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Company-sponsored picnics are a popular summertime tradition for many businesses, as well as a way to run afoul of wage and hour laws when such events are staffed with employee volunteers.
Employers that allow employees to perform volunteer duties at company picnics during nonworking hours should understand that under the Fair Labor Standards Act, nonexempt employees may not volunteer their services for the benefit of private-sector for-profit employers.
Employers also should be aware that under an interim final rule issued July 1, 2016, the Labor Department Wage and Hour Division’s penalty for willful violations of the FLSA's minimum wage and overtime provisions that occurred after Nov. 2, 2015, and are assessed after Aug. 1, 2016, is to rise to $1,894 from $1,100.
Whether an employee must be paid for voluntary or charitable off-the-clock activities depends on whether the duties are performed as a volunteer or as an employee.
Work performed on behalf of a for-profit private-sector company would not, by definition, be considered a volunteer activity, the Labor Department said in the Fair Labor Standards Advisor, which offers online information about federal wage and hour issues.
Many factors may be considered when determining whether someone is acting as a volunteer or as an employee, but none of them address the situation in which a private-sector employee volunteers to help at an off-the-clock event that is being produced, sponsored or operated by the company, but not for charitable purposes.
“Under the FLSA, employees may not volunteer services to for-profit private sector employers,” the department said . “On the other hand, in the vast majority of circumstances, individuals can volunteer services to public sector employers.”
The Labor Department's definition of volunteer in its FLSA regulations only addresses situations in which someone is a public-agency employee or a private-sector employee volunteering for a public agency.
Nothing in the FLSA, Labor Department regulations or court opinions allow a private-sector employer to refrain from paying an employee for time spent working at a company picnic or other event on the grounds that such time qualifies as volunteer work.
Employees of private-sector, for-profit companies who perform noncharitable work for the companies would not be considered volunteers under the FLSA.
Many employers conduct or sponsor community service events, volunteer days or pro bono work, for outside events and at nonprofits. However, whether employers may accept volunteer services from an employee depends on the facts of the event and business.
Nonexempt employees may participate voluntarily and without compensation in a business’s outside charitable event if the event is unrelated to the company's usual business and participation does not bring direct economic benefit to the business; if the event takes place outside of regular working hours; if the employees’ participation is voluntary and if the business does not employ any regularly paid workers to participate in that event. For these events only, for-profit, private-sector employers may accept volunteer service from their employees.
The Labor Department and courts weigh these factors, and employers must satisfy all of them. Because each case is different, employers may not assume that every charitable event is the same or that because volunteer service was previously accepted that it may be accepted again.
Hosting a company picnic offers fun activities for employees and a larger deduction for employers than might have accompanied other meal and entertainment expenses.
Company picnics are considered a de minimis fringe benefit, the value of which is so small that accounting for it would be unreasonable or administratively impracticable. If a gift is de minimis, the cost of the gift may be deducted as a business expense.
As long as company picnics are occasional and food costs are insubstantial, picnics generally qualify as de minimis fringe benefits. The cost of the picnic may be deducted and employees do not have to include the value of the picnic in their incomes.
Generally, businesses are limited to deducting 50 percent of allowable meal and entertainment expenses.
Certain expenses are 100 percent deductible, including: recreational or social activities for employees, such as summer picnics and holiday parties, and food and beverages furnished at the workplace primarily for employees. Such expenses are excludable from employees’ income as de minimis fringe benefits.
The entire staff must be invited for a 100 percent deduction. Otherwise, expenses are deductible under the regular business entertainment rules.
Whether employers deduct 50 percent or 100 percent of allowable expenses, there are a number of requirements, including certain records that employers must keep to prove their expenses.To contact the reporter on this story: Christine Pulfrey firstname.lastname@example.org To contact the editor responsible for this story: Michael Trimarchi email@example.com
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