A Rehabilitation Program or a Free Labor Pipeline?

Justin Spilman entered the Salvation Army’s adult rehabilitation center seeking help with addiction. What he found, according to his lawsuit, was a structured labor operation. Spilman loaded and unloaded trucks, sorted donations, and moved carts of goods through a warehouse, day after day. He received no paycheck. He could not seek outside work. If he refused to participate in what the Salvation Army called “work therapy,” he would be removed from the program entirely.

Teresa Chase sorted donated clothing, operated warehouse machinery, served customers, and managed the front desk. Jacob Tyler stocked shelves, created store displays, staffed the front desk at the residential facility, and scrubbed bathrooms. All three were enrolled in the Salvation Army’s six-month residential substance abuse program at facilities in San Francisco, Stockton, and Chico between 2015 and 2020.

None of them received minimum wage. 💼 None received overtime pay, even when they claim to have worked more than 40 hours a week. The Salvation Army classified them as volunteers, shielded by their status as program participants, and for years that classification held up in court. In January 2026, a California appellate panel said: not so fast.

Inside the Allegations: What the Workers Actually Did

The Salvation Army’s adult rehabilitation centers operate a three-part system: a residential dormitory where participants live and attend programming, a warehouse where donated goods are processed, and a retail thrift store where those goods are sold to the public. The organization acknowledges that revenue from thrift sales funds the charitable operation, including the rehabilitation program itself.

Program participants formed a core part of that revenue engine. The Salvation Army controlled the work schedules, assigned the tasks, and set the conditions. Participants who missed shifts due to illness were required to make up the missed time. The organization prohibited participants from taking any outside employment during the program.

In exchange for full-time labor, participants received dormitory housing, three meals a day, some clothing, and small “gratuities”: canteen cards redeemable only at the rehabilitation center itself, plus modest amounts of cash. The Salvation Army characterized these benefits as gifts or allowances intended to support recovery, not wages. Plaintiffs characterized them as compensation for work performed, in another form.

The Salvation Army further required participants to sign forms confirming they were not employees, that gratuities were gifts, and that work therapy was a skill-building exercise rather than employment. The court found those signed disclaimers are not legally decisive, because California law explicitly prohibits workers from waiving minimum wage protections, regardless of any agreement to accept less.

The Legal Gray Zone the Salvation Army Exploited

California’s wage laws exist, in the court’s words, to protect “vulnerable workers” and to prevent employers from gaining a competitive edge by failing to comply with minimum labor standards. The wage order that covers retail and mercantile industries defines employment broadly, using a “suffer or permit to work” standard that was deliberately written to capture irregular arrangements designed to evade labor protections. The standard was historically used, for example, to reach employers who used child labor without formally hiring children.

For years, the Salvation Army and courts relied on a simpler test: did the worker have an agreement to be paid? If not, they were classified as a volunteer, outside the law’s reach. The trial court in this case applied exactly that logic, granting summary judgment to the Salvation Army on the grounds that Spilman never had a reasonable expectation of compensation. 🏛️

The First Appellate District reversed that reasoning entirely. The appeals court held that the absence of a compensation agreement is one relevant factor, but it cannot serve as a threshold test that automatically excludes a worker from the law’s protection. Accepting the trial court’s approach, the appeals panel warned, could “allow the most vulnerable of workers to persist in positions of unpaid servitude.”

Corporate Accountability: The New Legal Test That Could Change Everything

The appeals court did more than reverse the lower court’s ruling. It established a new legal standard for all California courts to use when evaluating whether nonprofit workers are employees or volunteers. That standard is now a two-part test, and the nonprofit bears the burden of proving both parts.

Part One: Did the Worker Truly Volunteer Freely?

The nonprofit must show that the worker freely agreed to work without pay, seeking a personal or charitable benefit rather than wages. This requires examining whether benefits like housing and food were genuinely provided to support recovery, or whether those benefits were structured as compensation, made contingent on showing up to work and meeting productivity standards. The court noted that workers who participate in programs to avoid incarceration, as Spilman and Chase did, can still be considered genuine volunteers. The Salvation Army did not create their criminal circumstances.

Part Two: Was the “Volunteer” Classification a Scheme to Avoid Paying Wages?

Even if a worker freely participated, the organization must also demonstrate that its overall use of volunteer labor is not a scheme to extract substandard labor and undercut competitors who pay minimum wage. Courts must now ask: did the “work therapy” serve genuine rehabilitative purposes? Did unpaid participants perform the same tasks as paid employees? Did the organization use volunteers to replace paid workers and reduce costs? 📊

The plaintiffs alleged exactly that: that program participants performed the same warehouse and retail tasks as workers the Salvation Army classified and paid as regular employees. The court found those factual disputes material and unresolved, which is precisely why summary judgment was improper.

