services (instead of being coerced or pressured into doing so) for their time engaged in their “volunteer” extracurricular public or charitable activities to be non-compensable under the FLSA.  In this situation, the subject individuals all sought to give back to their profession and held highly compensated positions outside of their roles as graders. The DOL opined the nonprofit entity was not required to pay these graders for their time, but could pay for the individuals’ incidental travel, lodging, meals and other expenses (without negating their FLSA volunteer status).

Nonprofit organizations should ask volunteers several questions to determine, properly, whether such an individual truly qualifies as a “volunteer” whose time is non-compensable under the FLSA, including:

  • Why are you volunteering?

  • Are you employed elsewhere?

  • Is your employer asking you to volunteer here?

  • Has someone from our organization asked you to volunteer here?

  • Is anyone asking you to volunteer here?

  • Are you also seeking employment through our organization?

  • Are you leveraging this volunteering opportunity as a means to work for our organization?

  • Do you understand you will not be compensated for your time?

  • Do you understand we will not consider you for employment because of this volunteering opportunity?

As a better, or even best practice, any nonprofit entity utilizing non-paid volunteers should memorialize in writing answers to these questions and require the volunteer to sign the written understanding.