California Appellate Ruling Discusses Proper Classification of Volunteers at Charitable Organizations

A new California Court of Appeal decision raises questions about whether volunteers at charities may be legally reclassified as employees. This reclassification could result in greater responsibilities and liabilities for charities, including wage-and-hour laws, class actions, and Private Attorneys General Act (PAGA) claims. Fortunately, you don’t have to navigate these changes in the law on your own. Our charitable organization lawyers at the California Center for Nonprofit Law are here to help.

In Spilman v. The Salvation Army, three individuals participated in the Salvation Army’s six-month residential substance abuse rehabilitation program. They worked full-time at the Salvation Army’s retail thrift store but received no wages. The individuals later claimed that California law required the Salvation Army to pay them minimum wage and overtime pay for their work, despite the rehabilitation context. The trial court granted summary judgment in favor of the Salvation Army, including that the rehabilitation program participants were volunteers exempt from state wage laws.

On appeal, the Court of Appeal acknowledged that volunteers at charitable organizations may fall outside the scope of wage and hour laws in some cases. However, the appellate court found that the trial court applied an overly narrow legal standard in relying primarily on the absence of a compensation agreement between the individuals and the rehabilitation program. As a result, the appellate court reversed the trial court’s ruling and remanded the case for further proceedings consistent with its opinion.

As part of its decision, the appellate court outlined a new two-part test designed to determine whether an individual is a volunteer or an employee of a charitable organization. The court noted that no state policy or statute creates a blanket exception to wage-and-hour laws for volunteers. Although volunteer status is an implied exception to wage and hour laws, it is not an automatic exception, especially when a charitable organization engages in commercial operations or the volunteer work duties closely mirror traditional employment tasks.

Therefore, the Court held that to determine whether an individual is a volunteer and thus exempt from payment of wages, the organization must satisfy the following two-pronged test:

• Whether the individual voluntarily agreed to work for personal or charitable purposes, rather than for compensation; or
• Whether the charitable organization is using volunteer labor to avoid wage-and-hour laws.

The first prong of the test focuses on the worker’s expectations and the benefits they receive for their work. For instance, a court might consider whether the organization made any express or implied promise of compensation to the volunteer or offered any in-kind benefits instead of wages (especially if based on work performance). Other factors for consideration include whether the individual’s participation was completely voluntary or the result of coercion, pressure, or lack of meaningful choice. Finally, the court pointed out that, in the context of long-term residential programs, in-kind benefits over time might result in a more traditional employment relationship, depending on the duration and extent of the individual’s dependence on the organization for support.

If analysis of the first prong does not establish the individual as an employee rather than a volunteer, the inquiry moves to the second prong of the test. A court must examine how an organization uses unpaid labor and whether that use is legitimate volunteerism. Relevant factors for consideration may include:

• Whether the work component of a program has a valid rehabilitative purpose;
• Whether unpaid labor displaces employees;
• Whether the organization has an unfair competitive advantage in commercial operations; and
• Whether the overall program structure is exploitative or otherwise inconsistent with volunteer service.

The appellate court pointed out that the absence of a compensation agreement, as the trial court focused on, does not necessarily mean that an individual is a volunteer. Instead, the proper approach is to examine both the voluntariness of the individual’s participation in the work and whether the organization is avoiding the requirements of wage and hour laws.

The import of this decision is that charitable organizations should immediately evaluate their volunteer programs to determine compliance with the appellate court’s two-part analysis. Organizations should assess factors such as the nature of volunteer duties, any expectations and benefits communicated to participants, the use of unpaid labor in commercial operations, and the displacement of paid staff by volunteers.

Frequently Asked Questions (FAQ)

How does the Spilman decision change the way charities should evaluate volunteer roles?

The Spilman ruling holds that courts should take a more nuanced approach to whether a volunteer relationship is truly voluntary or functions like traditional employment. Instead of relying on the absence of a wage agreement, courts must examine the individual’s expectations, the benefits they receive, the nature of the work performed, and the organization’s operational structure. As a result, charities must be prepared to show that volunteer roles are genuinely charitable in purpose and not substitutes for paid labor, especially when the organization operates commercial enterprises such as retail stores or fee‑based programs.

What types of volunteer arrangements may create a higher risk of being treated as employment?

Risk increases when volunteer duties closely resemble the tasks performed by paid staff, when volunteers work full‑time schedules, or when the organization provides in‑kind benefits tied to work performance or long‑term participation. Residential programs, workforce‑development initiatives, and volunteer roles embedded in revenue‑generating operations may receive heightened scrutiny. Courts may also question arrangements where individuals have limited freedom to decline work, feel pressured to participate, or rely heavily on the organization for housing, food, or other necessities.

What steps should charitable organizations take now to reduce misclassification exposure?

Organizations should review their volunteer programs to ensure that roles are structured around genuine service, education, or rehabilitative goals—not labor that replaces employees or supports commercial operations without compensation. Charities should also assess whether their operational model relies on unpaid labor in ways that could be interpreted as a means of avoiding wage-and-hour obligations.

Strengthen Your Compliance Strategy Today

Protecting your organization’s long‑term stability requires more than meeting minimum legal standards—it demands a proactive, well‑informed approach to compliance. California’s nonprofit laws evolve quickly, and staying ahead of those changes is essential to preserving your mission, your credibility, and the trust of your community. You don’t have to navigate these complexities alone. The California Center for Nonprofit Law provides clear, practical guidance to help you interpret new requirements, update your policies, and maintain the strong governance your organization depends on.

For personalized support, call (949) 892‑1221, email info@NPOlawyers.com, or reach out online to ensure your charity remains resilient, compliant, and mission‑focused.