Employment Law Daily Churchgoers staffing ‘the Lord’s buffet’ are not statutory employees under FLSA
Wednesday, April 18, 2018

Churchgoers staffing ‘the Lord’s buffet’ are not statutory employees under FLSA

By Lisa Milam-Perez, J.D.

Volunteers who help to staff a church-affiliated buffet restaurant are not statutory employees, the Sixth Circuit found, reversing a bench trial verdict in favor of the DOL on its claims that the church and its televangelist pastor violated the FLSA’s minimum-wage requirements by utilizing churchgoers’ unpaid labor at “the Lord’s buffet.” The key factor: The church members did not expect to receive compensation and, as such, the economic realities test did not apply. As the appeals court explained, “a volunteer’s expectation of compensation is a threshold inquiry that must be satisfied before we assess the economic realities of the working relationship.” The court also found it irrelevant that the churchgoers ostensibly felt coerced by their pastor into volunteering their labor, as the DOL had argued, since the FLSA may not regulate “spiritual coercion,” a concurring opinion explained (Acosta v. Cathedral Buffet, Inc., April 16, 2018, Siler, E. Jr.).

Working for salvation. The Grace Cathedral church operated the Cathedral Buffet, a restaurant on its Cuyahoga Falls, Ohio, campus. The restaurant was registered as a for-profit corporation but it did not turn a profit; in fact, it was heavily subsidized by the church, its sole shareholder. The restaurant served a religious purpose: to allow church members to proselytize among local residents who dined there. It was staffed in part by church members who clean, wash dishes, chop vegetables, and work the cash register on a volunteer basis, alongside paid employees doing the same work.

The pastor recruited restaurant volunteers from the church pulpit every Sunday. If the restaurant was short-staffed, the pastor would tell congregants more volunteers were needed, admonishing them that “[e]very time you say no, you are closing the door on God.” Church members who repeatedly refused to volunteer were at risk of “blaspheming against the Holy Ghost”—an “unforgivable sin in the church’s doctrine.” During services, ushers passed around slips of paper and churchgoers would write down their name and number if they wanted to volunteer. The restaurant manager would call to schedule them, making sure to work around the church members’ schedules, but the manager would stress, as she had been told to do, that the pastor would hear about it if they refused to work. As one church member explained, she agreed to work because she “feared failing God.”

Minimum-wage violations. The Department of Labor conducted an audit and then filed suit, contending the church violated the FLSA’s minimum-wage provisions by using the churchgoers’ unpaid labor. (This was not the agency’s first go-round with the church: The DOL first investigated in 1999 and found that the church violated the Act by failing to pay the church members. The church paid $37,037 in back wages and, at least for a short time, paid the church members for their work at the restaurant. However, several church members later testified they were required to endorse their paychecks and return them to the church secretary.).

A federal court in Ohio ruled in the DOL’s favor following a bench trial. The court concluded that despite the church’s religious affiliation, the restaurant itself was a for-profit corporation engaged in commerce and therefore, it was not exempt from FLSA coverage. Applying the economic realities test, the judge noted that the volunteers’ work was integral to the restaurant’s operations and that management exerted a high degree of control over their work. The court also noted that the church used volunteer labor to save money (the church had conceded as much) and also that the volunteers felt pressured into working. For its willful violations of the Act, the church was ordered to pay $388,000, the DOL’s estimate of back wages due, doubled for liquidated damages.

No expectation of payment, no economic realities test. The Sixth Circuit reversed. It cited the two seminal Supreme Court decisions on the employment status of volunteers, both of which made clear that “to be considered an employee within the meaning of the FLSA, a worker must first expect to receive compensation,” and the church members had no such expectation. This key variable distinguished the case at hand from the religious volunteers in Tony & Susan Alamo Found. v. Sec’y of Labor, who had toiled for the defendant ministry in exchange for food, clothing, and shelter. That 1985 Supreme Court decision was premised upon the High Court’s 1947 holding in Walling v. Portland Terminal Co., which defined “volunteer” as someone who worked “without promise or expectation of compensation, but solely for his personal purpose or pleasure.” The Sixth Circuit was thus twice bound to its holding by High Court precedent.

Significantly, the economic realities test doesn’t even kick in here, the Sixth Circuit held—a point of law that also could have implications for the recent uptick in “volunteer” wage suits brought under the FLSA. As the appeals court explained, the economic realities analysis typically arises in the context of an employee-or-independent-contractor dispute. In those cases, regardless whether employee or independent contractor, it is a “foregone conclusion” that the worker expects to be paid. Such is not the case with volunteers. “Put simply, there was no economic relationship between the restaurant and the church member volunteers,” the court said. “Because the volunteers did not work in expectation of compensation, the threshold remuneration requirement fails.”

Notably, the concurrence reasoned that the churchgoers weren’t statutory employees under the traditional economic realities criteria anyhow, since they were not economically dependent upon the church, the church did not have the ability to hire or fire them, and the church did not substantially control the terms and conditions of their work. (This was not the case, though, as for the 35 paid full-time Cathedral Buffet employees who lost their jobs as a result of the DOL’s lawsuit, Judge Kethledge lamented in a concurring opinion.).

No showing of coercion. The DOL argued that the churchgoers were coerced, which overrides the fact that they had no expectation of payment for working in the restaurant. A showing of coercion would suffice in certain circumstances to overcome this threshold question, the appeals court agreed, but not here. Under the circumstances of this case, the question of coercion doesn’t even come into play. “The type of coercion with which the FLSA is concerned is economic in nature, not societal or spiritual,” the court said, adding that the FLSA was not intended to regulate “when, where, and how a person may volunteer her time to her church.”

Competitive advantage irrelevant. Nor did it matter that the Cathedral Buffet held an unfair advantage over other restaurants in the area because it got by, in part, on free labor. Church vans compete with taxicab companies and the Catholic fish fry can take away business from the local fast food joint, the appeals court pointed out. Nonetheless, church members engaged in those enterprises don’t expect payment for their services, so the enterprise is exempt from FLSA coverage.

“Spiritual coercion” not the DOL’s domain. Another important takeaway, driven home with considerable force in a concurring opinion, is that the DOL has no business intervening in what is, if anything, “spiritual coercion.” The agency concerns itself with matters of economic coercion, and there was no dispute the church volunteers were not economically dependent on the Cathedral Buffet. Allowing the agency to impose itself into what essentially was a “spiritual dialogue between pastor and congregation” would run afoul of the Free Exercise Clause. “The Department’s position here is that otherwise legal conduct—such as volunteering at a church restaurant—becomes illegal if the worker’s pastor spiritually pressures her to engage in it.” Here, the DOL attempted to regulate “spiritual conduct qua spiritual conduct, and to impose significant liability as a result,” based on expressly spiritual criteria—a clear burden on religious exercise, according to the concurrence.

“What is perhaps most troubling about the Department’s position in this case, however, is the conceit of unlimited agency power that lies behind it,” Judge Kethledge continued. “The power of a federal agency is no more than worldly. The Department should tend to what is Caesar’s, and leave the rest alone.”

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