In Spilman v. The Salvation Army, the California Court of Appeals addressed whether participants in a nonprofit residential rehabilitation program should be classified as volunteers or employees under California wage laws.
The case involved individuals participating in a residential substance abuse rehabilitation program operated by The Salvation Army. Participants performed various tasks as part of the program. They later brought claims arguing that they should have been treated as employees and, therefore, entitled to wages under California law.
The trial court granted summary judgment in favor of the nonprofit. It concluded that the participants were volunteers rather than employees because there was no express or implied agreement that they would be paid for their work. Based on this reasoning, the trial court treated the absence of a compensation agreement as the key factor in determining employee status and declined to analyze other disputed evidence about the working relationship.
The Court of Appeal reversed the decision, holding that the trial court applied the wrong legal standard. The court explained that although nonprofit volunteers may fall outside California wage laws, the lack of an agreement for compensation is not a dispositive or threshold test for determining whether someone is an employee.
Instead, the court adopted a two-part framework for analyzing these situations. First, the nonprofit must show that the individual freely agreed to perform services for personal or charitable reasons rather than for compensation. Second, the nonprofit must demonstrate that the use of unpaid labor was not a subterfuge designed to evade wage laws.
Because the trial court failed to apply this analysis and did not resolve several disputed factual issues under this framework, the Court of Appeals vacated the judgment and remanded the case for further proceedings.
