FLSA2005-51 — Nonexempt employees who volunteer as coaches/advisors and nominal fees under section 3(e)(4)(A)

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

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FLSA2005-51

November 10, 2005

Dear Name*:

This is in response to your letter of September 23, 2004 written on behalf of your client
school district. You request guidance as to whether certain stipends the school district
provides to non-teaching, nonexempt school employees who volunteer as coaches or
advisors for the school’s sports teams and clubs constitute “nominal fees” as described in
29 C.F.R. § 553.106(e) and (f).

You state that all such employees are nonexempt staff, such as secretaries or custodians.
They volunteer for roles as coach, assistant coach, club advisor, or staff for athletic
events. You further state that based on their specific duties as school district employees
such employees’ volunteer services are different from the services for which the school
employs them.

Your letter mentions a specific example of a nonexempt school custodian who has
coached the Varsity Track team for a number of years. The school provides the
individual with a stipend of $3,675 for a season of volunteer coaching. You indicate the
custodian is not required to coach any team as a condition of employment, and that the
stipend, which the school provides regardless of the performance of the team or number
of hours the coach spends in team-related activities, is not intended or provided as a
substitute for wages. Nor is the stipend based on the amount of time spent on coaching or
the productivity of the team. For example, there is no extra payment for participation in
play-offs, regional or state championships, or tournaments. In addition, the school does
not base the stipend on the length of the season or the number of meets the team attends.
You also state that the custodian spends his own money to provide certain extra benefits
to the students, e.g., hamburgers, pizza, ice cream, an end of season party, plaques or
trophies, and commemorative booklets and that this practice is common among coaches.
You state that the coaches provide these “extras” due to their love of coaching and
because it enriches the experience for the students, and that the school does not separately
reimburse the coaches for these expenses.

The Fair Labor Standards Act, 29 U.S.C. § 201 et seq., recognizes the generosity and
public benefits of volunteering, and does not seek to pose unnecessary obstacles to bona
fide volunteer efforts for charitable and public purposes. The Department of Labor is
committed to ensuring that citizens are able to freely volunteer their services for
charitable and public purposes within the legal constraints established by Congress.

As you may be aware, in enacting the 1985 FLSA Amendments, Congress sought to
ensure that true volunteer activities were neither impeded nor discouraged. Congress was
explicit in its 1985 Amendments that a “volunteer” may receive “no compensation,” but
may be paid “expenses, reasonable benefits, or a nominal fee.” 29 U.S.C. § 203(e)(4)(A);

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

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see also 29 C.F.R. § 553.106(a) (“Volunteers may be paid expenses, reasonable benefits,
a nominal fee, or any combination thereof, for their service without losing their status as
volunteers.”); 29 C.F.R. § 553.106(e) (“Individuals do not lose their volunteer status if
they receive a nominal fee from a public agency.”). Neither the FLSA nor the Senate
Committee Report to the 1985 Amendments further defines the term “nominal fee.”
Rather, the Committee Report directed the Department to issue regulations providing
guidance in this area. Employees of a public agency are permitted to provide volunteer
services in certain circumstances, and the FLSA regulations governing this issue are
found at 29 C.F.R. §§ 553.100-.106 (copy enclosed).

Under the Department’s regulations, the term “employee” does not include individuals
who volunteer for a public agency if the volunteer:

1. Performs hours of service for a public agency for civic, charitable or humanitarian
reasons, without promise, expectation or receipt of compensation for services
rendered. Although a volunteer can receive no compensation, a volunteer can be
paid expenses, reasonable benefits or a nominal fee to perform such services;

2. Offers services freely and without pressure or coercion, direct or implied, from an
employer; and

3. Is not otherwise employed by the same public agency to perform the same type of
services as those for which the individual proposes to volunteer.

See 29 C.F.R. §§ 553.101, 553.106. Your inquiry assumes a full-time, nonexempt school
employee who agrees to volunteer, without pressure or coercion from the school, as a
sports coach for a season and that there is a humanitarian nature to the volunteer service.
The specific question you ask is whether this type of arrangement constitutes a
permissible “nominal fee.”

There are regulations that address the nominal fee issue which are relevant in the high
school coaching context. Specifically, “[a] nominal fee is not a substitute for
compensation and must not be tied to productivity.” 29 C.F.R. § 553.106(e). In
determining whether a fee constitutes “a substitute for compensation” or whether it is
“tied to productivity,” the Department looks at the “economic realities of the particular
situation.” 29 C.F.R. § 553.106(f). A key factor in the context of school coaching or
advising a club is whether the amount of the fee varies as the particular individual spends
more or less time engaged in the volunteer activities, or varies depending upon the
success or failure of a particular team or school activity. For example, if the fee does not
vary based upon the win-loss record of a team, or the degree of student involvement in a
particular club, or other similar factors relevant to the quality or quantity of the team,
club, or activity, the Department generally would not find that the fee was a “substitute
for compensation” or “tied to productivity.” See 29 C.F.R. § 553.106(e).

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

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The regulations also list several factors the Department will examine in determining
whether a given amount is nominal. Specifically, the Department looks at “the distance
traveled and the time and effort expended by the volunteer; whether the volunteer has
agreed to be available around-the-clock or only during certain specified time periods; and
whether the volunteer provides services as needed or throughout the year.” Id. With
respect to the factors listed in 29 C.F.R. § 553.106(e), your letter states your view that
such factors are more relevant to a volunteer firefighter situation than a school coach’s
situation. The Department agrees that, historically, the factors enumerated in §
553.106(e) were intended to provide guidance in the context of whether firefighters were
paid a nominal fee and qualify as bona fide volunteers. However, in the context of school
coaching or club sponsorship, the “substitute for compensation” and “tied to
productivity” standards are still generally relevant. As the attached opinion letter states,
“These factors focus upon whether the fee is actually analogous to a payment for services
or recompense for something performed and, hence, is not nominal.” See July 14, 2004
Opinion Letter.

