Two-Part Test Controls if Nonprofit ‘Volunteer’ Is Due Wages

Thursday, January 8, 2026

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Court of Appeal:

Two-Part Test Controls if Nonprofit ‘Volunteer’ Is Due Wages

Opinion Says Judge Erred in Ruling for Salvation Army Based Solely on Lack of Compensation Agreement, Announces That Entity Must Show That Worker Sought Personal Benefit, No Intent to Evade Wage Laws

By Kimber Cooley, associate editor

Div. Five of the First District Court of Appeal has held that a trial judge erred in ordering judgment to be entered in favor of The Salvation Army in a putative wage class action based on a determination that participants in the group’s rehabilitation program, who were required to perform “work therapy” relating to the entity’s collection and sale of donated goods, were exempt volunteers solely because there was no compensation agreement between the parties.

Announcing a two-part test to govern the analysis of whether “volunteers” are actually employees subject to California’s labor provisions, the court declared that a nonprofit organization defending against wage claims bears the burden of establishing that the participant freely agreed to work for the organization to obtain a personal or charitable benefit and that the group’s use of the unpaid labor is not a “subterfuge” to avoid governing wage laws.

Justice Gordon B. Burns authored Tuesday’s opinion, declaring that “California case law on this question is limited” but citing the 2018 state Supreme Court decision in Dynamex Operations West Inc. v. Superior Court—which ruled that the designation of a worker as an “independent contractor” will be upheld only if the entity meets its burden as to a three-part inquiry into the nature of the relationship and the work—as providing a helpful framework.

Burns wrote:

“Guided by Dynamex, we take a similar approach….[T]he existing (mostly federal) cases use inconsistent standards, which makes compliance unpredictable and may encourage evasion. A simpler test would focus on the differences between volunteers and employees, as well as the goal of preventing evasion of the wage orders. Accordingly, we adopt a two-part test for distinguishing between employees and volunteers of nonprofit organizations.”

Acting Presiding Justice Mark B. Simons and Justice Danny Y. Chou joined in the opinion.

False Classification

The question arose after Justin Spilman, Teresa Chase, and Jacob Tyler filed a putative class action complaint against The Salvation Army in May 2021, alleging that the California-based Christian charitable organization falsely classifies enrollees in their drug and alcohol rehabilitation programs as “volunteers” even though they are required to perform forty hours per week of “work therapy” for the group’s revenue-generating thrift-store operations.

In the operative complaint, they sought damages for unpaid wages and penalties, among other relief, and asserted:

“Notwithstanding the substantial benefits the Salvation Army derives from the labor of the individuals who have come to its programs…, the Salvation Army has maintained an across-the-board policy of failing to treat its participants as employees….And as a result of its unlawful policy, participants do not receive California minimum wage for their labor. Rather, the Salvation Army pays them a ‘gratuity’—which is often only redeemable at the Salvation Army canteen and may be as little as a few dollars a week….In so doing, the Salvation Army violates a host of California’s labor protections for workers.”

According to The Salvation Army, the so-called “work therapy”—which includes tasks such as unloading, cleaning, and sorting donations—is designed to help those in recovery develop job skills and productive work habits.

After the parties stipulated that the trial court should resolve cross-motions for summary adjudication on the question of whether the plaintiffs were Salvation Army employees under California law, San Francisco Superior Court Judge Ethan P. Schulman sided with the nonprofit organization in September 2023, saying that because the plaintiffs “voluntarily participated…without…any reasonable expectation of receiving compensation” they are “not employees.”

Concluding that the issue was dispositive, he directed the court to enter judgment in favor of the defendant.

Labor Code Provision

Burns noted that the plaintiffs asserted claims under Labor Code §1194, which provides:

“Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.”

Governing wage orders define an “employee” as one whom an employer has “engaged” or “suffer[s] or permit[s] to work.” Saying that “[w]e are primarily concerned with the second standard,” the jurist explained that the definition “sweeps more broadly” and “is triggered when an employer” acquiesces to the labor scheme by failing to interrupt it.

He acknowledged that “[s]ome federal courts have decided cases involving Salvation Army rehabilitation programs” but commented that “they…have applied different tests with arguably contradictory results.” In California, courts have observed that treating all volunteers as employees would devastate religious and other charitable organizations.

Saying that the high court in Dynamex noted that the existing cases addressing independent contractors have also applied a variety of multifactor tests, he remarked that “[t]he court rejected this vague…approach because it is too unpredictable for workers and businesses” and opted for a “simpler, more structured test” in which an employer must demonstrate the presence of three conditions.

Opting to follow suit, Burns declared:

“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.”

Essential Distinction

Fleshing out the standard, he remarked:

“The essential distinction between a volunteer and an employee, for our purposes, is that a volunteer agrees to work for a personal or charitable reason…rather than to earn money….In the classic case, a person is motivated to perform uncompensated work by a desire to advance a cause championed by the nonprofit. In other instances,…the person works to obtain a benefit, like drug rehabilitation. Spilman and Chase had the added incentive of participating in the rehabilitation program in lieu of imprisonment.”

The justice continued:

“In assessing whether in-kind benefits are compensation provided in exchange for labor, the court should consider whether the nonprofit 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….On the other hand, in the case of a rehabilitation program, for example, evidence that the worker’s room and board, small gratuities, or similar benefits are typical of, or required for, rehabilitation and treatment programs may weigh against deeming them compensation.”

Addressing the second factor, he explained that the “goal is to enforce the policies underlying the wage laws, not to regulate the effectiveness of…promised benefits” and said:

“In most cases, it should suffice for the nonprofit to show that it has an actual and reasonable belief that the work therapy, along with other elements of the program, contributes to rehabilitation.”

However, he pointed out that “the court may consider whether the organization is using volunteers to replace…preexisting paid employees” as using unpaid workers to perform identical work as those receiving compensation may “suggest [that] the nonprofit is attempting to gain a competitive advantage.”

The matter was remanded to allow the trial court to apply the two-part test.

The case is Spilman v. The Salvation Army, 2025 S.O.S. 67.