Laurie Woods sued the American Film Institute, a nonprofit entity, because she thought she should be paid for volunteering. In fact, she thought it should pay all its volunteers. Consequently, she filed a class action lawsuit against the institute for unpaid wages, unpaid overtime, missed meal and rest periods, failure to reimburse expenses, and failure to provide wage statements.

Both the trial court and the appellate court refused to allow Woods’ case to proceed as a class action because “workers are not employees unless they expect compensation for their services” and “determining whether particular class members were actually employees would create individual issues that would dominate the trial.”

Volunteer Contends She Was Unpaid Employee

Since 1987, the American Film Institute has used unpaid volunteer workers to run its annual film festival in Los Angeles. Specifically, volunteers usher guests, answer phones, control lines for events, work in the box office, and run errands, among other things.

Woods purportedly volunteered at the American Film Institute’s film festival for four days in November 2017. She alleged she worked between 12 and 14 hours each of those days.

Woods ultimately filed a class action lawsuit against the American Film Institute. She alleged it “solicited” class members “under the false pretense that volunteers will get to enjoy the event in exchange for their services.” She further alleged that “because volunteers were expected to, and in fact did, spend the vast majority of their time performing job duties under [the American Film Institute’s] direction, supervision and control, the promise of free admission was illusory.”

Consequently, Woods claimed volunteers were really employees and entitled to the benefits of California’s wage and hour laws, “such as minimum and overtime wages, meal and rest breaks, and wage statements.”

Woods asked the trial court to determine whether her lawsuit could proceed on a class-wide basis. She defined the class as “all persons who worked at the festival . . . who were not paid for their work.” The trial court found the case wasn’t appropriate for class action treatment, and Woods appealed. The appellate court agreed with the trial court.

Expectation of Compensation is Key

To determine whether a case may proceed as a class action, courts must consider numerous factors, including whether common questions of law or fact “predominate over individual issues.” To analyze predominance, a trial court must decide whether “the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.”

In the context of Woods’ lawsuit, “to determine whether common issues would predominate, the trial court needed to analyze the applicable law only to the extent of deciding whether [the American Film Institute] was precluded from using volunteer labor as a matter of law.”

The court stated: “The Labor Code does not provide a direct answer to the question [of] whether the minimum standards that protect employees under California law must be extended to those who volunteer their time for nonprofit organizations.” Several parts of the Labor Code, however, support the “conclusion that volunteers for nonprofit entities are not employees for purposes of the wage and hour rules.”

For example, the Labor Code provisions concerning minimum wages for people employed on “public works” provide that a volunteer is a person “who performs work for civic, charitable, or humanitarian reasons for a public agency or corporation qualified under Section 501(c)(3) of the Internal Revenue Code as a tax-exempt organization, without promise, expectation, or receipt of any compensation for work performed.” Likewise, the workers’ compensation law excludes from the definition of “employee” any “person performing voluntary service for a public agency or a private, nonprofit organization who does not receive remuneration for the services, other than meals, transportation, lodging, or reimbursement for incidental expenses.”

Therefore, “because workers are not employees unless they expect compensation for their services, determining whether particular class members were actually employees would create individual issues that would dominate the trial.” Each class member would be required to testify whether he or she expected payment in exchange for his or her services. “This would splinter any potential class action into hundreds of individual trials.”

Importantly, the appellate court limited its decision to the facts before it: “We need not decide whether the trial court was correct in suggesting that the expectation of compensation is a necessary condition to be an employee in all contexts. We need only consider whether persons may volunteer for an organization such as [the American Film Institute] without becoming employees.” Laurie Woods v. American Film Institute (California Court of Appeal, 2d Appellate District, 12/17/2021).

Bottom Line

Needless to say, the risk of liability on a class-wide basis can be significant. Nonprofits should proceed with caution when determining whether to treat a person as an unpaid volunteer. That’s particularly so because, as mentioned, the Labor Code doesn’t definitively state whether volunteers for nonprofit entities are employees for purposes of wage and hour laws.

Likewise, although the appellate court’s decision provides some guidance for determining whether a person is a volunteer or an employee, the appellate court declined to extend its decision to all contexts. Therefore, if a nonprofit is uncertain whether a person is a volunteer or an employee, it would be prudent to consult with employment counsel.

Ryan C. McKim is an attorney with Clark Hill LLP in Los Angeles, California. Ryan’s practice focuses on employment disputes where he represents businesses and public entities in high stakes cases involving sexual harassment, gender discrimination, age discrimination and negligent hiring, retention, and supervision claims. He also has substantial environmental litigation experience, primarily on water and soil contamination cases. He can be reached at rmckim@clarkhill.com.

The views and opinions expressed in the article represent the views of the author and not necessarily the official view of Clark Hill LLP. Nothing in this article constitutes professional legal advice or is intended to be a substitute for professional legal advice.