Spilman v. The Salvation Army (Jan. 6, 2026, A169279) __ Cal.App.5th __ (2026 WL 35953).
The California Court of Appeal (First Appellate District) recently issued an important wage-and-hour decision clarifying when individuals classified as “volunteers” for nonprofit organizations may nevertheless qualify as employees entitled to minimum wage and overtime protections. In Spilman, the court reversed summary judgment for the nonprofit and announced a new two-part test for evaluating volunteer status under California law.
The decision has immediate implications for nonprofit and nonprofit-adjacent employers that rely on unpaid labor, particularly in rehabilitation programs and revenue-generating operations.
Key Takeaways from Spilman
Lack of pay is not dispositive. The absence of an express or implied agreement for compensation does not automatically defeat employee status.
A new two-part test governs. Nonprofits (and employers utilizing unpaid labor) must show both:
- voluntary consent for non-compensatory reasons; and
- that the arrangement is not a subterfuge to evade wage laws.
The test involves a fact-intensive inquiry. When the day-to-day realities look more like employment, volunteer status will be determined by the specific circumstances and may not lend itself to summary judgment.
Factual Background of the Case
The plaintiffs participated in the Salvation Army’s residential substance-abuse rehabilitation programs, which provided room and board, meals, clothing, and limited stipends or gratuities. As part of the program, participants were required to perform full-time “work therapy,” including labor at warehouses and thrift stores supporting the organization’s operations.
Plaintiffs brought claims under California’s wage-and-hour laws, including Labor Code section 1194 (recovery of unpaid minimum wages and overtime). The trial court granted summary judgment for the Salvation Army, reasoning that an agreement for compensation is a threshold requirement for employee status and that plaintiffs lacked any reasonable expectation of wages.
Court of Appeal Rejects a Compensation-Only Test
The Court of Appeal disagreed with the trial court’s ruling. While recognizing that bona fide volunteers for nonprofits may fall outside California’s wage laws, the Court of Appeal held that a lack of a compensation agreement is not dispositive of employee status.
California wage protections are interpreted broadly, and exemptions are narrowly construed. Once a worker makes a prima facie showing of an employment relationship, the burden shifts to the defendant to establish that the worker is not an “employee” within the meaning of the Labor Code and applicable wage orders. (Spilman, supra, _ Cal.App.5th 2026 WL 35953); see also Dynamex Operations W., Inc. v. Superior Court (2018) 4 Cal.5th 903; Linton v. DeSoto Cab Co., Inc. (2017) 15 Cal. App.5th 1208.)
The New Two-Part Test for Volunteer Status
The court adopted a two-part framework for determining whether unpaid workers at a nonprofit are volunteers rather than employees.
1. Free Agreement to Work for a Non-Compensatory Benefit
Courts must assess whether the individual freely agreed to perform services primarily for a charitable, rehabilitative, or personal benefit rather than compensation. The inquiry is not limited to cash payments. The court cautioned that non-monetary benefits—such as meals, housing, or stipends—may, in context, function as “wages in another form.”
Written acknowledgments disclaiming employment status may be relevant but are not controlling if the relationship otherwise resembles employment.
2. No Subterfuge to Evade Wage Laws
Even if an individual is willing to volunteer, the nonprofit must also show that its use of unpaid labor is not a subterfuge to evade wage-and-hour protections. Relevant considerations include whether unpaid workers perform tasks integral to revenue-generating operations, displace paid employees, or are subject to employee-like scheduling, supervision, or productivity requirements.
The court emphasized that California minimum wage and overtime laws cannot be avoided through labels or program structure.
Implications for Unpaid Intern Programs
Although Spilman addressed nonprofit volunteers, its reasoning is likely to inform how courts evaluate unpaid intern programs under California law. California already applies a demanding, fact-intensive analysis to unpaid interns under the IWC Wage Orders and DLSE guidance, focusing on whether the intern—not the employer—is the primary beneficiary of the relationship. (Benjamin v. B & H Educ., Inc. (9th Cir. 2017) 877 F.3d 1139; Dept. of Industrial Relations, DLSE Opinion Letter No. 2010.04.07, Educational Internship Program (Apr. 7, 2010).) Spilman reinforces that courts will look beyond labels and written agreements to examine the practical realities of unpaid work arrangements, including whether non-monetary benefits such as academic credit, training, or professional exposure function in practice as substitutes for wages. The decision’s emphasis on whether unpaid labor operates as a subterfuge to evade wage-and-hour protections aligns closely with existing intern standards prohibiting displacement of paid employees and requiring that programs be structured around bona fide educational objectives. Employers should therefore expect heightened scrutiny where unpaid interns perform productive work central to business operations or adhere to employee-like schedules and performance expectations.
Practical Implications for Employers and Nonprofits
The Court of Appeal did not determine whether the plaintiffs were employees as a matter of law but remanded the case for further proceedings under the new standard. Organizations relying on unpaid labor should proactively review volunteer and intern programs for compliance risk, with particular attention to benefit structures, operations/day-to-day tasks, and the relationship between unpaid work and revenue-generating activities.
Disclaimer
This article is for general informational purposes and does not constitute legal advice. The information contained herein is not intended to create, and receipt of it does not constitute an attorney-client relationship. Because the application of employment laws is highly fact-specific, employers should consult with legal counsel regarding their particular circumstances before taking any action based on the information discussed herein.