In evaluating the nominal fee issue in the case of the school coach, we recognize that a
coach might travel significant distances for away games, which may occur at the
volunteer’s expense. Any such unreimbursed expenses will increase the amount of the
stipend that may qualify as nominal. In addition, a coach’s expected time commitment
often will depend on the sport he or she coaches, as the length of the season can vary
greatly depending upon the sport. The time commitment also can vary depending upon
other factors, such as whether the sport is varsity or junior varsity. The stipends
established for different sports may vary based upon such broad variations in the
coaches’ time commitments and still qualify as nominal. However, the length of the
season also could vary significantly depending on whether the team makes the play-offs
and how far the team advances in the play-offs. If a school paid a coach more because
his team made the play-offs, the Department would likely view such a payment as a
“substitute for compensation” or a payment “tied to productivity.” As indicated in the
July 14, 2004 Opinion Letter, the regulations are focused on preventing payment for
performance, which is inconsistent with the spirit of volunteerism contemplated by the
FLSA.

The FLSA permits volunteers to be paid a nominal fee, which we believe is the same as
an incidental or insubstantial fee. Since the FLSA does not define “nominal fee,” the
Department believes the definition of “incidental” in 29 U.S.C. § 213(c)(6)(G) of the
FLSA to be informative here. In that provision, Congress set out a 20-percent test to
determine whether something is insubstantial. That provision, which lays out the terms
under which a 17-year old employee may drive an automobile or truck on public
roadways, states that “occasional and incidental” activities are those that are no more than
20 percent of an employee’s worktime in a workweek.

In determining whether the $3,675 stipend at issue here is a permissible “nominal fee,”
the Department looks to the “economic realities” of the situation and must compare the
volunteer stipend to what it would otherwise cost to compensate someone to perform

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

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those services. If the stipend is no more than 20 percent of what the district would
otherwise pay to hire a coach or advisor for the same services, it would appear to be a
permissible “nominal fee.” Such a threshold assumes that the coaches are freely
volunteering their services and the school district simply provides a lump-sum payment
or series of payments without regard to wins or losses or hours worked as discussed
above.
1
Moreover, a willingness to volunteer for an activity for 20 percent of the
prevailing wage for the job is a likely indicium of the spirit of volunteerism contemplated
by the 1985 amendments to the FLSA. See 29 U.S.C. § 203(e)(4)(A). Therefore, when a
public agency employee volunteers as a coach or extracurricular advisor, the Department
will presume the fee paid is nominal as long as the fee does not exceed 20 percent of
what the public agency would otherwise pay to hire a full-time coach or extracurricular
advisor for the same services.

With regard to your specific school district, the Department is unable to answer whether
the fee of $3,675 is nominal due to the limited information provided concerning what the
school district would otherwise pay to hire a full-time coach or advisor for the same
services. However, the market information necessary to complete this good faith
determination is generally within your client school district’s knowledge and control.
Thus, any coaches the school district has on its payroll would be a good benchmark for
this calculation. Absent such information, your client may look to information from
neighboring jurisdictions, the state, or ultimately, the nation including data from the
Department of Labor, Bureau of Labor Statistics. So long as your calculations are based
on an approximation of the prevailing wages of a coach and the fee amount does not
exceed 20 percent of that coach’s wages for the same services, the Department would
find that such a fee would be nominal within the meaning of 29 C.F.R. § 553.106.
2

This opinion is based exclusively on the facts and circumstances described in your
request and is given based on your representation, express or implied, that you have
provided a full and fair description of all the facts and circumstances that would be
pertinent to our consideration of the question presented. Existence of any other factual or
historical background not contained in your letter might require a conclusion different
from the one expressed herein. You have represented that this opinion is not sought by a
party to pending private litigation concerning the issue addressed herein. You have also
represented that this opinion is not sought in connection with an investigation or litigation

1
In the case of public school employees, a 20 percent level also appears reasonable given that various
states have endorsed significant lump sum amounts of compensation as “nominal” for state public agency
volunteers; and we believe current coaching stipends of 20 percent would likely not reach such amounts.
See Ind. Code § 36-8-12-2 (2005) (“‘Nominal compensation’ means annual compensation of not more than
twenty thousand dollars ($20,000).”); see also Minn. Stat. § 144E.001, Subd. 15 (2005) (nominal fee for
volunteer ambulance attendant may be up to $6,000 annually).
2
We are withdrawing the opinion letter dated July 11, 1995 as it relates to “nominal fee.” The Department
does not believe this letter fully took into account the “economic realities” of the particular situation of
coaches and extracurricular sponsors as discussed in this letter including the humanitarian nature of the
volunteer effort, the lack of pay for performance, and the fact that school districts often do not track or
control their coaches’ hours. The Department is also withdrawing opinion letters dated July 15, 1988, April
2, 1992, and September 17, 1999 to the extent they are inconsistent with the interpretation of nominal fee in
this opinion.

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

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between a client or firm and the Wage and Hour Division or the Department of Labor.
This opinion is issued as an official ruling of the Wage and Hour Division for purposes of
the Portal-to-Portal Act, 29 U.S.C. § 259. See 29 C.F.R. §§ 790.17(d), 790.19; Hultgren
v. County of Lancaster, 913 F.2d 498, 507 (8th Cir. 1990).

We trust you will find the above discussion and analysis responsive to your request.
Sincerely,

Alfred B. Robinson, Jr.
Deputy Administrator

Note: * The actual name(s) was removed to preserve privacy in accordance with 5
U.S.C 552(b)(7).