Law.com, “Volunteer or Not? A New Test for Nonprofit Organizations,” by Katherine Catlos, Esq., 1-28-2026

Kaufman Dolowich’s Katherine Catlos weighs in on a California Court of Appeals decision that has widespread implications for nonprofit organizations that rely on volunteers

The article is outlined below:

Volunteer or Not? A New Test for Nonprofit Organizations

The ruling raises the risk that workers traditionally treated as volunteers could be legally reclassified as employees, potentially triggering wage and hour liability, class actions, and Private Attorneys General Act (PAGA) claims. Whether an individual is properly classified as a volunteer is therefore an increasingly consequential question for nonprofit organizations, especially those engaged in commercial or revenue generating activities.

Volunteers remain central to the functioning of the nonprofit sector, contributing significant labor and economic value each year. Data from the U.S. Census Bureau illustrates the scale of this contribution: between September 2022 and September 2023, an estimated 28–29% of U.S. adults—approximately 75.7 million people—formally volunteered with an organization. In addition, 2026 Gallup Poll reporting stated that 63% of adults reported volunteering with a religious or secular nonprofit within the previous year, reflecting a strong rebound from pandemic-era declines. Statistics shared from nonprofit assistance program Double the Donation state that roughly one third of the nonprofit workforce consists of volunteers, highlighting the structural reliance that many organizations have on unpaid labor.

According to the National Philanthropic Trust, these volunteers collectively provide billions of hours of service annually; nearly 5 billion hours in 2022–23 alone, representing more than $160 billion in economic value to nonprofits and the communities they serve.

Against this backdrop, a Jan. 6, 2026, California Court of Appeal decision carries potentially significant consequences for nonprofit employers. The ruling raises the risk that workers traditionally treated as volunteers could be legally reclassified as employees, potentially triggering wage and hour liability, class actions, and Private Attorneys General Act (PAGA) claims. Whether an individual is properly classified as a volunteer is therefore an increasingly consequential question for nonprofit organizations, especially those engaged in commercial or revenue generating activities.

The case at issue, Spilman v. The Salvation Army (Calif. Cour of Appeal, First Appellate District, 2025 DJDAR 225), involved three plaintiffs: Justin Spilman, Teresa Chase and Jacob Tyler, who participated in the Salvation Army’s six-month residential substance abuse rehabilitation program. As part of the program, participants worked full time in operations supporting the organization’s thrift store retail activities but were not paid wages. Spilman alleged that, notwithstanding the rehabilitation context, the Salvation Army was required under California law to pay minimum wage and overtime for this work. The trial court granted summary judgment for the Salvation Army, concluding that the participants were properly considered volunteers exempt from wage laws.

The Court of Appeal agreed that nonprofit volunteers can, in appropriate circumstances, fall outside the scope of wage and hour protections. However, it held that the trial court applied an unduly narrow legal standard by relying primarily on the absence of a compensation agreement. The appellate court determined that a more comprehensive inquiry was required and therefore reversed and remanded the case. In doing so, it articulated a new, two part test for distinguishing volunteers from employees in the nonprofit context.

The court’s analysis began with the public policy goals underlying California’s wage laws: protecting workers, preventing unfair competition, and ensuring a minimum standard of living. These principles are reflected in the broad “suffer or permit to work” standard that governs employee status under California’s wage orders. Although the Legislature has long recognized the important role of nonprofit volunteers evidenced by numerous statutes that authorize volunteer activities, incentivize service, or
limit liability, these policies do not create a blanket exemption. The court reiterated that volunteer status is a traditional but implied exception, not an automatic one, particularly where an organization engages in commercial operations or where unpaid work resembles typical employment.

The Court of Appeal’s Two-Part Test

To determine whether an individual is a true volunteer, a nonprofit must satisfy both prongs of the new test.

1. Did the individual freely agree to work for personal or charitable reasons, rather than for compensation?

This inquiry focuses on the worker’s expectations and the nature of the benefits received. Courts will examine:

 whether any express or implied promise of compensation existed;
 whether in kind benefits such as food, housing, or stipends functioned as wages in substance,
particularly where they were tied to work performance;
 whether participation was genuinely voluntary or involved coercion, pressure, or lack of
meaningful choice; and
 the duration and extent of the individual’s dependence on the organization, especially in long
term residential programs. Where in kind benefits extend over a lengthy period, the relationship
may begin to resemble traditional employment.

If these factors are not satisfied, the analysis ends—the individual must be classified as an employee.

2. Is the nonprofit using volunteer labor as a subterfuge to evade wage laws?

This prong requires an examination of how the organization uses unpaid labor and whether the arrangement is consistent with legitimate volunteerism. Courts may consider:

 whether any “work therapy” or similar program components serve a real rehabilitative purpose;
 whether unpaid labor displaces paid employees;
 whether the nonprofit gains an unfair competitive advantage in commercial operations; and
 whether the overall structure appears exploitative or inconsistent with volunteer service.

This analysis is inherently fact specific and requires an assessment of the totality of the circumstances.

The Court of Appeal emphasized that the trial court erred by treating the absence of a compensation agreement as dispositive. The court reasoned the proper approach examines both the voluntariness of the individual’s participation and whether the organization’s use of unpaid labor has the effect or intent of avoiding wage and hour obligations. On remand, the trial court must determine whether genuine issues of material fact exist under this broader framework.

Recommendations for Nonprofits

In light of this decision, nonprofit organizations should promptly evaluate their volunteer programs to ensure compliance with this clarified legal standard. A structured audit should review the nature of volunteer roles, the expectations and benefits communicated to participants, the organization’s use of unpaid labor in commercial operations, and whether any volunteer program elements could be construed as displacing paid staff. Conducting such an audit can help reduce exposure to wage and hour claims and strengthen defenses under the amended PAGA framework.

Katherine S. Catlos is a labor and employment law partner in the San Francisco office of Kaufman Dolowich. She represents businesses in a broad range of employment law matters including wage & hour matters, privacy law, directors & officers liability, and in commercial litigation. Contact her at kcatlos@kaufmandolowich.com.

Reprinted with permission from the January 28, 2026 edition of “Law.com” © 2026 ALM Global
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