No California statute makes an unpaid intern at a for-profit company lawful. The Labor Commissioner’s enforcement manual puts it flatly: “In California there is no state statute or regulation which expressly exempts persons participating in an internship from wage and hour laws.” Nonprofits have more room, but a January 2026 appellate decision set a test they must meet. If an unpaid worker turns out to be an employee, the company owes back minimum wage plus liquidated damages, and penalty claims follow.
Can a for-profit company in California have unpaid interns?
Only in narrow cases, and the program has to look more like school than like a job.
The Labor Commissioner (the agency’s enforcement arm is the DLSE) uses six criteria taken from the Supreme Court’s 1947 decision in Walling v. Portland Terminal Co. The manual lists them in section 46.6.4. Among them, the training has to be “similar to that which would be given in a vocational school,” and the interns must “not displace regular employees, but work under their close supervision.” The employer also can’t get an immediate advantage from what the interns do. The next section of the manual says that if any one criterion isn’t met, the time counts as hours worked.
That’s a hard standard for a business to satisfy. An intern who answers phones, builds spreadsheets, or covers a vacationing coordinator is giving the company an immediate advantage. Most real internships fail on that factor alone.
Federal law is looser. The U.S. Department of Labor’s Fact Sheet #71 applies a seven-factor primary beneficiary test, which asks whether the intern or the company gets more out of the arrangement. The Ninth Circuit adopted that test for the Fair Labor Standards Act in Benjamin v. B&H Education, Inc. (9th Cir. 2017) 877 F.3d 1139. But passing the federal test doesn’t settle a claim under California’s wage orders. The safer assumption for a California business is that an unpaid intern doing productive work is an employee.
What if the intern is getting college credit?
Credit helps, but it doesn’t fix an internship that is really a job.
The DLSE manual says in section 43.6.8 that students who perform work “as part of the curriculum, are not employees if they receive no remuneration or credit toward school fees.” It then points readers back to the internship criteria. A school’s academic credit shows the arrangement has a training purpose. It doesn’t show the company got no immediate benefit, and that’s the factor plaintiffs’ lawyers usually attack.
The useful step is paperwork that ties the work to the curriculum: a written agreement with the school, a learning plan, and a named supervisor whose job includes teaching. A company that can’t produce those documents will have trouble calling the program training.
Can our nonprofit use volunteers without paying them?
Yes, if the volunteers really chose to work without pay and the organization isn’t using them to dodge the wage laws.
The leading case had been Woods v. American Film Institute (2021) 72 Cal.App.5th 1022. Volunteers who staffed a nonprofit’s film festival sued for wages as a putative class. The Second District affirmed the denial of class certification and held that “The trial court correctly decided that putative class members who expected no compensation were not employees under California law.”
In January 2026, the First District went further and set a test. Spilman v. The Salvation Army (Cal. Ct. App., Jan. 6, 2026, A169279) is certified for publication. The plaintiffs worked full time in a six-month residential rehabilitation program, without wages. The court opened by saying, “We agree that a volunteer for a nonprofit organization can fall outside the wage laws, but we conclude the trial court applied the wrong standard to distinguish a volunteer from an employee.” It vacated the summary judgment for the Salvation Army and sent the case back.
Under the Spilman test, “the nonprofit must establish that (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.” Once the worker makes a prima facie showing of employment, the nonprofit carries the burden.
Two parts of the opinion matter most for nonprofits.
The first is in-kind benefits. Free housing and meals can look like pay. The court said trial courts should ask whether the nonprofit ties those benefits to “the worker’s labor and satisfactory performance,” which tends to point toward employment. A program that evicts participants who skip shifts is building the plaintiff’s case.
The second helps nonprofits. The DLSE had taken the position that a nonprofit can’t use volunteers in its commercial operations, such as a thrift store. Spilman rejected that bright line: “we see no reason to categorically exclude volunteers from all commercial functions” of a nonprofit’s operations. That’s a real opening. It isn’t a free pass, because commercial work still feeds the subterfuge question.
Are working interviews and unpaid trial shifts legal?
A short skills test can be unpaid. A shift that produces work the business uses has to be paid.
Section 46.8 of the DLSE manual treats try-out time as non-compensable only if it tests skills instead of training, the period is reasonable, and “there is no productivity derived from the work performed by the prospective employee.” A typing test passes. A line cook who works a dinner rush, or a server who takes tables for tips, doesn’t.
Restaurants and retailers get caught here more than anyone. The applicant who wasn’t hired is often the one who files.
Which unpaid arrangements carry the most risk?
