"We decided not to pursue the case from an enforcement angle due to the limited resources here at the Labor Department," said Stuart Roy, a spokesman for the government agency.
AOL has traditionally used volunteers, or "community leaders," to monitor chat rooms, solve problems and act as guides throughout the service. Volunteers are given free membership to AOL in exchange for their services and get access to many proprietary areas of the site. For this reason, volunteer accounts have been targets for hackers trying to access confidential information.
However, volunteers in the original 1999 suit alleged that AOL had violated the federal Fair Labor Standards Act, which requires companies to pay minimum wage to employees. The suit further alleged that AOL was treating volunteers like paid staff, requiring time cards, scheduled shifts, reports and minimum hours.
With the case pending in federal court in New York, AOL said that it remains confident that the court will rule in its favor and that the company will continue to "vigorously" defend itself against the allegations.
"We are satisfied by the decision," said AOL spokesman Nicholas Graham. "As we have always stated, AOL complies with applicable labor law."
News.com's Jim Hu contributed to this report.