Sample Of Internal Memo — FLSA Compliance

Waseem D. Ezzie
Jul 9 · 10 min read

Memorandum

To: The President of Transparency University

From: Waseem Ezzie

Date: 9/30/18

Subject: Changing to an All Uncompensated Employee Volunteer System

Your request for changing from a $200 honorarium to solicit volunteers for the semi-annual commencement to an all uncompensated employee-only volunteer system is feasible, excluding the security and registrar’s staff, as their regular job duties are needed during the commencement. The Fair Labor Standards Act (FLSA) provides flexibility for private non-profit organizations in the use of employee volunteers. Caution must be taken for implementing and soliciting employee volunteers, and the university cannot delegate an employee to perform volunteer tasks during regular working hours.

An overview of the state and federal laws that currently apply to the use of volunteers:

The Fair Labor Standards Act (FLSA) is the only law that currently applies to the use of volunteers under state and federal law. The FLSA establishes a minimum wage and overtime pay affecting full-time and part-time employees and requires an employer to pay an hourly minimum wage of $7.25 and overtime pay (over forty hours in a week). Most bone-fide salaried employees that earn at least $455 per week are referred to as overtime-exempt employees, which are classified as teachers, administrators, professionals, and executives. The university can mandate overtime-exempt employees to participate in the commencement and the university is not required to pay overtime to those bone-fide salaried employees.

Under the U.S. Department of Labor’s FLSA guidelines, non-profits employers can accept employee volunteers without violating the FLSA’s overtime and minimum wage regulations. It is important to note the following; “nonprofit organizations must exercise caution with respect to the type of perks or rewards given to volunteers for their services. While volunteers may be provided with nominal and occasional perks and rewards for their services (such as snacks or certificates), actual payments in the form of stipends and/or products of meaningful monetary value may be interpreted by the DOL as compensation for services, which may cause a putative volunteer to be classified as an employee.” (Schwartz & Leung, 2012)

It is also important to emphasize that “allowing paid employees of a nonprofit organization to perform the same type of services for their employer on an uncompensated, volunteer basis would allow employees to waive their rights to compensation under the FLSA. The Supreme Court held an employee may not waive his or her rights to compensation due under the FLSA.” (Passantino, 2018)

FLSA contains exclusions for individuals who choose to volunteer for 501c3 private non-profit organizations, but the U.S. Department of Labor weighs several factors for FLSA compliance, such as; 1.) What is the nature of the services associated with volunteer’s work? 2.) Does the organization provide a volunteer with compensation or does the volunteer expect compensation? 3.) What control does the organization have over a volunteer and are the activities performed by the volunteer less than full-time occupation? 4.) Does the volunteer’s work displace the duties of an actual paid worker? (Hass, 2015; Herman, n.d.)

Answers; 1.) The nature of the volunteer time is for a charitable purpose to simply provide support to employees, graduating students, and attendees. 2.) The current process does compensate volunteers with a $200 honorarium, but the new proposal does not compensate volunteers.3.) In the new proposal, the services are offered freely and without pressure. The volunteers are performing tasks that occur semi-annually and the volunteers function as a support system. The activities performed are less than full-time occupation.4.) The current system displaces duties of regular work duties. In the new proposal, the volunteer’s supportive tasks will not do the job of the university’s regular Monday — Friday duties of a paid worker.

Analysis of compliance by the university with the current laws:

The university should not engage in any coercion or undue pressure to get employees to volunteer. The employee volunteers must be “true volunteers” with no expectation of compensation. Volunteering must occur on non-working days, volunteers should work toward civic, personal, charitable, religious, or humanitarian objectives. The volunteers cannot displace the work of actual employees.

Soliciting volunteers by using a $200 honorarium as compensation violates the FLSA. A true volunteer should not expect to collect or receive any form of compensation that has any type of meaningful monetary value. Also, giving a $200 honorarium to an hourly employee who worked over forty hours that week and their overtime surpassed $200 could lead the university to violate the FLSA’s overtime rules.

The $200 honorarium should be abandoned in a prompt manner. The university should adopt a volunteer policy limiting a volunteer’s compensation to only receive nominal compensation such as snacks, meals, a coffee cup, a T-shirt, and light refreshments. There is no absolute list of what is considered “nominal compensation,” as it depends on an individual economic basis, but to be on the safe side and not jeopardize the volunteer program, a good rule of thumb is to only use inexpensive items that an individual may exclude from their reportable income tax.

