Unpaid interns become expensive work experience for an employer

The Federal Circuit Court of Australia recently imposed penalties on Crocmedia Pty Ltd (Crocmedia) of $24,000 for breaches of the Fair Work Act 2009 (Cth) primarily due to its failure to pay two interns their statutory entitlements as employees.

The two interns were initially engaged for three weeks’ unpaid work experience.  Upon completion, Crocmedia engaged the two interns to produce radio programs that were broadcasted on the SEN radio network.  Whilst carrying out their duties as producers, Crocmedia classified the interns as either volunteers or contractors.  The interns were only reimbursed for their “expenses” of approximately $75 to $120 per shift.

For the period the two interns were engaged as volunteers or contractors, the payments for expenses made to the two individuals by Crocmedia totalled $17,720.  Following an investigation into the arrangement by the Fair Work Ombudsman, it was agreed by the parties that the interns had been in fact casual employees after they had completed the three weeks’ work experience and were therefore entitled to payment for the hours worked and minimum entitlements in accordance with the Fair Work Act 2009 (Cth).  Crocmedia agreed to pay the two interns all their minimum wages totalling $22,168.08 and did not seek to set off the expense payments totalling $17,720 that it had previously made.

The Court imposed penalties on Crocmedia of:

• $12,000 for failing to pay minimum wages;
• $9,000 for failing to pay casual leave loadings;
• $2,000 for failing to pay wages in full, at least monthly; and
• $1,000 for failing to provide pay slips.

Whilst the Court was not persuaded that Crocmedia had been openly defiant of the law, the Court found that Crocmedia could not “avoid the proposition that it is, at best, dishonourable to profit from the work of volunteers, and at worst, exploitative.”

The Court also said that:

The arrangements for work experience are a difficult topic within employment systems.  This case does not involve circumstances, where, at the end of the day, the arrangements could, on any view, be categorised as ongoing work experience or an internship.  Profiting from “volunteers” is not acceptable conduct within the industrial relations scheme in Australia.

Dealing with work experience arrangements in the workplace

When assessing whether an arrangement can be genuinely considered to be work experience, relevant considerations for employers include the following:

• The length of time the arrangement continues.  The longer the arrangement, the more likely it could be deemed to be an employer/employee relationship.
• The beneficiary of the arrangement.  The arrangement should be for the benefit of the person receiving the experience rather than the business.
• What tasks the person carried out.  If the person is required to undertake productive activities, particularly where the business is charging a client for the completion of those activities, the more likely it is that an employment relationship exists.
• What reason there was for the arrangement.  Work experience should be exactly that, for work experience.  The more the person is required to assist with the ordinary operation of the business, the more likely the arrangement is one of employment.
• Whether the activities of the person are significant to the business.  If the activities of the person would normally be carried out by a paid employee of the business, the arrangement is more likely to be one of employment.

Employers should not however confuse work experience or internships with vocational placements which are provided for under the Fair Work Act 2009 (Cth).

For further advice on this topic, please do not hesitate to contact a member of the Employment and Workplace Relations Team.