The volunteers, some of them learning to make wine while helping out, were illegally unpaid laborers, and Westover Winery should have been paying them and paying worker taxes, the state Department of Industrial Relations said.
"I didn't know it was illegal to use volunteers at a winery; it's a common practice," said winery owner Bill Smyth.
State law prohibits for-profit businesses from using volunteers.
Before the fine, volunteer labor was common at wineries in the nearby Livermore Valley, said Fenestra Winery owner Lanny Replogle.
Jill Smyth applies labels to bottles of port wine while winery workers Dan Hoover, left, and Ken Tatum take a break from filling orders at the
Jill Smyth applies labels to bottles of port wine while winery workers Dan Hoover, left, and Ken Tatum take a break from filling orders at the going-out-of-business sale at Westover Winery in Castro Valley, Calif., on Sunday, Sept. 7, 2014. After being fined $130,000 for using volunteer workers, owner Jim Smyth is closing up shop by Dec. 24. (Jim Stevens/Bay Area News Group) ( JIM STEVENS )
"But not anymore," he said Monday. When word got around, several wineries sent their volunteers home.
Westover was cited in July for not paying minimum wage, not providing wage statements and not paying workers' compensation insurance, said Peter Melton, a spokesman for the state.
"These are not idle things. People should be paid for their labor. The workers' compensation violations are very serious. What happens if someone has a catastrophic injury at the winery?" he asked. And, he added, "It isn't fair to wineries that are paying their employees to have to compete against for-profit wineries that do not."  
Some in the industry were already aware of the risk. After learning in early 2013 that two member wineries were using volunteers, the Livermore Valley Winegrowers Association told its members that for-profit businesses can't do that, said Chris Chandler, the association's executive director.

The Wine Institute, which represents more than 1,000 California wineries, gives the same advice. "If our member wineries are using volunteers, they might want to reconsider," said Wendell Lee, its attorney and vice president.
While he was not familiar with all the facts in the Westover case, Lee said the size of the fine surprised him.
"It seems to be a case of a small-business owner who inadvertently thought it was OK" to use volunteers, he said. "It just seems the penalties shouldn't be so punitive as to put someone out of business."
Smyth has paid some of the fines and is appealing the rest.
Meanwhile, he and his wife, Jill, are holding a going-out-of-business sale and plan to shut down before the end of the year. The fines represent more than a decade's worth of profits for the winery, which nets about $11,000 a year, Smyth said.
"There's just no money left; they've taken everything," he said.
"We're a small winery, open only 10 hours a week. We didn't really need any helpers; we were just educating people about wine," he said.
About half the people the state considered Westover employees were taking a free class at the Palomares Canyon Road winery. Students learned about growing vines, harvesting and blending grapes and marketing the finished product.
"This was an incredible opportunity for me," said Peter Goodwin, a home winemaker from Walnut Creek who said he dreams of opening a winery with some friends. "I got to learn from someone who knows the business."
The winery sometimes asked Goodwin if he wanted to assist in different tasks.
"That's what I wanted, to be as involved as much as possible -- it was all about learning," he said. "I don't understand the state's action. It was my time, and I volunteered."
Ken Tatum took the classes because he thought it would be fun to learn more about making wine and running a winery. The state fines were ridiculous and unfair, he said.
"I should be able to volunteer my time," said the retired Castro Valley resident.
Why, Tatum asked, didn't the state first warn Smyth that using volunteers was not OK?
The law does not allow for warnings, Melton said. If Department of Industrial Relations representatives see violations, he said, they are required to issue citations.
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