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Volunteers and the Law: Winery Shuts Down After Labor Violation

by Laura Ness
September 08, 2014

Many small wineries make use of volunteers who work in the tasting room, pour at outside events, help run the bottling line, assist in picking grapes at harvest and do all manner of important tasks. In fact, volunteers are the lifeblood of many wineries. Without them, some wineries could not make ends meet.

The problem is that under California labor laws, using volunteers for a for-profit business is illegal. Anyone who works in the capacity of an employee at a for-profit business must also have access to worker’s compensation insurance. Every employer is required to offer it, even if there is only one employee.

The Division of Labor Standard Enforcement (DLSE) appears to be cracking down on violators. All it takes is a potentially disgruntled former volunteer and a winery could be facing stiff fines and penalties—even enough to shut the business down.

Take the very recent case of the owner of Westover Winery in Livermore Valley, William Smyth. He received an unannounced visit from two representatives of the DLSE Oakland Office while he was visiting with customers, who then levied a complaint against him. Smyth then found himself facing fines of nearly $100,000, including being forced to pay back wages to a group of volunteers, as well as legal fees.

Smyth said he had no idea using volunteer labor at a winery was illegal. “We really didn’t even need all the volunteers we had, but they enjoyed being part of our clubs and they loved helping out. My licensed winery consultant handled all the scheduling, and even she didn’t know about this law. It’s devastating,” he said.

When he sent checks out to the volunteers as stipulated by the DLSE, half of them seemed happy to have the money, while the other half were outraged that this was happening to their favorite winery. When they tried to return the checks, feeling they’d already been “paid” sufficiently, the owner was fined yet again: he was told it’s illegal for an employer to take money back from an “employee.”

“We can’t wake up in the morning in this state without violating a law,” said Smyth.

At this point, Smyth has decided to close up shop. Even though he has the opportunity to appeal the case, he was told, rather dismissively by the DLSE reps, that he wasn’t going to win an appeal.

Smyth has reached out to his local representatives, asking them to redress the situation by amending the law. In particular, he proposes:

1. Provide the same labor exemption for small wineries and businesses which are extended to nonprofits and government entities which allow for volunteers in California.
2. Make it a law that the State of California must first issue cease and desist orders for small business violations and allow businesses to get legal before any fines are levied. Only after they have been warned can they be penalized for further violations.
3. Require the Labor Department go out of their way to do outreach to inform all businesses of the state law.

Wine Institute’s counsel attorney Wendell Lee advises wineries to consult their labor attorneys and to pursue becoming compliant with the law. He admits that many wineries operate in an independent fashion: it’s the nature of the business, he says. He cautions against the urge to re-characterize employees as something other than “volunteers,” warning them not to simply use the term “interns,” which has another set of regulations attached.

The best thing to do: put all volunteers on the payroll—1099’s for everyone — and obtain employment/worker’s compensation insurance.

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