Landmark ruling tightens when nonprofits can treat workers as unpaid volunteers

A California appeals court just rewrote the rules on who counts as a volunteer, creating headaches for HR teams across the nonprofit sector.

The decision, handed down January 6, 2025, establishes a new framework that could force organizations to rethink how they classify unpaid workers.

The case centers on the Salvation Army's substance abuse rehabilitation programs in San Francisco, Stockton, and Chico. Three former participants claimed they were actually employees who worked full-time in the nonprofit's thrift stores without getting paid minimum wage or overtime.

Justin Spilman, Teresa Chase, and Jacob Tyler had enrolled in six-month residential programs between 2015 and 2020. Spilman and Chase entered to satisfy probation requirements instead of going to jail. All three worked what they say were full-time hours sorting donations, unloading trucks, assisting customers, and handling various warehouse and store operations.

In exchange, they received room and board, meals, small amounts of cash, and rehabilitation services including counseling and classes. The Salvation Army called it work therapy, designed to help participants build job skills and stay focused during recovery.

The participants saw it differently. They argued they were doing the same jobs as paid employees, just without paychecks, and filed a class action lawsuit seeking back wages.

A trial court sided with the Salvation Army,...

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