As seen in Craft Brewing Business – by Kathleen Spero
Craft beer operations often start as a labor of love, with owners and founders working tirelessly to bring their vision into fruition. Offers of assistance and unpaid labor may come in from friends, family and supporters of the craft beer community, and can at first seem like a great way to bring in new help. Craft beer operations are also desirable places to work, and volunteers and interns/trainees may clamor to find a way to learn the ins and outs of the business through unpaid, hands-on training opportunities.
Under the terms of the federal Fair Labor Standards Act (FLSA), as well as state wage and hour laws, an employer is required to pay each “employee” for all hours worked. The definition of an “employee” is a broad one, and includes anyone that the employer “suffered or permitted to work.” Unless the nature of the services rendered falls under one of the narrow statutory exceptions to the definition of an “employee,” the employer is going to need to pay the individual the minimum amount of pay required by law. This article will examine some of the instances where unpaid labor may be offered to a craft beer brewery – volunteers, family members, and interns/trainees.
The term “volunteer” is not defined by the FLSA, which instead takes the approach of outlining specific conditions when an unpaid volunteer may be used. Under the FLSA, unpaid volunteers can only be used if three conditions are met:
• First, the unpaid volunteer must be performing work for a public agency for civic, charitable or humanitarian reasons, without the promise, expectation or receipt of compensation. This specifically excludes the use of volunteers for for-profit businesses, and permits payment only in the form of a nominal fee or reimbursement for expenses.
• Second, the unpaid volunteer must choose to give his or her time and services freely and without pressure or coercion from an employer.
• Third, the unpaid volunteer must not be employed by the same public agency or non-profit business to perform the same type of services as being donated by the unpaid volunteer.
This rule is very rigid, and penalties levied for violating these rules can be high. For example, in 2014, Westover Winery in California was forced out of business as a result of a $115,000.00 fine for using volunteers to help produce wine, even though many of those volunteers willingly wanted the opportunity to learn about winemaking. Accepting the assistance of volunteers outside of limited, one-time demonstrations is going to be generally prohibited for craft brewing operations.
In addition to not accepting the services of volunteers, for-profit companies are also prevented from asking employees to donate their time or services without compensation. For example, a brewery cannot ask an employee to volunteer his or her time at a beer festival, pint night or other similar company event. For-profit breweries can also not ask for services in exchange for an admission ticket or other thing of value. Employees may volunteer for a non-profit hosting a beer festival or similar event, but it must be entirely their choice to volunteer, and their volunteer duties and assignments would be at the complete discretion of the non-profit entity.
Hiring family members or accepting family member assistance is also a common way for a brewery to receive an offer of unpaid labor. Most people assume that federal and state wage and hour laws do not apply to family members working for the business, but some laws apply regardless of any family relationship, and other laws may apply depending on the organizational structure of the business and the relationship of the individuals in the family.
Many state wage and hour laws have exceptions in place that allow a solo proprietorship or a family-only partnership to use the unpaid labor of a parent, spouse, child, or legally adopted child. If the child is a minor and is permitted to work in accordance with your state ABC license, state laws on work permits and working hours would still apply even though the child is not considered to be an employee and is not being paid. Even if you are permitted to accept the unpaid labor of a family member, state law may still require you to have workers’ compensation insurance coverage for those individuals.
Corporations and limited liability companies cannot legally be considered to have family, and therefore must comply with wage and hour laws for all employees, including family members.
State laws can vary widely in this regard, so it is important to verify the specific rules of your state before proceeding with hiring a family member.
Interns and trainees can also be a popular way of bringing unpaid help into a work place. The U.S. Supreme Court recognized as early as 1947 that an individual who is seeking work that “services only his own interest” can be excluded from the FLSA definition of an employee.
The U.S. Department of Labor has created rules to allow for-profit businesses to legally provide training and learning opportunities without pay, called the “trainee exception.” This consists of a six-part test for use in determining whether or not an intern or trainee must be paid as an employee. If all six factors are met, a valid intern/trainee program exists, and participants do not have to be paid:
(1) The training must be similar to that which would be provided in academic or vocational education.
(2) The training must be for the sole benefit of the intern/trainee.
(3) The training must does not displace regular workers, but works under the close supervision and observation of those workers.
(4) The business providing the training derives no immediate advantage from the intern/trainee, and at times, operations may actually be impeded by having the intern/trainee.
(5) The intern/trainee understands and agrees s/he is not entitled to a job at the end of the internship.
(6) The intern/trainee and the business providing the training understand and agree that no wages will be paid for time spent in the training program.
States may also have their own requirements for intern/trainee program, which require additional tests for legality.
Unpaid intern/trainee programs have garnered a great deal of attention in recent years, with a number of widely-publicized lawsuits filed by interns in the entertainment and publishing industries. Those lawsuits have upheld the position that this trainee exception is to be very narrowly interpreted, and should not be expanded to help businesses find a way to obtain unpaid, free labor during difficult economic times.
For-profit companies can and do operate unpaid intern/trainee programs, but those programs should take into account all six of the U.S. Department of Labor factors, as well as any unique state rules. It is also recommended that you have a formal internship policy and written procedures; formal application and selection process; and written training materials that are incorporated with job duties that focus on specific skill development, rather than routine work. You may also want to partner with a homebrew club, vocational training program, or beer education program at a local college or university as a means to advertise and recruit for your program.
It is often said that good help is hard to fine, and good unpaid help is even more elusive. Should it come across your way, take the time to ensure you are not running afoul of government laws regarding employees.
For more on employment law, check out this in-depth series on compensation for employees in your brewery.