Home' HR Monthly : March 2017 Contents March 2017 HRMonthly 47
nternship and work experience programs are
commonplace in many industries. They can
provide essential practical training for students
and recent graduates, while giving employers a
“trial period” in which to assess potential future
employees. For less scrupulous companies,
interns also represent a limitless pool of free
labour. It is not surprising then that responses to
an intern survey ranged from “valuable learning
experience” to “slavery”.
Regardless of the exact name or shape, all
internship programs face legal risks. This is
because Australian law maintains a binary
conception of employment: an individual is
either an employee, and thereby entitled to the
full range of employment protections, or not.
The current scheme has little room for lesser
shades of employment: paid interns, unpaid
interns and the like.
It follows that where an employment
relationship is objectively considered to
exist between a company and an intern, the
latter is entitled to pay and other benefits in
accordance with the relevant award. Where
proper remuneration has not been provided,
the company risks legal action from aggrieved
interns and prosecution by the Fair Work
The cost of turning a blind eye
The ombudsman has been pursuing internship
cases with vigour lately, successfully seeking
a total of over $300,000 in penalties against
several companies over the past two years.
Penalties are usually imposed in addition to full
payment of entitlements to the interns involved.
While some of the penalties paid in
early cases – $17,500 in one, $24,000 in
another – may not provoke immediate fear,
Judge Riethmuller sounded an ominous word
of caution in a 2015 case involving media
“There can also be little doubt,” the federal
circuit cou rt judge observed, “that the penalties
are likely to increase significantly over time as
public exposure of the issues in the press will
result in respondents not being in the position
of being able to claim that a genuine error of
categorisation was made.”
In other words, turning a blind eye to the
risks posed by internships will no longer suffice.
Where’s the dividing line?
Unfortunately, determining as a matter of
law how an intern should be classified is
fraught with difficulty, as neither case law nor
statute offers a clear dividing line between
employee and non-employee in this context.
An individual’s attendance at a workplace
for a matter of weeks in a predominantly
observational capacity will not satisfy the
criteria of an employment relationship.
Conversely, a three-month program where
the intern works regular hours and undertakes
productive work in a position indistinguishable
from junior employees will almost certainly
amount to employment. Where the middle
grou nd falls is unclear.
Herein lies the dilemma: for an internship
to be useful for both parties, interns need
to be engaging in proper work and not
simply sitting around ‘making coffee’. Yet
that important characteristic is the very
thing that exposes companies to risk. As
the ombudsman explained: “Where the
arrangement involves productive work
rather than just meaningful learning,
training and skill development, it is likely to be
an employment relationship.”
The obvious solution is to employ interns
on a fully award-compliant basis – that is, to
engage the individuals as short-term employees.
However, in many cases this defeats the purpose
and leaves little incentive for prospective
employers to run such programs.
A more comprehensive way to avoid these legal
risks is to take advantage of the vocational
placement exception in the Fair Work Act. This
excludes from the Act’s coverage individuals
undertaking unpaid work as a requirement of
an authorised educational or training course.
Aligning an internship program with a local
school, university or training college would
therefore be a prudent risk mitigation strategy.
While such an approach may limit flexibility,
this seems a small price to pay to ensure a
legally compliant scheme.
If the current oversupply of graduates in many
professions continues, internships may become
even more commonplace. In this context,
companies need to tread carefully in devising
and operating their own internship programs.
When the various pitfalls are minimised,
internships can be a valuable experience for
both parties. Offered without due regard to the
legal risks, an attempt to attract free labour can
become very expensive.•••
Experience vs exploitation
Internships can be valuable for employer and student alike.
Beware, though, the legal pitfalls.
BY JOHN WILSON AND KIERAN PENDER, BRADLEY ALLEN LOVE
rather than just
training and skill
development, it is likely
to be an employment
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17/02/2017 5:29 PM
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