Hofstra University in New York was recently sued by 256 graduate and undergraduate students. They charged the school had underpaid them for the work they did, a violation of the Fair Labor Standards Act (FLSA). In a federal district court, Hofstra settled the case for nearly $500,000. As a result, the judge didn’t rule on whether they were students or employees.

Who’s an employee? If you see teaching and research assistants and other working students as students, you may be wrong. Worse still, the issues are not always clear cut. According to Chapter 10 of the U.S. Department of Labor’s Field Operations Handbook, “In some cases graduate students … are engaged in research in the course of obtaining advanced degrees and the research is performed under the supervision of a member of the faculty in a research environment provided by the institution under a grant or contract.” Under those conditions, DOL says, the research may be considered part of the student’s education. He or she may receive some pay from the grant or contract, but the school needn’t pay the student by the hour.

The lead plaintiff in the Hofstra case charged that she had worked more than 40 hours a week during the fall semester: She managed the football team and had other on-campus jobs. But she was paid only a $700 stipend for the whole semester—less than minimum wage, with no overtime pay provided. We expect the other student claims against Hofstra were similar. Unlike research assistants, teaching assistants are likely to be seen as employees. To complicate matters still further, the National Labor Relations Board has seesawed on whether graduate students working for/at their schools are allowed to unionize, meaning they are employees. The board said in 2000 that they could, reversed that stance in 2004, and seems poised to reverse it again.

What about volunteers? Establishing and maintaining a volunteer force that augments a nonprofit’s functions and works well with employees and clients can be crucial to its success. But as is true with students, there are gray areas in which nonprofit employers may treat individuals as volunteers when they should be treated as employees. One key is whether anything of value is given to volunteers. Reimbursing any expenses they may incur in the course of their activities is acceptable.

But let’s say there’s a degree of personal risk attached to a volunteer’s role, and the nonprofit decides to make them eligible for a disability pension or survivors’ benefits for dependents. Courts tend to see such offerings as evidence that the volunteers are really employees. Other pitfalls that might put a nonprofit in danger of violating FLSA are whether volunteers’ activities might displace employees and whether volunteers who are also employees of the nonprofit are asked to perform the same activities when they volunteer for which they are normally paid.