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Internships: A potential minefield for employers

instructor teaches steel construction trainee how to use an angle grinder

instructor teaches steel construction trainee how to use an angle grinder

As the job market becomes increasingly competitive for university graduates, many students and young professionals are willing to take on unpaid internships to gain experience in their chosen industry. This practice is widespread in the United States, where a laissez faire approach to workplace relations means businesses can benefit from taking on unpaid workers. But Australian employment law creates strict rules about internships, and as this trend becomes more popular in Australia the Fair Work Ombudsman is cracking down on businesses that take advantage of these arrangements.

So while hiring an intern might seem like a great opportunity to inject some fresh blood into your organisation, make sure you consider the risks involved before jumping on the bandwagon.

Employee or intern – what’s the difference?

An unpaid internship is only allowed under the Fair Work Act 2009 if no employment relationship exists. Otherwise, the worker should be employed in accordance with the national employment standards and be paid minimum wage.

So what exactly is an “employment relationship”? Because employment relationships are assessed on a case by case basis, there is no hard and fast rule. As a general guide, you should consider the following factors:

Type of Work

  • What kind of work will the intern be doing? Their role should be mostly observational, such as shadowing another staff member. It’s generally okay if they will do a minimal amount of productive work, provided that work is incidental to their main role as an observer.
  • Consider how significant the intern’s contribution is to your business. If you’re relying on the intern to complete certain tasks that the business needs to function, or if they are required to do work that is normally performed by paid staff members, then it’s more likely to be considered an employment relationship.

Employment Contract

  • If both parties have entered into a binding agreement, and the individual owes legal obligations to your business, it’s more likely that they’ll be considered an employee
  • If you’ve made any representations to suggest that an employment relationship exists, you’ll have a hard time arguing that the intern shouldn’t be paid. Keep this in mind when posting any job advertisements or discussing the position in interviews.
    • The longer the term of the arrangement, the more likely the individual will be considered an employee
    • Avoid formal arrangements like requiring the intern to work for a minimum number of hours, rostering them for certain shifts, or requiring a medical certificate for any absences, as these tend to suggest there is an employment relationship

Who Benefits?

  • What is the genuine purpose of the internship – is it to provide the individual with a learning experience, or are they working for the business? In a true internship, the main benefit should be flowing to the intern, not the business
  • It should be clear that the intern is receiving a meaningful learning experience as well as other non-monetary perks, such as networking and mentoring opportunities.

Getting it wrong can have serious consequences

If you take on unpaid interns who technically should be treated as employees, you could be ordered to make lump sum back-payments for unpaid wages, as well as fined for breaching workplace laws.

In a recent case before the Federal Circuit Court, a radio and media business was fined $24,000 for breaching minimum wage conditions, in addition to having to back-pay around $50,000 to three journalism students who were producing radio shows for the company as “volunteer” workers.

Not only would this have serious repercussions for your cash flow, but it isn’t a good look if your business is attracting media attention for exploitative labour practices.

Getting it right – some tips to follow

  1. Set clear expectations from the beginning
    • in job advertisements, clearly state that the position will be unpaid and be upfront about the requirements of the role
    • use the interviewing process to answer any questions and make sure that the intern has realistic expectations
    • it’s still a good idea to have an agreement in writing to ensure that both parties are on the same page, but the intern shouldn’t owe any legal obligations to your business
    • don’t suggest that there is an opportunity for the internship to turn into employment, unless this is a real possibility
    • set fixed start and finish dates, and be reasonable about how long the intern will benefit from the arrangement – they probably don’t need to work for you for a year to learn about photocopying and administrative tasks
    • let the intern choose hours that suit them, don’t make them work set shifts or minimum hours each week
  2. Offer real perks
    • make sure there are real non-monetary perks for the intern, such as learning opportunities, industry experience, mentoring and networking
  3. Conduct regular reviews
    • schedule time to meet with the intern and make sure they are benefiting from the experience
    • monitor the intern’s work and check that they are not doing productive work for the business. In particular, make sure your staff members understand the observational nature of the role – don’t let them dump work on the intern!
    • be honest – make sure you are genuinely giving the intern an opportunity to learn from your organisation. If they’re mostly attending to administrative work and running errands for you, you need to reconsider why they are there
  4. Check insurance coverage
    • consult with your insurer and check whether the intern will be covered by your insurances – you don’t want any additional liability if the intern is hurt or suffers any loss while working for you
  5. Get professional help
    • when in doubt, seek legal advice from an employment lawyer who understands your specific circumstances

Like any commercial decision, you’ll need to weigh up these considerations and decide whether interns are worth the risk. Minimum wage may be a small price to pay when compared to the cost of dealing with legal issues in the future.


About the author:

Brittany Smeed is an employment law guru at Sajen legal. Brittany holds a Bachelor of Laws (Hons) and Bachelor of Arts (English Literature) from the University of Queensland, as well as a Graduate Diploma of Legal Practice from the Australian National University. Sajen legal is a unique law firm, specialising in the protection and growth of Australian businesses. We stand for 3 things – your business, your success and your security. We pride ourselves on being different and allowing you to benefit from that difference. Everything we do at Sajen legal is designed to develop, manage and protect the business and wealth of our clients.