When a Nonprofit Volunteer Is Really an Employee

One of the questions we hear most often from small nonprofits goes something like this, “our office manager has volunteered four days a week for two years, she loves the organization, and she has never asked to be paid. Is that a problem?” The short answer is that it can be. In this post we explain when a volunteer becomes an employee under federal and state wage laws, what the exposure looks like in Arizona and Washington, and what boards can do to reduce the risk.

The Federal Rule

The Fair Labor Standards Act (FLSA) requires employers to pay minimum wage and overtime to employees. It does not require payment to volunteers. For private nonprofits, the Department of Labor (DOL) treats an individual as a volunteer when he or she serves for civic, charitable, or humanitarian reasons, without promise, expectation, or receipt of compensation.

The label the organization uses does not control. In Tony and Susan Alamo Foundation v. Secretary of Labor (1985), the Supreme Court held that workers in a religious foundation’s commercial businesses were employees even though they testified that they considered themselves volunteers and did not want wages. They received food, clothing, and shelter in exchange for their work, and the Court looked at the economic reality rather than the workers’ own description of the arrangement. A signed volunteer agreement helps, but it does not settle the question.

Factors That Point Toward Employment

The DOL and the courts look at the whole relationship. The following facts push a volunteer toward employee status:

1. The volunteer fills a position the organization would otherwise pay someone to fill, such as bookkeeper, office manager, or program coordinator.
2. The volunteer works a regular, organization-set schedule with defined duties and a supervisor.
3. The volunteer receives something of value beyond reimbursement of actual expenses, such as a stipend tied to hours, gift cards, housing, tuition, or insurance.
4. The volunteer expects to be paid later. The classic example is a founder working full time on the understanding that a salary will start once the first big grant comes in.
5. The volunteer works in a revenue-generating activity like a thrift store or fee-for-service program.

A regular schedule alone does not make someone an employee. Plenty of genuine volunteers show up every Tuesday. The risk comes from the combination of a staff role, staff hours, and something of value flowing back to the worker.

Stipends and the 20 Percent Benchmark

Nonprofits may reimburse volunteer expenses, provide reasonable benefits, and pay a nominal fee without destroying volunteer status. The DOL’s benchmark, drawn from its public agency regulations and opinion letters, is that a fee is presumed nominal if it does not exceed 20 percent of what the organization would otherwise pay to hire someone for the same services. The fee also cannot be tied to productivity or hours worked. A $50 per shift payment is a problem even if the annual total is small.

Paid Staff Cannot Volunteer for Their Own Jobs

This is the rule organizations tend to underestimate. A nonprofit’s employees can volunteer for their employer only in a capacity that is genuinely different from their regular job. A paid development associate who volunteers at the gala registration table is probably fine. The same associate who “volunteers” an extra ten hours a week finishing grant reports is owed wages for that time, and overtime if those hours push the week past 40.

Arizona and Washington

Both of our practice states have their own minimum wage laws, and both carry more bite than the federal rule.

Washington’s Minimum Wage Act excludes individuals serving a charitable or nonprofit organization where an employer-employee relationship does not in fact exist or the services are rendered gratuitously (RCW 49.46.010). That language helps, but it is still a factual test. Washington’s 2026 minimum wage is $17.13 per hour, the highest statewide rate in the country, and an employer that willfully withholds wages can be liable for double damages plus attorney’s fees under RCW 49.52.070.

Arizona courts look to FLSA standards in deciding who is an employee under the Arizona Minimum Wage Act. Arizona’s 2026 minimum wage is $15.15 per hour, and A.R.S. § 23-364 allows a worker to recover the unpaid wages plus an additional amount equal to twice the underpayment.

To put numbers to it, a volunteer office manager working 30 hours a week, 50 weeks a year, for two years has logged 3,000 hours. At current Washington rates, that is $51,390 in unpaid wages, which can double to $102,780 before attorney’s fees. The same facts in Phoenix produce $45,450 in unpaid wages and potential liability of $136,350. A wage claim also rarely travels alone. Reclassification can bring back payroll taxes, unemployment insurance contributions, and workers’ compensation questions, and these often surface when the relationship ends badly and the former volunteer files for unemployment.

Practical Steps for Boards

• Keep volunteer roles distinct from paid positions. If the role is really a job, budget for it.
• Do not allow employees to volunteer in their own job category.
• Limit payments to documented expense reimbursement or a genuinely nominal fee that is not tied to hours.
• For founders working unpaid, document in board minutes that the service is gratuitous. If pay is contemplated, put an actual compensation arrangement in place.
• Use a written volunteer agreement, and review long-tenured, regular-schedule volunteer relationships at least annually.

Conclusion

Volunteers are the backbone of many nonprofits, and nothing here should discourage organizations from relying on them. But a volunteer who works a staff schedule in a staff role is a wage claim waiting to happen, and good feelings at the start of the relationship are not a defense. If your organization has volunteers in traditional staff roles, now is a good time to review those arrangements.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form. This post is for general informational purposes and does not constitute legal advice.