20 Jan 2020

Commercial Litigation Director, Murray Thornhill and Lawyer Kai Yuin Yeo look into the legalities around unpaid internships.

20200120 Employment Unpaid Internships

 

Unpaid work experience or internships are often sought by young people as a first step into the workforce and a stepping-stone to permanent employment. Some businesses also require potential employees to work a trial shift or period unpaid to assess their suitability for the job.

 

Work undertaken as part of unpaid internships and trials may open up claims against businesses for back pay of wages and employee entitlements if it is work that the person undertaking the unpaid work should have been paid for. The legality of such work is unclear because whilst the Fair Work Act 2009 (Cth) specifies the requirements for unpaid vocational placement, it does not provide guidance on the legality of other types of unpaid work.

The Courts frown upon conduct by businesses that, even if not ‘openly defiant of the law’,[1] are profiting from volunteers, or even exploiting them. As Justice Altobelli stated in Fair Work Ombudsman v AIMG BQ Pty Ltd, ‘there is a need to send a serious message to [employers] that the Court will not countenance attempts to disguise employment relationships as unpaid internships and thus deny employees their required minimum entitlements’.[2]

It is clear in such cases where businesses systematically engage or accept unpaid internships and expect these interns to conduct productive work that the businesses are exploiting them. However, the line is often blurred between a legitimate unpaid work experience or internship and employment disguised as an unpaid internship.

Does an employment relationship exist?

In determining whether businesses should be treating unpaid interns as employees, the law requires an assessment of various factors to determine whether an employment relationship exists. If an employment relationship exists, the unpaid intern will be entitled to wages and benefits as an employee.

Factors suggesting that an employment relationship exists include:

  1. the work done by the intern is work that would be done by a paid employee;
  2. the business charges clients for work done by the intern;
  3. the business expects the intern to come in regularly to do productive work; and
  4. the business is getting the main benefit of the arrangement.

Each case will turn on its own specific circumstances.

A new precedent for determining the legality of unpaid internships?

There are currently Federal Circuit Court proceedings brought by a young footballer against Central Coast Mariners. which may provide clearer guidance as to the legality of unpaid internships or trial periods. The footballer, Mr Moric was required to serve an unpaid trial period for over three months and did so because he was promised a professional contract. However, he was never offered the professional contract and was under financial strain from being unpaid for several months. Therefore, the Federal Circuit Court may be required to make a determination on the legality of Mr Moric’s unpaid trial and whether he is entitled to unpaid wages and damages for the period of the unpaid trial.

This case could set a precedent for unpaid work generally and is one to look out for.

What can HHG do?

If you are not sure about your obligations as an employer or are undertaking unpaid work, our employment lawyers can help you.

[1] Fair Work Ombudsman v Crocmedia Pty Ltd [2015] FCCA 140.

[2] [2016] FCCA 1024, [117].

*This is general information only, and does not constitute specific legal advice. Please consult one of our experienced Legal Team for specific advice relevant to your situation.

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