The registrar’s staff cannot be replaced with an employee volunteer, as they are performing similar duties described by their job description. If the registrar’s staff member is a salary over-time exempt employee, then the university is not required to pay them overtime. An individual can volunteer if they are not performing a task similar to their regular job duties or if they are not displacing the duties of a paid worker. The university police officers also cannot volunteer because they are performing the same type of service for the school by providing security. These duties should not be performed by employee volunteers:

· Providing security at the event in the main event hall as well as in the faculty/administration and student assembly rooms.

· Distributing diplomas after graduation, including verifying identities through documents provided by students/graduates and in the student records database.

The employee volunteers should perform duties at the commencement that are not similar to their normal work duties. The following list of duties can be performed by employee volunteers because the tasks are not part of the employee’s regular day to day duties and the day of the commencement is not taking place on a regular workday:

· Checking in students/prospective graduates who are participating in the event

· Lining up students/prospective graduates for the procession

· Assisting faculty and administrators with their academic gowns, including assisting with donning it and straightening the hoods

· Assisting students/prospective graduates with their academic gowns

· Serving as ushers; assisting attendees in finding seats

· Serving as greeters/information resources for attendees

· Assisting disabled guests in reaching appropriate seats

· Taking tickets at the entrances of the event

· Serving as hosts/hostesses at the celebration open house immediately following commencement

Proposed changes in laws that can impact the current and new plan, including the political climate:

There are not any current state laws or pending state legislative bills that apply to 501c3 private non-profit organization which are applicable to the current situation or proposed change. There are three bills in the U.S. Legislative system that may become applicable to the current situation or proposed change. There are two identical bills titled Restoring Overtime Pay Act of 2017, one is in the House of Representatives (H.R. 4505) and one is in the Senate (S.2177). Both bills are backed by Democrats, and both bills would strengthen overtime protection for bona fide overtime-exempt salaried employees. The Working Families Flexibility Act of 2017 (H.R. 1180) bill, backed by Republicans, will amend the Fair Labor Standards Act by allowing private-sector employers to pay hourly employee’s overtime in a form of compensatory time off or convert paid time off into monetary funds. (McGregor, 2017)

This November’s midterm elections can potentially dictate if the Republican-backed Working Families Flexibility Act of 2017 bill becomes law. The Senate currently has 51 Republicans and 49 Democrats, including 2 independents. It is unlikely that the Republicans will lose control of the Senate, but it is possible.

The university’s current practices in staffing commencement and the proposal might be affected by pending legislative changes, including what would be necessary to remain in compliance:

The Restoring Overtime Pay Act of 2017 (H.R. 4505 & S.2177) bills are backed by the Democrats, which would require the U.S. Department of Labor to strengthen overtime protection by increasing the overtime-exempt salary level from $23,660 a year to $47,476 per year (“H.R. 4505”, 2017). This bill is not likely to pass the House, Senate, and become law because the Republicans currently hold both the Legislative and Executive branches. This bill could impact the university’s bona fide salaried executives, administrators, teachers, and professional employees in the current and proposed plan. If either of these bills become law, the university will be required to pay bona fide salaried employees a minimum threshold salary of $47,476 a year or $913 a week, regardless of the number of hours worked in a workweek. (“S.2177”, 2017)

The Working Families Flexibility Act of 2017 (H.R. 1180) passed the House of Representatives with support from Republicans and is currently in the Senate (S.801). If S.801 became law, it would amend the FLSA by adding rules to permit a private employee to receive overtime hours in a form of paid time off and enable an employee to cash out unused paid time off. S.801 may impact the university’s current and proposed plan by not allowing the university to directly or indirectly persuade any employee to interfere with the employee’s right to cash out “comp time” or requiring any employee to use “comp time” during the commencement. Thus, the university may not be able to use the employee volunteer’s system in this situation, as the recruiting process may find an obstacle that may interfere with an employee’s rights under the proposed bill. Even an indirect attempt to coerce an employee to volunteer on a “day off” may be construed as “interfering with such employee’s rights.” (“S.801”, 2017) If S.801 became law, the university might have to rely on recruiting non-employee volunteers, in order to be in compliance.

Recommendation on whether legal counsel should be consulted

I recommend consulting with legal counsel regarding current and proposed changes of the employee volunteer system to ensure a bulletproof plan is created which does not leave the university in any grey areas of the law. My questions to counsel are:

· What should be included in an employee volunteer expressed contract that will cover the employee volunteer’s rights and arbitration clause? The employee volunteer policy needs to be written clearly to explain the new FLSA compliant system.

