Rules for Nonprofits When Engaging Interns and Volunteers
It’s not uncommon for your nonprofit clients to use unpaid workers, such as interns and volunteers, to help further their mission. However, when doing so, it’s critical for the organization to differentiate between the two types of workers so there is no mistake about expectations, as well as for liability protection.
Interns vs. volunteers
In most industries that use interns and volunteers, these individuals are exempt from wage requirements. However, the fact that these individuals perform services that are uncompensated doesn’t release nonprofits from following specific rules and requirements.
When nonprofits engage with interns or students, they must first determine who is considered the “primary beneficiary” in the relationship. Courts use the “primary beneficiary test,” which considers seven factors when deciding the economic reality of the relationship between the company and the person performing services on its behalf. If the student/intern is considered to be the primary beneficiary, the relationship is likely to be classified as an internship. However, if the employer is determined to be the primary beneficiary, then employee classification is likely to apply.
According to information posted by the law firm Wrady Michel & King, the primary beneficiary test considers no one factor as determinative. Instead, courts weigh the specific circumstances of each internship to determine whether the person should legally be considered an unpaid intern or a paid employee. If the facts show that the individual is an employee, that person is entitled to both minimum wage and overtime pay under the Fair Labor Standards Act. Read more about the primary beneficiary test under the FLSA here.
In the nonprofit sector, volunteers are used more frequently than interns. Information posted by the law firm Hurwit & Associates, which affords legal counsel for the philanthropy and nonprofit sectors, suggests that when deciding whether a worker qualifies as a volunteer, the following six factors should be considered.
- Whether the entity that is receiving the services is a nonprofit.
- If compensation of any sort is exchanged — including room and board, special perks, or rewards.
- If there is an implied expectation of benefits in exchange for work in the future.
- Whether the work performed is less than a full-time occupation (part-time is a better indicator of an individual being a volunteer).
- Whether regular employees are being displaced to create a job for a volunteer.
- If the services are offered freely without pressure or coercion and are of the kind typically associated with the organization’s volunteer work.
There may be a time when a nonprofit wishes to offer a volunteer a token of the firm’s appreciation in exchange for the volunteer’s work. However, doing so can unintentionally convert the individual into an employee. In addition, a gratuity could mean that the organization must now offer workers’ compensation insurance. The Department of Labor (DOL) states that if a volunteer is paid a stipend of over $500 a year or 20% over what an employee would be paid, they must be treated as a paid staff person and are subject to the laws that govern employees. Your clients can visit the DOL website for more information regarding stipends and volunteers.
Interns and volunteers are often the lifeblood of a nonprofit. However, organizations need to clearly delineate the difference between the responsibilities of these individuals and paid staff. Once determined, the next step to mitigate potential risks and misunderstandings should include the development of a comprehensive volunteer program policy that outlines the position and its expected duties, as well as the use of signed agreements and/or contracts.
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