Exploitation of Workers: Wages Replaced by Canteen Cards

The workers in this case received housing, meals, clothing, and small sums of discretionary cash. That package may sound generous for a free program. Examined more closely, it looks like compensation structured to stay invisible. 🔍

Under California wage law, meals and lodging can constitute wages, requiring employers to keep records of their value and prohibiting employers from counting them toward the minimum wage without a written agreement. The appeals court cited federal precedent: when a nonprofit withholds food from workers who miss shifts due to illness, those food benefits are wages in another form, not gifts.

The canteen cards are telling. They were redeemable only inside the rehabilitation center, meaning workers who labored in commercial warehouses and thrift stores could not spend their earnings freely. The value circulated back into the Salvation Army’s own economy. Workers remained financially dependent on the organization for the full six months, unable to earn outside income, unable to leave without losing housing and care, unable to refuse work without losing their spot in the program entirely.

The U.S. Supreme Court confronted an almost identical structure in Tony and Susan Alamo Foundation v. Secretary of Labor (1985), finding that workers who were “entirely dependent” on a nonprofit for prolonged periods and who could lose food benefits for missing work were employees, not volunteers, regardless of their own insistence otherwise. California courts are now required to weigh the same considerations.

Wealth Disparity and Corporate Greed: Who Profits from Recovery?

The Salvation Army is not a small local charity. It is a global religious organization with billions in assets, operating hundreds of retail thrift stores across the United States. Those stores generate substantial revenue, and that revenue, by the Salvation Army’s own account, funds the rehabilitation programs.

The economic loop is worth examining: people in crisis enter the program. The program requires them to work full time in income-generating commercial operations. The income from those operations funds the program that requires them to work. Under the trial court’s original ruling, that loop was perfectly legal. None of the workers generating that revenue were owed a dime of it.

Competing thrift store operators and warehouse businesses, meanwhile, face costs that the Salvation Army avoided. Minimum wage, overtime, workers’ compensation, payroll taxes. The appeals court cited California Labor Code Section 90.5, which explicitly identifies this dynamic as a public harm, stating that minimum labor standards must be enforced in part to protect “law-abiding employers” from competitors who gain advantage by “failing to comply with minimum labor standards.”

The PR Machine: “Work Therapy” as Linguistic Cover

The term “work therapy” does serious rhetorical work in this case. It transforms commercial labor into clinical treatment. It transforms a workforce into a patient population. It moves the entire arrangement out of the language of labor and into the language of healing.

The Salvation Army’s program handbooks reinforced this framing in writing: participants were “not employees,” gratuities were “gifts,” and work was a tool for “developing skills and work habits.” Participants signed those documents upon enrollment, often after choosing the program as an alternative to incarceration, a circumstance that raises real questions about the voluntariness of any “agreement.”

The appeals court declined to allow that framing to be legally dispositive. Whether work therapy genuinely serves rehabilitation, or serves primarily to supply free labor to a commercial operation, is now a question of fact that a trial court must resolve on remand, with evidence.

Global Parallels: This Is Not an Isolated Case

The Salvation Army runs similar adult rehabilitation programs across the United States, and the legal challenges are piling up. A federal court in Georgia (Alvear v. Salvation Army, 2023) allowed similar wage claims to proceed after finding that plaintiffs plausibly alleged their work served no genuine rehabilitative purpose. A federal court in Illinois (Clancy v. Salvation Army, 2023) likewise permitted claims forward, considering the extent of participants’ dependence on the organization and the policy goals of minimum wage laws.

A federal court in Florida, however, ruled in the Salvation Army’s favor in early 2025, applying a narrower analysis. The legal landscape across federal circuits and state courts remains fractured, which the California appeals court directly acknowledged as part of its motivation for establishing a clearer standard.

Beyond the Salvation Army, the pattern of using rehabilitation programs as sources of unpaid commercial labor has drawn scrutiny in multiple industries. A federal Fifth Circuit ruling in 2024 (Klick v. Cenikor Foundation) remanded a similar case for further fact-finding, directing courts to evaluate therapeutic benefit, compensation expectations, and whether unpaid workers displaced paid employees. These are not isolated instances of nonprofit overreach. They reflect a structural incentive embedded in how charitable commercial operations currently interact with labor law.