· What are the legal liabilities of switching from a non-FLSA compliant volunteer system to an FLSA compliant system? Changing employee and volunteer policies could have predictable and unpredictable legal consequences.

· How can we minimize any formal legal claims from the current non-FLSA compliance? The university could face claims based on non-FLSA compliance from previous employee volunteers.

· Does the university need to update the job descriptions for mandatory employee attendance (for the registrar’s staff and security staff) at the commencement? It is good practice to update job duties and policies in writing to clearly communicate changes to employees.

Supplemental Information to consider with respect to change from old to the new proposal:

The consequences of the new proposed change include: a decline in morale can be an issue as employees that volunteered in past commencements are used to receiving $200 honorarium, which will create unprecedented challenges that might occur with respect to acquiring employee volunteers. As, by law, non-profit organizations cannot receive a receipt of compensation, the new proposal could be perceived as manipulation or abuse of minimum wage and overtime requirements.

The perspective of the new proposed change include that the new change for employee volunteers will ensure compliance with applicable laws, the university will save money, and ensure the new proposal does not carry liability to the university, since the old process left the university liable under the FSLA.

The recommendations for the major stakeholders to consider for the new proposal include holding a think-tank session with executives, professionals, and administrators to produce a bona fide volunteer program. Moreover, it is also important to create a change committee that can communicate the change as a positive opportunity to volunteer which can offer the volunteers an after-commencement reception or dinner to boost morale, and also consider charging a flat rate “donation” for the commencement tickets, in which the funds can be used to cover costs and/or get employee volunteers small inexpensive items to show the university’s appreciation.

Recap

The university is currently not in full compliance with FLSA and the university should consult with counsel to rectify the current FLSA violations. The current volunteer system violates the FLSA by having the security staff and registrar’s staff volunteer services which are part of their regular job duties. The university is also in violation of the FLSA by soliciting volunteers by compensating them with a $200 honorarium. It is important to make sure that the university does not engage in any coercion or undue pressure to get employees to volunteer.


References

Fact Sheet #70. (2009, November) Retrieve https://www.dol.gov/whd/regs/compliance/whdfs70.htm

Handy Reference Guide to the Fair Labor Standards Act. (2016, September). Retrieved from https://www.dol.gov/whd/regs/compliance/hrg.htm

Hass, D. (2015, November 20). Volunteers and the FLSA: When Non-Profit Employers Must Pay for Volunteer Work. Retrieved from https://dayshift.com/2015/11/20/volunteers-and-the-flsa- when-non-profit-employers-must-pay-for-volunteer-work/1221/

Herman, M. (n.d.). Employee or Volunteer: What’s the Difference. Retrieved from https://www.nonprofitrisk.org/resources/articles/employee-or-volunteer-whats-the-difference/

H.R. 1180 Working Families Flexibility Act of 2017. (2017, May 3). Retrieve https://www.congress.gov/bill/115th-congress/house-bill/1180

H.R. 4505 — Restoring Overtime Pay Act of 2017. (2017, November 30). Retrieve https://www.congress.gov/bill/115th-congress/house-bill/4505/text

Guidance for Higher Education Institutions on Paying Overtime under the Fair Labor Standards Act. (2016, May 18). Retrieved from https://www.dol.gov/whd/overtime/final2016/highered- guidance.pdf

McGregor, J. (2017, May 2). House Republicans just voted to change overtime rules for workers. Retrieve https://www.washingtonpost.com/news/on-leadership/wp/2017/05/02/house- republicans-just-voted-to-change-overtime-rules-for-workers/?utm_term=.61439caeb96b

Passantino, A. (2018, December 18). Opinion Letters — Fair Labor Standards Act. Retrieved from https://www.dol.gov/WHD/opinion/FLSA/2008/2008_12_18_14_FLSA.htm

S.2177 Restoring Overtime Pay Act of 2017. (2017, November 30). Retrieve https://www.congress.gov/bill/115th-congress/senate-bill/2177

S.801–115th Congress cited as Working Families Flexibility Act of 2017. (2017, April 3). Retrieve

https://www.congress.gov/bill/115th-congress/senate-bill/801/text

Schwartz & Leung. (2012, October 24). When can employees provide unpaid volunteer services. Retrieved from https://www.lexology.com/library/detail.aspx?g=a9e1ec60-c568-4e81-b5c8-d8b8c61bd282

Waseem D. Ezzie

Work Sample Portfolio

Waseem D. Ezzie

Written by

MBA Student @ the University of Houston Downtown with a concentration in Human Resource.

Waseem D. Ezzie

Work Sample Portfolio

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade