Salvation Army rehab ‘enrollees’ who work at thrift stores aren’t ‘employees’

By Jonathan Bilyk | Legal Newsline
The Center Square

A few days after agreeing to let them proceed with their class action against one of America’s most prominent charities under labor and wage laws, a Chicago federal judge has ruled people who work in the Salvation Army’s thrift stores while enrolled the organization’s rehabilitation programs aren’t actually employees and can’t sue for allegedly unpaid wages.

On March 31, U.S. District Judge Manish S. Shah granted judgment to the Salvation Army on that question, shutting down the legal action that has continued against them for nearly four years.

“The Salvation Army ran thrift stores and staffed those stores in substantial part with people who participated in The Salvation Army’s residential rehabilitation program, without paying them a minimum wage,” Shah wrote in his ruling.

“Although the scale of the operation and its arguable ineffectiveness as therapy could look like plaintiffs worked a job like any other, the economic reality is to the contrary. The relationship between plaintiffs and The Salvation Army was not employee–employer; plaintiffs were independent actors who did not reasonably expect compensation when participating in the temporary program of rehabilitation services offered by The Salvation Army.”

The case had first landed in Chicago federal court in 2022, when attorneys from the firms of Cohen Milstein Sellers & Toll, of New York and Washington, D.C.; Rosen Bien Galvan & Grunfeld, of San Francisco; and Rukin Hyland & Riggin, of Oakland, California, filed suit on behalf of a group of men who were at one time enrolled in the Salvation Army’s adult rehab centers.

The lawsuit is one of a batch of lawsuits filed in Illinois, California and other states by the California law firms and others against the Christian nonprofit organization whose red kettles and large network of charitable operations and facilities are recognized throughout the country.

All of the lawsuits center on a central claim: That the Salvation Army illegally has refused to pay a minimum wage to people enrolled in their rehabilitation centers.

Those centers provide 180-day residential therapy programs designed to help participants address substance abuse and other personal problems. The centers provide participants with housing, food, clothing and counseling, among other services.

However, as part of the program, the Salvation Army requires all enrollees to participate in so-called “work therapy.” Under those conditions, participants are required to work up to 40 hours a week, mostly at Salvation Army thrift stores.

Missing or leaving work shifts could be grounds for dismissal from the rehab program. Participants are also required to abide by other rules, including staying sober, eschewing violence, following a dress code and grooming policy, and keeping curfew.

In the case in Chicago federal court, the plaintiffs sought to include participants in the Salvation Army’s Central Territory, which includes the states of Illinois, Iowa, Michigan, Minnesota, Missouri, Nebraska and Wisconsin.

The lawsuit had survived rounds of proceedings in which the Salvation Army had sought to dismiss the action.

And on March 26, Shah delivered a ruling favoring the plaintiffs, saying he agreed the plaintiffs should be allowed to move the case forward as a class action.

However, even as that question was decided, Shah was also considering a separate motion from the Salvation Army seeking summary judgment on a crucial legal question:

Whether participants in the rehab program could be considered employees under federal and state labor laws at all.

In a motion for summary judgment, a party in litigation seeks a judgment essentially declaring that the evidence in the case, or at least, the most important evidence in the case, is so strongly in their favor that the case must be decided for them without going to trial.

In their motion, the Salvation Army argued the case must stand or fall on the question of whether the rehab participants should be legally considered employees or “enrollees.”

And in the ruling, Shah said the answer to that question falls decidedly in the charity’s favor.

In the decision, Shah said the question cannot center only on the fact that the program participants provided labor at Salvation Army stores.

Rather, he said, the “assessed reality must account for the context of how plaintiffs (rehab program participants) and the Salvation Army relate to each other.”

The judge agreed that the plaintiffs had presented “plenty of evidence that it was not a good rehabilitation program” as “‘work therapy’ was not a clinically tested method of overcoming substance abuse, many plaintiffs dropped out or could not maintain sobriety and stability after leaving the program, and the work assignments were simply menial tasks with no educational or vocational training to equip participants for advancement outside the walls” of the Salvation Army rehab program centers.

And the judge noted the Salvation Army financially benefited from the “revenue generated” by its network of thrift stores, at “large scale … staffed by vulnerable plaintiffs.”

But the judge said neither the “scale” nor “the efficacy of the program” matters when evaluating claims concerning a legally defined employer-employee relationship, and cannot “suggest an alternative economic reality to the objective bargain between plaintiffs and The Salvation Army.”

The judge likened the relationship to that of a student-athlete, who voluntarily plays on an amateur sports team with minimal expectation of compensation.

He noted the program presumes the independent, voluntary participation by all enrollees at all times, as they essentially willingly provide labor in exchange for the program’s benefits.

“The Salvation Army did not force enrollment, plaintiffs understood the program, they were free to seek help elsewhere, and The Salvation Army put up no barriers to exit,” the judge said.

Shah granted summary judgment to the Salvation Army and ordered the case terminated.

Plaintiffs may yet choose to appeal.

The Salvation Army was represented in the case by attorney Toni Michelle Jackson, and others with the firm of Crowell & Moring, of Washington, D.C.