Justin Spilman and two other plaintiffs participated in the Salvation Army’s six-month residential drug and alcohol rehabilitation program, which operates in facilities that include living quarters, warehouses, and retail thrift stores. Participants voluntarily entered the program, some in lieu of incarceration, and received housing, meals, clothing, limited gratuities, and rehabilitation services such as counseling, group meetings, and religious programming. As a required component of the program, participants performed full-time “work therapy” in Salvation Army warehouses and thrift stores, completing tasks such as sorting and processing donations, unloading trucks, stocking shelves, assisting customers, and operating equipment. The Salvation Army controlled participants’ work schedules, assignments, and conditions, prohibited them from obtaining outside employment, and required make-up work if shifts were missed.
After leaving the program, Spilman and the other plaintiffs filed a class and representative action alleging that they were misclassified as volunteers and should have been treated as employees under California law. They claimed the work they performed was indistinguishable from that of paid employees, that the Salvation Army used unpaid program participants to operate its commercial thrift store business, and that the room, board, and gratuities functioned as compensation tied to work performance. The Salvation Army denied these allegations, emphasizing that participants signed acknowledgments stating they were not employees, that the work therapy was designed to support rehabilitation and personal growth, and that any benefits provided were intended to meet participants’ basic needs during recovery rather than to compensate them for labor.
The trial court granted summary adjudication for the Salvation Army, concluding that the plaintiffs were volunteers rather than employees. The trial court reasoned that an express or implied agreement for compensation was a threshold requirement for employee status under California wage law, and that because the plaintiffs voluntarily participated in the rehabilitation program without an expectation of wages, they were not employees. Based on that conclusion, the trial court declined to resolve many factual disputes about the nature of the work, the degree of control exercised by the Salvation Army, or whether the unpaid labor displaced paid employees.
The California Court of Appeal reversed and remanded. While agreeing that genuine nonprofit volunteers may fall outside California’s wage laws, the Court of Appeal held that the trial court applied an overly narrow legal test. The appellate court explained that California wage orders define “employ” broadly to include work an entity “suffers or permits,” and that wage protections may apply even in the absence of a traditional contractual employment relationship. Relying on California Supreme Court precedent and federal cases involving rehabilitation and nonprofit programs, the Court emphasized that the purpose of the wage laws is to prevent exploitation and circumvention, particularly where unpaid labor could place downward pressure on wages or replace paid workers.
To clarify the analysis, the Court adopted a two-part framework for determining whether a nonprofit has properly classified a worker as a volunteer. Under this approach, the nonprofit must show that the individual freely agreed to perform the work primarily for a personal or charitable benefit rather than compensation, and that the overall use of unpaid labor is not a subterfuge to evade wage-and-hour laws. Relevant factors include whether in-kind benefits function as wages, whether benefits are contingent on work performance, the duration and intensity of the work, whether participants perform the same tasks as paid employees, and whether the work primarily advances rehabilitation goals or instead serves the nonprofit’s commercial operations.
Because the trial court treated the absence of an agreement for compensation as dispositive and did not evaluate these broader considerations, the Court of Appeal vacated the judgment and remanded the case for further proceedings. On remand, the trial court must apply the correct legal standard and determine whether disputed facts preclude summary judgment.
Spilman v. Salvation Army, No. A169279 (Cal. Ct. App. Jan. 6, 2026).
Note: This decision provides important guidance for nonprofits, including independent schools, that rely on volunteers or program participants who perform work connected to the organization’s operations. Courts will look beyond labels and written acknowledgments to examine the reality of the working relationship, including whether unpaid labor displaces paid positions or functions as compensation in another form.