The answer turns mostly on who the employer is and whether the business uses the work.
| Arrangement | Rule California applies | Defense position |
|---|---|---|
| For-profit intern doing productive work | DLSE six criteria, and failing any one makes the time hours worked | Weak unless the program is tied to a school curriculum and closely supervised |
| Student working for credit under a school agreement | DLSE manual section 43.6.8, read with the internship criteria | Moderate, and depends on documents showing training, not staffing |
| Nonprofit volunteer with no expectation of pay | Woods; Spilman two-part test | Strong where the worker freely agreed and the program isn’t a substitute workforce |
| Nonprofit program participant receiving housing or meals | Spilman, with in-kind benefits weighed as possible pay | Contested, more so if benefits depend on work performance |
| Job applicant on a trial shift | DLSE manual section 46.8 | Strong for a brief skills test, but weak if the business used the output |
What does it cost if the volunteers turn out to be employees?
The core exposure is minimum wage for every hour worked, and California doubles it.
Labor Code section 1194.2 lets a worker recover “liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon.” There’s a defense. If the employer shows good faith and reasonable grounds for believing it wasn’t violating the law, the statute says the court may, “as a matter of discretion, refuse to award liquidated damages.” A documented, considered decision to treat workers as volunteers is the best evidence of good faith. A practice nobody thought about is the worst.
The derivative claims come next. Someone who was never on payroll never got a compliant wage statement, and a former intern may claim waiting time penalties for wages not paid at the end of the relationship. Plaintiffs also add PAGA claims on behalf of every unpaid worker. Those penalties carry their own conditions, but they turn a small wage claim into a large one.
Woods also points to the best class defense. The Woods class failed because the trier of fact would have had to decide, person by person, who expected to be paid. Signed acknowledgments, recruiting materials that say “volunteer,” and a record that nobody was promised a job make that individualized question harder for a plaintiff to avoid.
First steps after an unpaid-worker claim arrives
- Put a litigation hold on everything about the program: sign-up forms, volunteer or internship agreements, recruiting posts, schedules, sign-in sheets, emails and texts with the worker, and every version of the program policies.
- Calendar the deadline on the demand letter, Labor Commissioner claim, PAGA notice, or summons. Check whether any agreement with the worker has an arbitration clause and whether an employment practices liability (EPLI) policy requires prompt notice.
- Identify the supervisors who directed the work and the people who decided to run the program unpaid. Make sure nobody removes the worker from the program or changes their treatment in a way that looks like retaliation.
- Pull the documents the case turns on: what the worker was told about pay, any housing or meal benefits and the rules for keeping them, school agreements for credit-based interns, and records of what the worker actually produced.
- Talk to a lawyer before responding, contacting the worker or their lawyer, or offering back pay. A payment made without a release, or framed the wrong way, can read as an admission.
Classification claims over unpaid labor are usually won or lost on the documents created before anyone complained. Companies that need California wage and hour defense on an intern or volunteer claim should collect those records first.
FAQ
Does paying interns a small stipend solve the problem?
No. A stipend is pay, and once a company pays for work it has to meet the minimum wage for every hour worked. A flat stipend that falls below minimum wage for the hours actually logged leaves a gap that a former intern can claim, along with liquidated damages. Under Spilman, compensation in exchange for labor also points toward employment for nonprofits. The cleaner choices are hourly pay at or above minimum wage or an unpaid program built around a school curriculum.
Does a signed volunteer agreement protect a nonprofit?
It helps, but it’s not enough by itself. A signed agreement is strong evidence on Spilman’s first prong, that the worker freely agreed to work without pay. It doesn’t answer the second prong, whether the organization’s overall use of volunteer labor is a subterfuge to evade the wage laws. Courts will look at how the program actually ran, including whether benefits depended on work and how long participants stayed.
Is complying with the federal intern test enough in California?
No. The Department of Labor’s primary beneficiary test governs claims under the federal Fair Labor Standards Act. A California intern can sue under the state wage orders instead, and the Labor Commissioner applies its own six criteria. A program can pass the federal test and still fail the state one. California employers should design internship programs around the stricter state criteria.
Can a for-profit company accept volunteers at all?
Generally not for work that benefits the business. The volunteer cases, including Woods and Spilman, involve nonprofit organizations, and the DLSE manual describes volunteers as people donating their services to religious, charitable, or similar nonprofit organizations. A for-profit company that calls unpaid helpers volunteers should expect a court to treat them as employees. The label doesn’t change the analysis.
If unpaid interns or volunteers have filed claims
If your company or nonprofit has received a wage claim, demand letter, or PAGA notice from someone who worked unpaid, the program documents and what the worker was told about pay usually decide how much of the claim survives. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving unpaid internships and volunteer classification. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The decisions are Spilman v. The Salvation Army (Cal. Ct. App., Jan. 6, 2026, A169279); Woods v. American Film Institute (2021) 72 Cal.App.5th 1022; and Benjamin v. B&H Education, Inc. (9th Cir. 2017) 877 F.3d 1139. The agency guidance is the Labor Commissioner’s Enforcement Policies and Interpretations Manual, sections 43.6.7, 43.6.8, 46.6.4, 46.6.5, and 46.8, and the U.S. Department of Labor’s Fact Sheet #71. The statute is Labor Code section 1194.2.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.