Charitable Organizations and Nonprofits depend on volunteers. In California, the line between a “volunteer” and an “employee” can get blurred. Spilman v. The Salvation Army provides detailed guidance on when a nonprofit’s volunteers will be treated as employees under the Industrial Welfare Commission (IWC) wage orders.
Plaintiffs worked full time for the Salvation Army, a nonprofit organization, in various operations that supported its retail thrift stores. They worked without wages as part of a six-month, residential, substance abuse rehabilitation program. In their lawsuit, they believed that, under California law, the Salvation Army had to pay them the minimum wage and overtime. The trial court concluded the Plaintiffs were volunteers, and the appellate court agreed.
Before discussing the analysis, this case is only about non-profit, charitable organizations (i.e., 501(c)(3) organizations). It does not apply to private employers.
The legal test in plain language
The court adopted a two‑part test to determine whether a person serving a nonprofit is a volunteer or an employee under California wage orders. Under that test:
- First, the individual must be working for a personal, charitable, or rehabilitative benefit rather than to obtain compensation in any form.
- Second, the nonprofit’s use of that labor must not be a subterfuge to evade wage laws or to gain an unfair advantage over organizations that pay for similar work.
Labels alone do not decide the issue. Calling someone a “volunteer” or having them sign a “not an employee” form will not control the outcome if the overall relationship looks like paid employment. Courts look to the economic reality and the totality of circumstances, includiung why the person is there, what they receive, and how the nonprofit is using their labor.
What nonprofits should do
To align with the court’s framework, nonprofits that rely on volunteers should structure the relationship around the volunteer’s personal or charitable benefit, not economic gain.
Key practices include:
- Communicate the unpaid nature of the role.
- Use written forms, handbooks, or orientation materials that explain: (1) there is no salary or wages; (2) the person is not an employee; and (3) participation is for personal, charitable, educational, or rehabilitative reasons (e.g., community service, spiritual growth, recovery services, life‑skills development).
- Emphasize the program’s personal or rehabilitative purpose.
- Where service is part of a broader program (for example, rehabilitation or character‑building), describe the work part as “work therapy,” training, or service that supports counseling, classes, and other program benefits, rather than as a job performed for pay.
- Provide in‑kind support as program benefits, not as wages.
- Many nonprofits provide housing, meals, clothing, transportation, classes, counseling, or small stipends or canteen cards. The court recognized that such in‑kind support can be consistent with volunteer status when integrated into the program’s therapeutic or charitable purpose, rather than delivered as a quid pro quo for specific hours or productivity.
- Maintain a defined and coherent program structure.
- Time‑limited, structured programs (for example, a six‑month residential rehabilitation program with integrated work therapy and services) look more like bona fide programs and less like open‑ended employment.
- Program requirements (attendance, chores, work therapy) should be explained in terms of personal development, rehabilitation, or community service, not simply production targets or labor needs.
- Ensure voluntariness and avoid coercion.
- Volunteers should enter the role freely, understanding they are not entering into a wage‑earning job. The court looked favorably on situations where individuals chose to take part in a program (even in difficult life circumstances) because they sought the program’s benefits, not because the nonprofit created pressure to perform unpaid labor.
- Keep your overall operations aligned with charitable purposes.
- The court acknowledged that nonprofits may run revenue ‑generating activities and still use volunteers, but emphasized that the organization’s overall use of volunteers must follow its charitable mission and not a disguised way of obtaining a low‑cost commercial workforce.
Documenting these elements—mission statements, program descriptions, volunteer agreements, and descriptions of nonmonetary benefits—can help show the nonprofit is operating a legitimate volunteer or program model rather than an employment relationship.
What nonprofits should avoid
Just as important as the affirmative steps are the practices nonprofits should steer clear of if they want to preserve volunteer status. The Court of Appeal highlighted several red flags that can push a volunteer arrangement into “employee” territory.
Practices to avoid include:
- Do not tie benefits directly to work performance in a wage‑like way.
