Question: I run a small nonprofit and have unpaid volunteers in addition to paid staff. When am I permitted to treat an individual as an unpaid volunteer rather than an employee?
Answer: In California, an employer may treat an individual as an unpaid volunteer only if specific criteria are met. California’s Division of Labor Standards Enforcement (the DLSE) historically took the position that the intent of the parties is the controlling factor. Under DLSE guidance, a volunteer must donate their time voluntarily without contemplation of pay. A recent court decision expands on this guidance and outlines a new, two-part test.
In Spilman v. The Salvation Army, the California Court of Appeal clarified when nonprofits may treat an individual as an unpaid volunteer instead of a paid employee. The individuals who sued The Salvation Army participated in its six-month residential substance abuse rehabilitation program. In this program, they were required to participate in “work therapy” as part of their rehabilitation efforts. Common tasks included loading and unloading trucks, accepting and sorting donations, moving carts of donated goods, and picking up donations. In exchange, they received dormitory housing, meals, clothing, gratuities, and rehabilitation services. They were not, however, compensated for their work.
These individuals sued, claiming that they were employees and should have been paid minimum wage and overtime. The Salvation Army disagreed and argued that they were volunteers and therefore not entitled to compensation. The trial court ruled in favor of the Salvation Army based on the ground that there was no “express or implied” agreement for compensation. The trial court reasoned that an expectation of compensation is essential and that these participants voluntarily participated in the program without an expectation of compensation. In other words, they knew they were not going to be paid, and they participated anyway.
The individuals appealed, and the California Court of Appeal reversed the trial court’s ruling. The Court of Appeal reasoned that—unlike an employee—a volunteer agrees to work for a personal or charitable reason or benefit, rather than to earn money. The Court of Appeal then adopted a new two-part test to make guide this distinction.
For a nonprofit to lawfully use unpaid volunteers, it must now establish both of the following: (1) The worker freely agreed to work for the nonprofit to obtain a personal or charitable benefit, rather than for compensation, and (2) overall, the nonprofit organization’s use of the volunteer labor is not a subterfuge to evade the wage laws. Regarding the first part of the test, the Court stated that the key question is whether the person was motivated by a personal benefit (like rehabilitation or giving back to the community) rather than earning money. Regarding the second part of the test, the Court noted that any “work” requirement must genuinely serve the volunteer’s personal or charitable purpose rather than serve the organization. The Court of Appeal also noted that the duration of a volunteer relationship may also be relevant.
Nonprofits in California should closely analyze their classification of volunteers and employees. These organizations may explore having agreements with volunteers that make it clear they meet these new criteria. The risks of improperly classifying an employee as a volunteer can be substantial and lead to costly claims for unpaid wages and penalties. Nonprofits with questions about volunteer status should contact their labor counsel.