Spilman v. The Salvation Army (Jan. 6, 2026, A169279) __ Cal.App.5th __ (2026 WL 35953).
The California Court of Appeal recently clarified when individuals classified as nonprofit volunteers may qualify as employees under California law.
In Spilman v. The Salvation Army, the First Appellate District reversed summary judgment in favor of the nonprofit. The court also adopted a new two-part test for determining whether an unpaid worker is a volunteer or an employee.
The decision may affect nonprofits and related organizations that rely on unpaid labor. It is especially relevant to rehabilitation programs, thrift stores, warehouses, and other revenue-generating operations.
Key Takeaways from Spilman
The decision provides several important lessons for organizations that use volunteers or unpaid workers.
The lack of pay is not decisive. An individual may still qualify as an employee even without an express or implied agreement for compensation.
A new two-part test applies. Organizations must establish that:
- The individual freely agreed to work for non-compensatory reasons; and
- The arrangement was not designed to avoid wage-and-hour laws.
Volunteer status depends on the facts. Courts will examine how the relationship works in practice. As a result, these cases may not be suitable for resolution at the summary judgment stage.
Factual Background
The plaintiffs participated in residential substance-abuse rehabilitation programs operated by the Salvation Army.
The programs provided participants with room and board, meals, clothing, and limited stipends or gratuities. Participants were also required to perform full-time “work therapy.”
Their duties included working in warehouses and thrift stores that supported the organization’s operations.
The plaintiffs later brought claims under California wage-and-hour laws. Their claims included demands for unpaid minimum wages and overtime under Labor Code section 1194.
The trial court granted summary judgment for the Salvation Army. It concluded that an agreement for compensation was required before the plaintiffs could qualify as employees.
The trial court also found that the plaintiffs had no reasonable expectation of receiving wages.
Court Rejects a Compensation-Only Test
The Court of Appeal disagreed with the trial court.
The court recognized that genuine nonprofit volunteers may fall outside California wage-and-hour laws. However, it held that the absence of a compensation agreement does not automatically defeat employee status.
California courts generally interpret wage protections broadly. At the same time, they construe exemptions from those protections narrowly.
Once a worker makes an initial showing of an employment relationship, the burden shifts to the organization. The organization must then establish that the worker is not an employee under the Labor Code and applicable wage orders.
See Spilman, supra, __ Cal.App.5th __, 2026 WL 35953; 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 an unpaid worker is a volunteer rather than an employee.
1. The Individual Freely Agreed to Work for a Non-Compensatory Benefit
First, courts must determine why the individual agreed to perform the work.
The individual must have freely agreed to provide services primarily for a charitable, rehabilitative, or personal benefit rather than for compensation.
However, compensation is not limited to cash payments.
Meals, housing, stipends, training, or other non-monetary benefits may function as wages, depending on the circumstances.
Written acknowledgments that disclaim employment status may also be relevant. Still, those documents are not controlling when the relationship otherwise resembles employment.
2. The Arrangement Was Not a Subterfuge to Avoid Wage Laws
Second, the organization must show that the unpaid work arrangement was not designed to avoid wage-and-hour requirements.
Courts may consider whether unpaid workers:
- Perform tasks central to revenue-generating operations;
- Replace or displace paid employees;
- Work under fixed schedules;
- Receive employee-like supervision; or
- Face productivity or performance requirements.
The court emphasized that organizations cannot avoid minimum wage and overtime laws by simply labeling workers as volunteers.
Courts will instead examine the practical realities of the relationship.
Implications for Unpaid Internship Programs
Although Spilman involved nonprofit volunteers, its reasoning may also influence how courts evaluate unpaid internship programs.
California already applies a fact-specific analysis to unpaid internships. That analysis generally focuses on whether the intern, rather than the employer, is the primary beneficiary of the relationship.
See Benjamin v. B & H Education, Inc. (9th Cir. 2017) 877 F.3d 1139; Department of Industrial Relations, DLSE Opinion Letter No. 2010.04.07, Educational Internship Program (Apr. 7, 2010).
Like existing internship standards, Spilman directs courts to look beyond labels and written agreements.
For example, courts may examine whether academic credit, training, professional exposure, or other benefits operate as substitutes for wages.
They may also consider whether unpaid interns perform productive work that is central to the organization’s business.
Programs may face greater scrutiny when interns follow employee-like schedules, meet performance expectations, or perform work that paid employees would otherwise handle.
Practical Implications for Employers and Nonprofits
The Court of Appeal did not decide that the plaintiffs were employees as a matter of law.
Instead, it returned the case to the trial court for further proceedings under the new standard.
Organizations that rely on volunteers, interns, or other unpaid workers should review those programs carefully.
In particular, they should evaluate:
- Why individuals participate in the program;
- What benefits participants receive;
- What duties they perform;
- How closely they are supervised;
- Whether they replace paid workers; and
- Whether their work supports revenue-generating activities.
The more an unpaid arrangement resembles a traditional employment relationship, the greater the potential compliance risk.
Disclaimer
This article is for general informational purposes only and does not constitute legal advice.
The information does not create an attorney-client relationship, and receiving this information does not establish one.
Because employment laws are highly fact-specific, employers should consult legal counsel before taking action based on the issues discussed in this article.