Corporate Accountability Fails the Public: Four Years Without a Resolution

Spilman filed his lawsuit in 2021. It is now 2026. The case is being remanded back to the trial court for further proceedings, meaning the workers who labored full time without wages between 2015 and 2020 still have no judgment, no settlement, and no resolution. 📅

The trial court’s original ruling did not weigh the evidence. It granted summary judgment on a pure legal theory: no compensation agreement means no employee. Four years of litigation produced a reversal of that legal theory, not a verdict on the facts. The workers must now relitigate before a court applying the correct standard, potentially years more before any outcome.

This is how corporate accountability fails in practice. Organizations with legal resources and institutional staying power outlast claimants who lack both. The Salvation Army retained one of the largest employment law firms in the United States, Littler Mendelson, to defend these claims. The plaintiffs relied on civil rights organizations including the Impact Fund, Disability Rights Education and Defense Fund, and Legal Services for Prisoners with Children to support their appeal as friends of the court. The asymmetry in resources shapes the timeline. It shapes the outcome.

Pathways for Reform: What Accountability Looks Like Going Forward

The California appeals court’s new two-part test is a genuine step forward. It shifts the burden of proof to the nonprofit and requires examination of whether work therapy serves real rehabilitative purposes, whether paid and unpaid workers perform identical tasks, and whether the overall arrangement exploits participants’ vulnerability to extract free labor. That test now applies to all California courts evaluating volunteer status in nonprofit organizations.

But broader structural reform requires more than one appellate ruling. California legislators could amend the Labor Code to establish explicit protections for rehabilitation program participants performing commercial labor, clarifying that the right to minimum wage survives enrollment in any therapeutic program. State regulators at the Division of Labor Standards Enforcement could update enforcement guidance to reflect the new standard and conduct audits of nonprofit commercial operations that rely heavily on program participant labor.

At the federal level, the fragmentation among circuit courts on this question argues for clear regulatory guidance from the Department of Labor, establishing that the “suffer or permit” standard applies to rehabilitation program participants who perform commercial labor, regardless of what the organization calls that labor.

Consumers who patronize Salvation Army thrift stores deserve to know that the pricing advantage those stores carry may partly reflect a wage structure their competitors do not enjoy. Transparency about the labor arrangements underlying nonprofit commercial operations is a reasonable public expectation that current disclosure requirements do not satisfy. 🔎

Conclusion: The Human Cost of Legal Delay

Justin Spilman, Teresa Chase, and Jacob Tyler came to the Salvation Army for help. They received housing, meals, and substance abuse programming. They also worked, day after day, at full-time schedules, in warehouses and retail stores that generated revenue for the organization. Whether California law required the Salvation Army to pay them for that work is now, finally, a question that a court must answer on the evidence.

That it took until 2026 to reach that threshold, after five years of litigation and through the intervention of multiple civil rights organizations, illustrates something important about how modern economies protect corporations over communities. Organizations with resources can build elaborate legal and rhetorical frameworks, “work therapy,” voluntary participation forms, and nonprofit status, to insulate commercial labor practices from accountability. The legal tools to challenge those frameworks exist, but they are expensive to use and slow to resolve.

The appeals court’s ruling does not guarantee justice for these three plaintiffs. It guarantees only that they will have the chance to present their evidence to a court applying a fair standard. For workers who entered a rehabilitation program between 2015 and 2020, that chance arrives in the second half of the 2020s. The human cost of that gap is not measured in legal fees. It is measured in years of unpaid labor, years of waiting, and years of being told that what happened to them was not, legally speaking, a problem worth resolving.

Frivolous or Serious Lawsuit?

This case is serious. The factual record, as described in the appellate decision, contains multiple unresolved disputes that are directly material to the legal question: whether participants performed the same tasks as paid employees, whether gratuities were contingent on work performance, whether the volume of labor left meaningful time for rehabilitation, and whether the Salvation Army used program participants to reduce labor costs in commercial operations. Those are not trivial factual questions. They are exactly the questions that wage law was designed to answer.

The case drew amicus support from the Impact Fund, Disability Rights Education and Defense Fund, California Rural Legal Assistance Foundation, Disability Rights Advocates, Disability Rights California, Legal Aid at Work, Legal Services for Prisoners with Children, The Wage Justice Center, and Worksafe. That coalition of legal advocacy organizations does not support frivolous litigation. It supports cases that raise genuine questions about the exploitation of vulnerable populations.

The Salvation Army may ultimately prevail on remand by demonstrating that its work therapy genuinely served rehabilitative purposes and that it did not use participants to replace or undercut paid workers. The court ruled only that those questions must actually be answered with evidence. That is not a frivolous demand. That is how accountability is supposed to work.