Think you can save money using volunteers or interns? You might want to think again. If you skirt the rules, your small business could face lawsuits and back-pay penalties that could cost more than hiring an employee.

“A lot of places are using interns and volunteers because it’s the only way the business can stay afloat,” says Harley Storrings, a labor and employment attorney with Arnstein & Lehr. But doing that could mean trouble with labor laws.

When it comes to hiring interns the rules are pretty clear cut.  According to Storrings, the small business can’t hire an intern instead of hiring an employee for a position just to save money.

“If the object is to have this person save money, you’re not going to get away with it,” says Storrings, noting the company could face a lawsuit if it turns out the intern was doing the work a paid employee should be doing.

In the case of volunteers, it gets a little more complicated. While for-profit companies aren’t allowed to use volunteers, unless it’s for a special charity event, there are those small businesses that would be considered a non-profit -- like a company that helps cancer patients or a for-profit animal shelter. If your business falls into that category and/or wants to use volunteers for a special event, Storrings says to tread carefully.

“The federal government is very strict as far as when someone crosses the line into being an employee,” says Storrings. “Someone who is volunteering should be working primarily for their own benefit or a humanitarian reason as opposed to trying to benefit the employer.”  Making that determination, says Harley, can be tricky and depends on the nature of the business. Generally Storrings says a volunteer shouldn’t be someone working full time and should be doing the volunteer work without any coercion. Not so uncommon, says Storrings, is when a company will have non-profit work and will encourage their paid employees to do the volunteer work on the side, which could be considered coercion. 

According to Storrings the Fair Labor Standards Act, which establishes the requirements for minimum wage, overtime and recordkeeping is a growing cause of action by lawyers, with many using the FLSA as leverage to force settlements when volunteers were improperly classified and should have been paid for the work. Since many small businesses don’t keep records of the time volunteers punched in and out, it becomes a case of the volunteer’s word against the company.  Without the record keeping, the small business owner could be on the hook for back wages as well as overtime if the volunteer was misclassified, he says.

In order to protect your business from running afoul of the labor laws, Storrings says to make sure volunteers are in it for their own personal reasons, are working part-time, and aren’t doing activities that paid employees are doing.

Storrings says if your business needs them, to check with a lawyer before moving ahead with volunteer workers.

“You should always consult with an attorney on whether to hire an intern or volunteer,” he says. “All it will take is a twenty minute conversation to avoid a lot of money and a lot of aggravation in the long run.”