California Court Clarifies Standard for Determining Whether an Individual is a Volunteer or Employee When Performing Services on Behalf of a Nonprofit Organization
In Spilman v. The Salvation Army, 117 Cal.App.5th 913 (Jan. 6, 2026), the California Court of Appeal for the First Appellate District clarified the standard for determining whether an individual performing services for a nonprofit organization is doing so as a volunteer or as an employee.
The Salvation Army is a religious nonprofit organization. In addition to other functions, it operates residential drug and alcohol rehabilitation programs. The plaintiffs in Spilman attended those programs, where they received benefits including dormitory housing, three meals per day, clothing, gratuities (canteen cards redeemable at rehabilitation centers and small quantities of cash), and rehabilitation services (classes, church services, Bible study, Alcoholics Anonymous 12-step program meetings, and biweekly one-on-one counseling sessions).
As part of the programs, the plaintiffs were required to engage in “work therapy,” which was designed to teach life skills, discipline, work ethics, and good habits; to assist participants in reentering the workforce; to reduce idle time during recovery; and to simulate real-work interactions to practice skills and develop coping mechanisms. Work therapy involved working full-time, without wages, in various functions that support the organization’s warehouse and thrift store. This included, among other things, loading and unloading trucks, accepting/sorting/cleaning donations and supplies, inventorying items for sale, assisting customers, operating machinery, and working the front desk. Plaintiffs were prohibited from obtaining outside employment while enrolled in the program.
They alleged that they performed the same tasks performed by Salvation Army employees and argued that they (and other similarly-situated individuals) should have been paid minimum wages and overtime as employees. The trial court disagreed and concluded that California’s wage and hour laws did not apply because the plaintiffs were volunteers rather than employees. The appellate court agreed that volunteers for nonprofit organizations can fall outside California’s wage and hour laws but held that the trial court applied the wrong standard to distinguish a volunteer from an employee and therefore reversed and remanded the trial court’s ruling for further proceedings.
The appellate court first explained that California’s wage and hour laws are intended to “ensure that vulnerable workers are afforded wages and working conditions sufficient to support their subsistence and safeguard their health and welfare.” It noted that there are two alternative standards to determine whether someone is an employee. The first asks whether the organization engaged the individual to work and the second asks whether the organization suffered or permitted the individual to work. The court focused its analysis on the second standard, noting that suffering or permitting one to work “sweeps more broadly” than engaging one to work and is triggered when an employer merely permits labor by acquiescence or suffers labor by failing to hinder it. This standard, the court explained, is intended to address irregular working relationships that might otherwise circumvent labor laws.
The court then asked whether volunteers for nonprofit organizations, as a general category, are outside the scope of California employment laws. Referencing case law addressing independent contractors, the court concluded that, if this were “applied literally, the suffer or permit to work standard would make all nonprofit volunteers employees. Like independent contractors, however, volunteers for nonprofit organizations comprise a traditional category of worker that cannot reasonably be viewed as employees.”
The court then went on to ask “the more complicated question” of how to categorize volunteers in particular cases, i.e., what standard to use to determine whether someone is a volunteer or employee when performing services on behalf of a nonprofit organization. To answer this question, the court adopted a two-part test for distinguishing between employees and volunteers of nonprofit organizations. According to the court:
When the question is whether a nonprofit organization has properly classified a worker as an unpaid volunteer rather than an employee, the nonprofit must establish that (1) the worker freely agreed to work for the nonprofit to obtain a personal or charitable benefit, rather than for compensation, and (2) overall, the nonprofit organization’s use of the volunteer labor is not a subterfuge to evade the wage laws.
The first part of the test asks whether there was an express or implied promise of compensation, whether in-kind benefits are compensation provided in exchange for labor (e.g., whether the organization makes the benefits contingent on the worker’s labor and satisfactory performance, which would tend to indicate the benefits are compensation and thus weigh in favor of finding an employment relationship), whether the individual chose to volunteer their services freely without coercion by the organization, and the duration of a volunteer relationship.
The second part of the test focuses on the organization’s motive and whether it intended to evade wage and hour laws. For instance, in the context of rehabilitation programs, the organization must show that the “work therapy” and related aspects of the programs are “reasonably calculated to serve a rehabilitative purpose, rather than being a ploy for sidestepping wage protections at the expense of workers and competing businesses.” Courts can also consider whether the organization is using volunteers to replace employees with individuals identified as volunteers, which may be “particularly relevant when volunteers work in commercial ventures” within the organization. Courts can “consider any other evidence as to whether the nature of the working relationship is exploitative, indicating an evasion of the wage laws.”
This decision is a good reminder for nonprofit organizations to review their existing policies and agreements and ensure any individuals classified as volunteers, rather than employees, are correctly classified as such in order to mitigate the risk of liability under California’s wage and hour laws.
This legal update and any use of its information does not create an attorney-client relationship. Nothing contained on this website should be considered legal advice for any specific employer or employment situation. Consult legal counsel before taking any action as a result of information contained herein.