- If food, housing, clothing, small stipends, or other benefits are conditioned on meeting work quotas, performing certain tasks, or maintaining a particular level of productivity, those benefits look like wages in another form.
- Using reduction of benefits as discipline specifically for work‑related shortcomings (e.g., docking housing or meals for missed shifts) mirrors wage penalties and suggests a compensatory relationship.
- Do not make express or implied promises of compensation.
- Statements or practices that signal “work in exchange for pay” undercut volunteer status, even if the pay is noncash. Nonprofits should avoid language in written or verbal communications that could be misunderstood as a promise of wages or salary.
- Do not displace paid workers or operate like a commercial workforce.
- Using volunteers primarily to replace paid employees or to reduce labor costs in revenue‑producing operations increases the likelihood that those volunteers will be treated as employees.
- When the nonprofit’s operations resemble a commercial enterprise staffed by unpaid “volunteers,” courts may view the arrangement as a subterfuge to avoid paying lawful wages.
- Understand that labels and acknowledgments help but are not definitive.
- Have volunteers sign acknowledgments, but do not assume those documents are conclusive. The court noted that this paperwork is only one factor and cannot override the actual economic reality.
- If the day‑to‑day relationship looks like employment, calling it “volunteering” will not prevent a finding of employee status.
- Do not create long‑term dependency on the nonprofit for basic needs.
- A pattern where individuals work extensive hours over long periods while relying entirely on the nonprofit for their basic living needs can resemble an employment relationship, especially if that dependency is tied to their work.
- The more the relationship looks like long‑term, full‑time labor for the organization’s revenue‑generating activities, the greater the risk that a court will find an employment relationship.
By avoiding these practices, nonprofits reduce the chances that a court will see their volunteer program as a disguised wage‑earning arrangement.
Volunteers in commercial or revenue‑producing activities
Many nonprofits run thrift stores, retail outlets, fundraising events, or other revenue‑generating programs. The Court of Appeal addressed these scenarios explicitly and rejected the idea that any “commercial” context automatically converts volunteers into employees.
Key points for nonprofits:
- Volunteers may serve in revenue‑producing operations.
- A volunteer who sorts donations, staffs a thrift store, or helps at a ticketed fundraiser is not automatically an employee simply because the activity generates revenue.
- What matters is whether the two‑part test is satisfied: the person is there for personal or charitable benefits rather than compensation, and the nonprofit is not using that labor as a subterfuge to avoid wage laws.
- Expect closer scrutiny in commercial settings.
- Courts are more likely to scrutinize “commercial” operations to ensure nonprofits are not gaining an unfair advantage over for‑profit businesses that must pay workers.
- Clear documentation of the program’s charitable purpose, the volunteer’s reasons for serving, and the non‑wage nature of any benefits will be especially important where volunteers are involved in revenue‑producing activities.
That means nonprofits should not abandon volunteers in commercial operations but should carefully structure those roles to reflect genuine volunteer service within a charitable framework.
Practical takeaways for nonprofit leaders
Taken together, the decision offers a roadmap for nonprofits that want to use volunteers in a compliant way.
In practical terms:
- Design roles so the primary benefit to the individual is personal, charitable, or rehabilitative, not economic.
- Provide in‑kind support as part of the program’s mission, not as a direct exchange for labor or productivity.
- Avoid using volunteers primarily to save on labor costs in operations that function like commercial businesses.
- Use clear documentation, but remember courts will look at the real‑world relationship, not just the paperwork.
Nonprofits that periodically review their volunteer programs against these principles will be better positioned to serve their communities while reducing legal risk.
The Nuddleman Law Firm helps non-profit organizations, private companies and individuals understand the complexities of California employment laws. Robert Nuddleman is dedicated to assisting charitable organizations and offers pro-bono and reduced fee services to several non-profit organizations. If you have a question about your workplace, contact the Nuddleman Law Firm.