Private contractors that provide fire service protection beware: you may not be able to claim partial exemptions for overtime under section 7(k) of the Fair Labor Standards Act (FLSA).

In Opinion Letter FLSA2018-24, issued on November 8, 2018, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) opined that a nonprofit, private volunteer fire department that contracts with the state to provide fire protection service to the general public is not a public agency. Therefore, such a fire department is not entitled to the partial overtime exemption in section 7(k).

The latest DOL opinion letter on the 7(k) partial exemption responds to an inquiry from a private, nonprofit volunteer fire company in North Carolina. The letter determines that the private contractor fails to meet the public agency test set out in the Fifth Circuit Court of Appeals decision, Wilcox vs. Terrytown Fifth District Volunteer Fire Department, Inc., and therefore they may not rely on the section 7(k) partial exemption for calculating overtime.

29 USC Sec. 207(k) (which is better known as section 7(k)) provides a partial exemption for certain employees of “public agencies” engaged in fire protection activities. Under Wilcox, to be considered a “public agency” the key factors are: (1) whether “the entity is directly responsible to public officials or to the general public”; and (2) “whether the parties’ contracts designate them as state agencies rather than independent contractors.”

The DOL opined that the private fire department is not “directly responsible” to public officials or the general public because, among other things, it independently elects its board of directors who are not subject to state municipality or county control. It also fails the second prong of the Wilcox test as its contracts specifically identify it as “independent contractors” and not as state agencies.

Keeping the above two factors in  mind, the DOL went on to explain that to transform a fire department into a public agency under section 7(k), a state government must “functionally establish ‘internal control’ over the fire department’s operations.” This means the power to appoint or remove board members or officers or to hire or fire employees—with the most determinative factor being the ability to appoint or remove board members.