Pre-Employment Support

BillG

My apologies in advance for this rather lengthy posting. But to understand the context of my question, I believe a bit of background information is required. Thus the following paragaphs.

My company is in a joint venture partnership with several other companies which are collectively in the process of setting up a new service company - a totally independent company that will have no operational reporting responsibilities to any of the joint venture partners -- that will operate entirely within a single Southeastern state. This "new company" already has major customers lined up but doesn't actually start operations -- and the service that goes along with it -- until January 1st. As a result, this new company will not exist until January 1st.

As this new company has no in-place HR workforce -- we're building everything up from scratch -- my department was asked to oversee the hiring of the new company's work force -- from top management on down. We have already accomplished this task, having lined up our work force starting with those that will be our senior managers -- then cascading the hiring process down till we filled all available positions.

My question concerns the efforts of the individuals that will be "hired" effective January 1st as our senior managers -- 2nd and 3rd tier managers for the most part. These individuals -- all of whom will be salary exempt employees -- were identified first. After they were given -- and had accepted -- job offers with the new company -- with official start dates on January 1st -- some of these senior managers were asked to help us with the interviewing, selecting and hiring process for those individuals that will work in echelons below them -- again starting January 1st. The "soon to be" senior managers with this new company are not yet on the new company's payroll as the new company will not actually exist and start operations until January 1st. The time they've invested to date has been both voluntary and on a non-interference basis with their current jobs -- jobs with a company totally unrelated to this new company or any of the joint venture partners.

My question: Do we have to compensate these individuals for the time they've spent assisting us in the hiring process -- or can their time really be considered "voluntary" -- making it unnecessary for us to compensate them for their efforts?

None of the indivduals in this category have objected to their "voluntary" contribution to the hiring process. In fact, those that have been asked say they do not mind "lending a hand" given that this gives them a say in who is to be hired within their respective subordinate organizations. But, even though these individuals say they are OK with the fact that they will not be compensated for their support efforts, I am very uneasy about not compensating them for their time and want to be sure we are not doing anything illegal or counter to any of the Wage and Hour statutues or regulations by doing so.

Don D

My thought is that nothing is officially owed them since no employment relationship actually exists; in fact the company they are going to work with effective January 1 does not yet exist materially. They are not working for YOUR company, thus there would be no wages due assignable to YOUR company's tax ID number. And the other one is not yet registered, so no wages are due there. Their efforts have not and won't result in a tangible product being produced nor will what they plan to do in the interim make any profit for any company. I think it's just like some people getting together, formulating plans for an entity that will exist down the road, planning to quit/change their jobs, making plans and laying roadmaps for something that kicks in a couple of months off. No wages are due. I'm just mad 'cause you didn't call me. x:-)

santire

After quite a few years in dealing with employment law I have never come across a situation like you describe. I have never heard of a company expecting people to do work without pay unless the workers are true principals putting in sweat equity for a start up organization. Even in that situation the work is not for free. Sweat equity means they receive equity in return for the work. While the “future” employees may be destined for exempt positions, the work they are currently performing may or may not be exempt activity. Let’s start with the fact that to be an exempt employee two things must happen. They must be paid a fixed salary and perform exempt activity. These “volunteers” are not receiving a salary therefore by definition they are not exempt. On the other hand, if they were nonexempt, they must be paid for all work done for the benefit of the company at least the minimum wage plus time and a half for overtime. Wages to nonexempt employees cannot be avoided unless it is for religious or charitable activity that does not financially benefit the company. On the other hand, exempt employees receiving a salary (note the assumption that they are getting a salary) do not need to get paid for any type of volunteer work, whether during or after work hours. Let’s get back to the assumption that these folks are doing exempt work. If they are perceived as doing employment activity they are employees and are entitled to be paid. If they are not employees, neither exempt nor nonexempt, they are entitled to be paid for their work that benefits the company and are entitled to this compensation as quantum merit. Quantum merit is a legal term whereby a person is entitled to be paid for a benefit he or she renders to someone else. It is highly unlikely that the promise that they will eventually be employees is sufficient to waive their right to compensation. If that could be done, employers would simply start telling employees “work for us a couple of months for free” and then we start paying. Highly unlikely the DOL would find that OK. The short of this is that if one of those “volunteers” decides to contest the fact they are not getting paid, I would bet on them winning one way of the other.