The Wage and Hour Division of the U.S. Department of Labor has been very busy so far this year. My last post was about its proposed new rule on the amount of salary that must be paid for employees to be exempt from the overtime pay requirements as an administrative, executive, professional, or highly compensated employee. The Wage and Hour Division has also issued proposed new rules on how to calculate overtime pay and what constitutes a joint employer situation. In addition, it has issued six opinion letters in the past two months. One of which should be of particular importance to agency owners. That opinion letter discusses when an employer must compensate its nonexempt employees for participating in volunteer activities sponsored or encouraged by the employer.
Most of the marketing articles I read about how an insurance agency can distinguish itself from its competitors and create stronger brand recognition by its target customers mention involvement in community and charitable activities. Such involvement, if appropriately targeted and publicized, can raise an agency’s profile among, and create goodwill with, those customers. However, to avoid having to compensate employees who are not exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”) for their time spent in participating in such activities, a few basic rules must be followed.
The employer must not direct or control the performance of the volunteer activities and cannot do anything that would constitute “coercion or undue pressure” on its employees to participate in the activities. This means that, although an employer may encourage its employees to participate in such activities, it cannot impose any adverse consequences on those employees who chose not to do so. An employer cannot treat employees who do not participate in volunteer activities any differently with respect to their “working conditions” or their prospects of continued employment or advancement than those who do participate in such activities.
However, according to some earlier opinion letters, employers can pay their employees who participate in volunteer activities during what would otherwise be the employee’s normal working hours, without having to pay them when they engage in such activities outside of those hours. They can also use an employee’s time spent engaging in volunteer activities as a factor in determining whether to pay the employee a bonus if engagement in those activities is optional, the employee is not guaranteed a bonus for engaging in them, and not engaging in them will not result in adverse effects on the employee’s working conditions or their prospects of continued employment or advancement.
The opinion letter contains a description of an interesting bonus pay arrangement that encourages employees to participate in volunteer activities, but does not violate any of the above rules. It or similar arrangements are worth considering by those agencies that want to raise their profiles in the community through volunteer activities.
The above rules do not apply to employees who are exempt from the overtime pay requirements of the FLSA. As long as those employees are paid the required salary and otherwise satisfy the criteria for an exemption from those requirements, such employees can be required to participate in volunteer activities without the payment of additional compensation for doing so. However, as with many things, just because something is legal, it may not be the right thing to do. Before mandating participation in volunteer activities by its exempt employees, an agency should consider the possible adverse effects on office morale and productivity that may result.