Unpaid but Not Unprotected: A New Framework for Nonprofit Volunteers
On January 6, 2026, the California Court of Appeal for the First Appellate District issued a published decision in Spilman v. Salvation Army (A169279) that helps clarify how California wage-and-hour law treats unpaid volunteers working for nonprofit organizations. In doing so, the court articulated a new, structured two-part test for determining when an individual who performs work for a nonprofit may lawfully be classified as a volunteer rather than an employee entitled to minimum wage, overtime, and other worker protections. The case sits at the intersection of volunteerism, rehabilitation programs, and wage and hour protections, and reshapes how nonprofit employers should evaluate volunteer programs.
Overview of the Decision and the New Two-Part Test
This article explains the facts of the case, how it reached the California Court of Appeal, what the court actually decided in summary, and what employers and employees should take away from the decision. At a high level, the court’s new test asks whether an individual truly agreed to work for a nonprofit to obtain a personal or charitable benefit, and whether the nonprofit’s use of unpaid labor is genuine rather than a way to sidestep California’s wage laws.
Factual Background: The Salvation Army Rehabilitation Program
The Salvation Army operates nonprofit adult rehabilitation centers in several California cities. These programs are six-month, residential programs for individuals seeking treatment for drug and alcohol addiction. Participants live on site and receive housing, meals, clothing, counseling, religious services, and small cash or canteen stipends. Some participants, including two of the plaintiffs, entered the program as part of criminal probation, choosing rehabilitation instead of incarceration.
As part of the program, participants were required to perform what the Salvation Army called “work therapy.” This work supported the organization’s thrift store operations and included tasks such as sorting donations, unloading trucks, stocking shelves, assisting customers, cleaning facilities, and similar retail or warehouse work. Participants generally worked full time (though the exact number of work hours remains disputed), could not obtain outside employment, and were subject to schedules, supervision, and discipline. They were paid no wages.
The plaintiffs later sued, seeking to certify the case as a class action, alleging that despite the “volunteer” label, they were actually employees under California law and were therefore entitled to minimum wages and overtime. The Salvation Army responded that the plaintiffs were volunteers participating in a rehabilitation program, not employees.
Procedural History: From Summary Judgment to Reversal and Remand
Procedurally, the case turned on a narrow legal question at the trial court level. The parties agreed to ask the trial court to decide, through summary adjudication, whether the plaintiffs were employees as a matter of law. The trial court ruled in favor of the Salvation Army, holding that an employment relationship under California wage law requires an express or implied agreement for compensation. Because the plaintiffs entered the program knowing they would not be paid wages, the court concluded they could not be employees.
The plaintiffs appealed, arguing that the trial court applied the wrong legal standard. The Court of Appeal agreed with them, reversed the judgment, and sent the case back to the trial court for further proceedings.
Legal Framework: What It Means to Be “Employed” Under California Law
The appellate court’s legal analysis begins with a reminder that California wage laws are intentionally broad and protective, even moreso than federal wage-and-hour protections, and this breadth comes in part from how California defines the concept of being “employed.” Under the Industrial Welfare Commission wage orders, a person is “employed” if the employer “engages” them or “suffers or permits” them to work. That second phrase is critical. It is broader than traditional contract-based employment and was designed to prevent businesses from evading wage laws through labels or technicalities.
To understand the court’s analysis, it helps to explain three key terms that appear throughout California wage-and-hour law: “engage,” “suffer,” and “permit.” Under the wage orders, a person is employed if an employer “engages” them or “suffers or permits” them to work. To “engage” someone means to create a traditional common-law employment relationship, based on mutual agreement and control. The phrase “suffer or permit to work” is intentionally broader. It reaches situations where a business allows work to occur, benefits from it, or fails to prevent it, even if there is no formal employment agreement. (Incidentally, this expansive language is why California wage law often triggers off-the-clock work claims.)
At the same time, the court acknowledged that not everyone who performs work is an employee. Just as California law recognizes that genuine independent contractors are not employees, it also recognizes that genuine volunteers for nonprofit organizations are a longstanding and legitimate category. If the law treated every nonprofit volunteer as an employee, many charitable, religious, and humanitarian organizations would be unable to function.
The Court’s Holding: Rejecting a Single-Factor Test and Adopting a New Framework
The key contribution of this decision is that it rejects the trial court’s solitary focus on whether there was an agreement to pay wages. The trial court relied heavily on Labor Code section 2775 and treated the absence of an agreement for remuneration as dispositive. The Court of Appeal disagreed, explaining that while compensation is relevant, it cannot be the sole or threshold test for employee status under California wage law.
