Charging for unpaid internships?

There have been stories in the media recently about employers charging students and graduates for the privilege of participating in an unpaid internship.  Setting aside whether an internship is a necessary step to build a career or exploitation of a vulnerable group, employers engaging interns should take note. The law around offering work experience and internships is clear and the penalties for getting it wrong can be significant. 

Photography / Stocksy

Photography / Stocksy

Late last year, the Fair Work Ombudsman obtained orders that a sushi outlet, along with its manager and external accountant, pay penalties of close to $200,000 in connection with unlawful internship arrangements. In a statement about that case, the Fair Work Ombudsman, Ms Natalie James said “My Agency has no tolerance for those who deliberately target the vulnerabilities of young workers, especially migrant workers, for their own financial gain”.

Employers can legitimately offer work experience placements to students if the placement is required as part of an approved education or training course. Various rules apply including that:

  • there must be no entitlement to payment;
  • the placement must be undertaken as a requirement of an education or training course; and
  • the placement must be an authorised placement.  Courses offered by universities, TAFE colleges and schools will typically meet this test.

Companies engaging interns that do not meet the above rules should take care to ensure that their interns do not perform productive work in an employee like way.  An intern who performs productive work that benefits the company will likely be an employee and entitled to salary and other employment related benefits. Unpaid interns should be engaged to watch, learn and gain experience relevant to their industry or profession. The benefit of the internship should favour the intern – not the company and be for a short duration.

As Ms James said in a recent medial release, “The system allows for unpaid work in some circumstances – for example, where they are part of an approved program. But the law prohibits the exploitation of workers by characterising them as ‘interns’ or as doing ‘work experience’ when those individuals are fulfilling the role of an employee. Such workers must be paid minimum employee entitlements.”  This is a timely reminder for employers to review their internship processes and address any non-compliant arrangements.

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