Workers’ Compensation and “Charitable Work Program” Employees

Who is an employee for purposes of workers’ compensation?

Church Law and Tax 1992-05-01 Recent Developments

Workers Compensation

Is a homeless person who is paid $5 per hour by a church for performing miscellaneous services as part of a “charitable work program” an employee covered by state workers compensation law? Yes, concluded a California appeals court. A Baptist church operated a charitable program for homeless or transient persons. Sometimes, the church made small payments directly to needy individuals. In other cases, when persons “wished to maintain their dignity and asked to do work,” the church would attempt to find work for them to do (generally at a rate of $5 per hour). Most persons worked at most a day. However, one individual worked for nearly 4 weeks, performing a variety of tasks including roofing, gardening, digging, drywall work, painting, and laying a carpet. This individual sustained serious injuries when he fell off a ladder while doing roofing work. The victim later asserted that he had been an “employee” of the church and accordingly was entitled to workers compensation benefits. The church vigorously rejected this position, claiming that the victim was a volunteer who was paid an “honorarium” for participating in the church’s charitable work program. It pointed out that it did not withhold any payroll taxes from the victim’s compensation, and in no sense considered him an employee. A state agency ruled in favor of the church, noting that private charities should not be discouraged from providing aid by requiring them to pay workers compensation. The agency noted that “in fact, [the church] has apparently discontinued its benevolence fund program due to the litigation and liability issues raised in this case.” The victim appealed, and a state appeals court concluded that he was an employee of the church, and as such was entitled to workers compensation benefits. The court observed that the question is “whether to characterize the work as donated services, not within the scope of a traditional work for hire relationship, or as payment within a true employment relationship where services are provided, not out of charitable generosity, but for a living wage.” The court concluded: “[The victim] worked shoulder to shoulder with covered employees, did the same work, received wages, and ran the same risks …. He worked at a set hourly rate, for cash wages …. They were hourly wages, indistinguishable in any way from the wages paid to any laborer, except that they were probably considered below the prevailing wage rate for the kind of work done …. Where the pay is above the minimum wage and is not gauged by the recipient’s necessities, we believe that it can logically only be wages.” The court acknowledged that its decision might deter churches and other charities from hiring the needy. However, it emphasized that this is not a relevant consideration in deciding whether or not such individuals are employees. The church had argued that the victim “bit the hand that fed him” and that he was responsible for the discontinuance of the church’s charitable work program. In responding to this claim, the court observed:

One is tempted to observe that the hand that fed him did not go empty; the church got some 160 hours of work at $5 an hour in return for its alleged charity to [the victim]. And as [the victim’s] attorney points out, the cost to the church of providing workers compensation insurance for an annual payroll of $5,000 would have been $553 in 1987 when [the victim] was hired. If that cost sufficed to discourage the church’s “charity,” the church was easily discouraged. But whether or not charity is easily discouraged, the law confers employee status under the [workers compensation law] when an employment relationship is fact exists, and an employer cannot escape the obligations of such a relationship by characterizing his hiring of an employe as “charitable,” by failing to report it to the Internal Revenue Service, nor by paying below-scale wages. Where, as here, the normal incidents of an employment relationship are present, the concomitant legal obligations follow.

This case illustrates the complications that may be associated with the payment of compensation to needy persons who perform work on behalf of a church. Attempting to avoid those obligations by characterizing such persons as volunteers, or by characterizing their compensation as “honorariums,” will not succeed, if the persons in fact meet the liberal definition of an “employee.” Hoppmann v. Workers Compensation Appeals Board, 277 Cal. Rptr. 116 (Cal. App. 1991).

See Also: Workers Compensation

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