The court held that the absence of an agreement for compensation is relevant, but it is not dispositive. Instead, the court adopted a structured, two-part test for determining whether a nonprofit worker is a volunteer or an employee under California wage law. The court was motivated to do so because federal courts applying the similar “suffer or permit” standard under the Fair Labor Standards Act (FLSA) have used inconsistent and ill-defined tests when analyzing volunteer status. At the same time, the California Supreme Court has repeatedly found federal cases persuasive when interpreting aspects of the “suffer or permit” standard. Drawing inspiration from the California Supreme Court’s decision in Dynamex, which replaced a vague multifactor test with a clearer framework for independent contractors (i.e., the “ABC Test“), the Court of Appeal similarly sought a simpler, more predictable test that would aid compliance while preventing evasion of the wage laws.
Here are the two factors announced in Spilman:
First, the nonprofit must show that the individual freely agreed to work for a personal, charitable, or rehabilitative benefit rather than for compensation. In other words, the person must be working primarily to obtain something other than wages, such as supporting a charitable mission or receiving treatment or training.
In evaluating this factor, courts may look beyond labels and paperwork. They may consider whether there was an express or implied promise of compensation, including non-cash compensation such as food, lodging, or stipends, and whether those benefits functioned as wages in another form. Benefits that are contingent on work performance or withheld as discipline may look more like compensation than true program support.
Second, even if the individual agreed to work for a personal or charitable benefit, the nonprofit must also show that its use of unpaid labor is not a subterfuge to evade the wage laws. This prong focuses on preventing exploitation and unfair competition. Courts may examine whether the work actually serves a legitimate rehabilitative or charitable purpose, whether unpaid workers are replacing paid employees, whether unpaid and paid workers perform the same tasks side by side, and whether the arrangement places downward pressure on wages.
One consideration the court identified in this analysis is the duration of the program. The court contrasted situations in which individuals remain dependent on an organization for years, which may suggest disguised employment, with more limited program durations. In the rehabilitation context, the court (citing to another case on this subject) seemed to indicate a six-month residential program would be a facially reasonable duration, so long as participants have meaningful time and opportunity to engage in rehabilitative services and are not consumed primarily by work obligations. In short, the longer a program relies on unpaid labor, and the more work crowds out rehabilitative services, the greater the risk that volunteer status will not hold. This prong focuses on preventing exploitation and unfair competition.
The inquiry is not focused on whether the nonprofit benefits at all, because every volunteer arrangement benefits the organization to some degree, but whether the overall structure looks like an effort to obtain substandard labor that the wage laws are meant to prevent.
Applying these principles, the Court of Appeal did not decide whether the Salvation Army ultimately wins or loses. Instead, it held that the trial court applied too narrow a legal test and would have to consider disputed evidence, and take further evidence, that matters under the correct analysis. The case was sent back so the trial court can evaluate the evidence under the new two-part framework.
Practical Takeaways for Nonprofit Employers
For employers, particularly nonprofit organizations, the practical takeaway is that labels and written acknowledgments are not enough. This decision is focused on nonprofit employers and their use of unpaid volunteers, not for-profit businesses. Calling someone a volunteer, even with signed paperwork, does not automatically remove wage-and-hour obligations. Organizations must be prepared to show both that individuals truly agreed to work for non-wage benefits and that the structure of the program is not being used to sidestep minimum wage and overtime requirements. This is especially important where unpaid workers perform work similar to paid employees or support revenue-generating operations.
What the Decision Means for Workers
For employees and workers, the decision reinforces that wage protections generally cannot be waived simply by agreement. Even if a worker initially volunteers in writing to perform unpaid work, California law may still treat them as an employee if the reality of the relationship shows compensation in another form or exploitation inconsistent with the protective purposes of state wage laws.
Finally, for rehabilitation programs and other mission-driven nonprofits, the decision offers both reassurance and caution. California law continues to recognize the legitimacy of volunteerism and rehabilitative work programs. At the same time, courts will look closely at how these programs operate in practice, not just how they are described on paper.
Another important clarification from the decision is that the Court of Appeal expressly disagreed with a long-standing Division of Labor Standards Enforcement opinion suggesting that volunteers who work in a nonprofit’s “commercial enterprise” are categorically employees. The court rejected this blanket rule, instead holding volunteers may still qualify as true volunteers even when they perform work that supports revenue-generating activities, such as thrift stores or fundraising operations, so long as the two-part volunteer test is satisfied.
Conclusion: Substance Over Form in California Wage Law
The ultimate lesson of Spilman v. Salvation Army is that in California, wage-and-hour analysis is driven by substance over form. Employers should review volunteer and program structures carefully, and workers should understand that their rights depend on what actually happens on the ground, not just on what the paperwork says.
Although the two-part test announced in Spilman applies specifically to nonprofit employers classifying workers as unpaid volunteers, the decision reinforces broader themes that extend beyond the nonprofit context. In particular, the court’s rejection of a threshold “agreement for compensation” requirement, its insistence on real-world substance over labels, and its focus on preventing subterfuge and evasion under the “suffer or permit to work” standard have crossover relevance to volunteer, trainee, intern, and off-the-clock analyses involving for-profit employers. In that sense, Spilman is not only a nonprofit volunteer case, but also a reminder that California wage law turns on how work actually functions in practice, not merely how it is described on paper.