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Jose Velasquez pleaded guilty in Santa Barbara County Superior Court to a felony count of forgery. (Pen. Code, § 476.) The court suspended pronouncement of judgment, placed Velasquez on supervised probation for three years with terms, including that he “[e]nter and complete a residential treatment program as directed by Probation.”

Velasquez entered The Salvation Army’s residential adult rehabilitation center in Santa Monica for substance abuse treatment. The Salvation Army is a private, nonprofit organization. Its residential treatment program is a six-month program provided at no cost to the beneficiaries. The program includes 12 hours per week of counseling, attendance at weekly religious services, meditation, and a work therapy component during which participants work in The Salvation Army’s warehouse. The work therapy component is designed to help individuals become productive members of society.

Velasquez was injured while moving furniture at The Salvation Army’s warehouse and sought workers’ compensation for his injuries. Both The Salvation Army and the County denied his claim for benefits.

At the administrative hearing, the workers’ compensation judge (WCJ) identified the issue as: “Employment and whether the applicant was an employee of Defendant The Salvation Army when he was the beneficiary of a Court-mandated drug diversion program per Labor Code Section 3352. [¶] The parties further raise the applicability of Labor Code Section[s] 3351 and 3301.”

During the program, Velasquez had no contact with the County. But The Salvation Army contacted his probation officer and reported everything he was doing and how he behaved. Velasquez was required to show his probation officer his program graduation certificate.

The WCJ concluded Velasquez was not an employee of either The Salvation Army or the County, and ordered he “take nothing” against either. The WCJ acknowledged that Velasquez’s work “conferred a benefit upon the Salvation Army.” But he reasoned The Salvation Army was not an employer because it was “sponsoring” Velasquez pursuant to section 3301, subdivision (b), “as a condition of his probation to get him clean and sober.” The WCJ concluded: “Based upon this statutory scheme and the societal interest in having private, non-profit organizations working with County and State prosecutors and government in terms of probation and drug and alcohol intervention, that societal interest outweighs the workers’ compensation general interest of finding persons to be employees whenever possible.”

On May 31, 2022, the Board issued its opinion and decision after reconsideration, affirming the WCJ’s order. The Board concluded The Salvation Army was exempt from providing workers’ compensation as a nonprofit sponsor (§ 3301, subd. (b)), and the County did not employ Velasquez because it did not exercise control over his working conditions. (Velasquez v. Salvation Army (May 31, 2022, ADJ 11436476) 2022 Cal.Wrk.Comp. P.D. LEXIS 162.)

In briefing filed in the Court of Appeal in this case, the Board requested “the Decision be annulled and this matter remanded to the Appeals Board for further consideration” whether Velasquez was an employee of the County, and whether The Salvation Army was his employer. Velasquez and the County oppose the request.  

Employee excludes “a person performing services in return for aid or sustenance only, received from any religious, charitable, or relief organization.” (§ 3352, subd. (a)(2) (former subd. (b).) “Employee” also excludes “[a] person performing voluntary service for a public agency or a private, nonprofit organization who does not receive remuneration for the services, other than meals, transportation, lodging, or reimbursement for incidental expenses.” (§ 3352, subd. (a)(9) (former subd. (i).)

Velasquez also contends he was an employee of the County. He relies on the probation department’s role in his enrollment in The Salvation Army program. The County denies it had an employment relationship with Velasquez.

The Board concedes its decision on reconsideration relied upon erroneous legal analysis and that there has been no evidentiary review or factual findings in this case with respect to whether the County was Velasquez’s employer.

Section 5908.5 mandates that “[a]ny decision of the appeals board granting or denying a petition for reconsideration or affirming, rescinding, altering, or amending the original findings, order, decision, or award following reconsideration . . . shall state the evidence relied upon and specify in detail the reasons for the decision.” “This procedural demand aims at revealing the basis of the Board’s action, at avoidance of careless or arbitrary action, and at assisting meaningful judicial review.” (Patterson v. Workers’ Comp. Appeals Bd. (1975) 53 Cal.App.3d 916, 924.)

“As the Board concedes, the record contains insufficient factual findings and legal analysis from the Board so this court can conduct a meaningful judicial review of the question whether Velasquez was an employee of the County. The Board’s failure to comply with section 5908.5 constitutes a sufficient basis to annul the Board’s decision and remand for further proceedings.”

The Court of Appeal concluded: 1) The Salvation Army is statutorily excluded from being an employer for workers’ compensation purposes under section 3301; and 2) the record was inadequately developed during the administrative proceedings to determine whether the County was Velasquez’s employer. The latter issue must be remanded to the Board for further consideration. Accordingly, it affirmed in part, annulled in part, and remanded the matter for further proceedings in the published case of Velasquez v WCAB -B321638 (December 2023).