No Good Deed: How Non-Profit Employers Should Properly Classify Volunteer Services
When does a volunteer legally become an employee? For California’s nonprofit sector, the answer just got a lot clearer.
A recent California appellate case, Spilman v. Salvation Army, provides a roadmap for distinguishing between employees and volunteers, specifically in the nonprofit setting. Importantly, this case does not extend the same protections to for-profit businesses, which remain subject to stricter standards under California wage law.
The Case
The Salvation Army, a nonprofit religious organization, runs a residential rehabilitation program providing housing, meals, and rehabilitation services. A key component of the program is “work therapy,” which is designed to help participants learn and develop life skills using real-life interactions.
Three rehab participants worked full time in the program. The Salvation Army classified them as volunteers. Two agreed to participate in lieu of incarceration. All three sued on a class basis to recover compensation for their work.
The trial court held that plaintiffs were not employees because “a key threshold” requirement for employee status is “the existence of an express or implied agreement for compensation.” The Court of Appeal ultimately affirmed this result, but it took a more nuanced path, clarifying that volunteers may be exempt from wage laws for reasons that extend well beyond the simple lack of compensation.
The appellate court articulated a two-step test applicable only to nonprofit organizations – focusing on whether the nonprofit can establish that:
- The worker freely agreed to work for the nonprofit to obtain a personal or charitable benefit, rather than for compensation, and
- The volunteer labor was not a subterfuge to evade wage laws.
Step 1: Working for Personal or Charitable Benefit
The court examined three factors: the promise of compensation, whether or not the labor was voluntary, and the length of the relationship.
Evidence of Compensation
Compensation includes both cash and non-cash benefits. In rehab programs, if non-cash benefits like lodging or meals are required for treatment, courts are likely to consider the worker a volunteer. However, this factor is not conclusive – a person providing labor without compensation may still qualify as an employee, particularly if benefits are contingent on performance.
Freely Given Services
The main concern stems from forced services. Criminal defendants who willingly enter a rehabilitation program as a condition of probation to avoid incarceration are not considered coerced. The nonprofit is not responsible for their predicaments.
Duration
The longer the volunteer period, the more likely services will be considered employment. The volunteer must not be entirely dependent on the organization.
Step 2: Not Evading Wage Laws
The nonprofit must demonstrate a bona fide volunteer agreement exists and that the classification was not for “obtaining substandard labor.” For rehab programs, the work must serve a rehabilitation purpose, and the organization need only show an “actual and reasonable belief” that volunteer work serves the program.
Importantly, nonprofits may not use volunteers to replace or perform the same functions as paid employees in commercial ventures.
Key Takeaways for Not-for-Profit Employers
Nonprofit organizations should keep these elements in mind to lawfully maintain their volunteer programs:
- The lack of salary isn’t enough to prove an individual is a volunteer; there must be proof the individual joined to gain a personal or charitable benefit;
- Non-cash benefits such as housing or meals must be tied to the volunteer program’s purpose; and
- Volunteers should supplement the organization’s mission, not replace paid employees.
For-Profit Employers
While Spilman provides a specific roadmap for nonprofits, for-profit businesses operate under a much stricter microscope. For-profit entities using unpaid interns must satisfy a more rigorous six-criteria test.
The main difference? The “educational” nature of the role. If a business derives an immediate advantage from the intern’s work, or if the intern displaces a regular employee, they are likely entitled to California’s full wage and hour protections.