Unpaid work placements – sometimes defined as “internships” or “on-the-job training” – can be perfectly legitimate and a good way for ambitious young things to get a foot in the door. Or they can be gross exploitation of the young and economically vulnerable. Not to put too fine a point on it, but wage theft is illegal and can carry heavy penalties for employers who skate too close to the edge.

Both employers and workers clearly need to know the difference. Fortunately, the Fair Work Act 2009 provides guidance, and prior disputes offer helpful examples. Both employers and workers should be very careful when offering or accepting unpaid work placements, however. 

Fair Work Act rules

The Fair Work Act establishes minimum wages, conditions and awards for various kinds of employment. The theoretical question with unpaid work placements is whether the tasks the worker is asked to perform amount to “employment.”  That depends on two sub-issues:

• What the intentions of the parties were; and
• Whether this is a vocational placement that is part of an education or training course. 

The first question is harder than the second because intentions are often mixed and incompletely expressed. What matters are the details of the relationship, not how either party describes it?
 
The following factors are important:

• What is the purpose of the arrangement? If the arrangement involves productive work rather than meaningful learning, training and skill development, it is likely to be an employment relationship.
• How long is the arrangement for? The longer the duration of the arrangement, the more likely the person is an employee. 
• Is the work normally performed by paid employees? Does the business or organisation need this work to be done? If the intern is substituting for a paid employee who is on holiday, for example, the arrangement should likely be seen as paid employment.
• What role does learning play?  An employment relationship is less likely to be found if the worker’s role is largely observational and does not primarily benefit the organisation.
• Who benefits from the arrangement? The main benefit from a legitimate unpaid work placement should be to the intern or trainee. If the business gains a significant economic benefit from the person’s work, an employment relationship is more likely to exist. 

Examples

Truthfully, the difference is easier to illustrate than define. If, for example, someone goes to work for a charitable organisation and neither the organisation nor the individual expects payment, then the relationship will likely not run afoul of the Fair Work Act.
 
If an unpaid job placement is part of an educational or vocational training course and is expected to give students important skills to help them transition from study to work, it will also likely meet the requirements of the Fair Work Act. If the worker’s internship or training period is not part of a formal educational program but is brief and involves extensive mentoring and training, it may also qualify.

If, on the other hand, an applicant interviews for a paying job and is then asked to perform an unpaid “work trial” for an indeterminate period of time to determine his or her suitability for the job, the unpaid placement would likely violate the Fair Work Act. An unpaid internship that offers little or no training and instruction is similarly problematic.

Proceed with caution

Are you considering offering unpaid work placements? Many unpaid arrangements do not qualify under the terms of the Fair Work Act. The penalties are not worth it for employers who are trying to save a little money. Even organisations that mean well and intend to offer opportunities to workers can find themselves in trouble if they operate outside of the legal guidelines. It's best to seek legal advice before proceeding with any unpaid arrangements. 

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