California’s New Volunteer Test – Spilman v. Salvation Army !

A California Court of Appeal decision from January 2026 (Spilman v. The Salvation Army A169279 1st Dist. 1-6-2026) has created a new test for when volunteers must be treated as employees. It skews reality, encourages litigation, and unless modified, changes everything for NPO volunteers.

The facts are unusual: Spilman enrolled in the Salvation Army’s six-month residential substance abuse rehabilitation program. Participants received room and board, meals, clothing, small gratuities, and social services including counseling. In exchange, plaintiff worked full time as a form of “work therapy”, performing retail and warehouse tasks such as unloading trucks, sorting donations, stocking, and assisting customers. These activities directly and substantially supported the Salvation Army’s thrift-store and warehouse operations. It appears that if plaintiff were not participating in the rehab program he would have been classified as an employee.

The Decision Doubles Down On The Dynamex Disaster
The Spilman opinion was “guided by” the California Supreme Court’s 2018 Dynamex decision, and it took a “similar approach” of one-size-fits-all regulation. (Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal. 5th 903, 952) Accordingly, it created a broad-brush “two-part test for distinguishing between
employees and volunteers of nonprofit organizations”, with the NPO needing to prove both parts. This procrustean test is not limited to Salvation Army-sized behemoths with residential programs, but rather applies to all California “nonprofit organizations” regardless of size. (Slip Opn. at 17)

The decision sees “no reason to categorially exclude volunteers from all commercial functions” of an NPO. (Slip Opn. at 15) It prefers instead to create an unnecessarily difficult new hurdle for every NPO to try to clear. The decision observed that “once the worker provides prima facie evidence of employment, it is the defendant who bears the burden of proving that the worker should be exempted as a nonemployee.” (Slip Opn. at 17 Fn 7) The worker easily “provides prima facie evidence of employment” by unilaterally denying he “freely agreed” to the relationship.

If the nonprofit fails to prove a given volunteer is not an employee, then it has misclassified the worker, and it probably did so with sufficient “intention” that the entity has committed a crime and its Directors now arguably “wage thieves”. (See Labor Code §226.8) Accordingly, best practices indicate that every unpaid “volunteer” must be treated as an employee unless the nonprofit is confident that it can show both of the following (Slip Opn. at 17) required prongs:
(1) the worker “freely agreed to work for a personal or charitable benefit, not for compensation;” and
(2) the nonprofit is not misclassifying the worker as a “subterfuge” to evade wage and hour laws.

1. The volunteer freely agreed to volunteer
   The requirement that the worker “freely agreed” looks at the volunteer’s subjective intent and expectations. The worker must have agreed “freely” – so every agreement may be revisited to explore the extent to which this worker acted free from compulsion on any given day of volunteering. A trial or arbitration may be required to determine this and several of the other new factors. Among the possible considerations (Slip Opn. at 18-20) for the judge, jury, and paid experts are:
   (1) Whether there was an express or implied promise of cash or non-cash compensation in some form;
   (2) Whether items such as housing, food, and any in-lieu benefits are tied to work performance or attendance in a way that looks like a wage substitute;
   (3) Whether the worker’s participation was free of any coercion or undue pressure by the nonprofit; and
   (4) The length of the arrangement and the worker’s dependence on the nonprofit.
   
   It is hard to know what to make of some of these elements. We must eagerly wait for trial lawyers to explicate the decision’s real meaning through lawsuits and appeals, and experts craft new ways to tell us what to think.
   
2. The NPO is not engaged in a subterfuge
   The second, or “subterfuge”, prong looks to the NPO’s subjective intent – meaning the intent of the person(s) making decisions for the nonprofit. The effect is to open up every nonprofit’s Board to a charge of moral turpitude in the form of subterfuge: deceit or lying to achieve some gain. But, of course, a term like subterfuge means whatever a judge or jury thinks it means, after hearing claims of shameful shenanigans.
   
   The terror in this prong is that even honest-to-God volunteers, knowingly helping for free in their small way, must still be treated as employees unless the NPO is able to show both that (1) its use of unpaid labor is not some trick to avoid the otherwise burdensome wage and hour obligations, and (2) its actions do not “depress wages” in the applicable (but undescribed) marketplace. Factors for the judge, jury, and experts to consider (Slip Opn. at 21-23) include:
   (a) whether the unpaid work is reasonably aimed at some form of rehabilitation,instead of “primarily serving operational needs”;
   (b) whether unpaid workers replace paid employees;
   (c) whether unpaid workers perform substantially the same work as paid employees;
   (d) whether the effect of the program is to exert downward pressure on wages; and
   (e) whether the unpaid work provides the nonprofit with an unfair competitive advantage.

In addition, litigators and courts “should consider any other evidence as to whether the nature of the working relationship is exploitative, indicating an evasion of the wage laws.” (Slip. Opn. at 23) The decision tantalizes with the prospect of punitive damages for “exploitation”, and suggests avenues for plaintiffs and their lawyers to lean into this new and exciting profit center.

Consider the decision’s five factors. (a) Most nonprofit volunteers are not looking to obtain, nor obtaining, any kind of “rehabilitation”, so the nonprofit loses this first element. (b) For any particular NPO-sponsored event, if there were no volunteers the entity might indeed need to hire people to help out. So too, (c) if there were two few employees to do everything needed for a special event, then does every volunteer
helping alongside for the night become an employee? The nonprofit must also (d) evaluate whether its volunteers are exerting any “downward pressure on wages”, although no guidance is provided on how an unsophisticated unpaid Board should wrestle with this macroeconomic conundrum. Finally, (e) what does it mean for an NPO to obtain an “unfair competitive advantage”? In donations? Unrelated business income? Volunteers?

This unneeded and draconian test is bad news for every California NPO. With the burden of proof on the nonprofit, and the prospect of large damages and attorneys fees, many one-time volunteers may be expected to change their mind, hire hungry counsel, and shake the money tree. Every volunteer has three (3) years to do so

What Should Be Done?
The Board of every California nonprofit that uses volunteers should now:

1. revisit their volunteer programs, policies, and documentation;
2. take action to expressly approve, or modify, the current volunteer arrangements in light of the Spilman test;
3. modify any document retention polices as needed for volunteer records to be maintained for at least the 3-year statute of limitations on employment claims; and
4. have comprehensive insurance in place, including for example a LegalShieldTM-type plan for initial responses, and Employment Practices Liability Insurance (EPLI) for defense of any actions. As much as the NPO can afford