A media company, Crocmedia Pty Ltd, has recently been fined $24,000 by the Federal Circuit Court of Australia for unlawfully engaging two workers on unpaid work experience arrangements, following legal action brought by the Fair Work Ombudsman (FWO).
Crocmedia operates in the sports media and entertainment sector,and develops and sells radio and television programs for broadcast.
The company had been approached by a journalism graduate (aged 23 at the time) and a sports journalism student (aged 20 at the time) seeking work experience in the media industry.
Initially, the arrangement involved a three-week period of unpaid work experience at Crocmedia. Following this, however, the student and the graduate performed six months and 12 months work, respectively. This routinely involved working multiple shifts each week, including at night, producing radio programs that were being broadcasted.
During the two latter periods, Crocmedia classified the student and graduate as 'volunteers', and made flat-rate payments, described as 'reimbursement-for-expenses', to them for each shift. Neither the student, nor the graduate, was paid any wages.
The workers lodged complaints about their unpaid work arrangements with the FWO, who investigated the complaints.
Crocmedia fully co-operated with the FWO during its investigation. The company admitted to inadvertently breaching workplace laws by not paying the workers, in circumstances where it had been of the view that it was a legitimate arrangement which allowed the workers to gain valuable work experience.
Crocmedia also fully back-paid the workers who had complained, as well as a third employee whose unpaid work arrangement was deemed unlawful by the FWO during the investigation, and took steps to replace all unpaid volunteer positions with paid casual or part-time employees.
Claim for penalty in the Federal Circuit Court
Despite Crocmedia's co-operation and payment of reparations toaffected workers, the FWO launched legal proceedings seeking a penalty against Crocmedia in respect of the under-payments.
The FWO makes clear that it initiated proceedings because of the "strong public interest in deterring employers from significantly underpaying young workers' entitlements through unpaid work arrangements" 1.
The FWO sought penalties in respect of four contravention types:
- Failure to pay minimum wages;
- Failure to pay casual loadings;
- Failure to pay in full, at least monthly; and
- Failure to provide pay slips.
The evidence in the case established that journalism students frequently approach employers, such as Crocmedia, seeking work experience in order to give them a competitive advantage in searching for employment in the industry. The Court noted that this evidence was consistent with a FWO report on unpaid work released in January 2013 - "Experience or Exploitation? The nature,prevalence and regulation of unpaid work experience, internships and trial periods in Australia" 2.
The Report particularly notes the print and broadcast media industries as having the greatest prevalence of unpaid internships and work experience, and expresses concerns about common occurrences of unlawful and exploitative unpaid work arrangements in Australia.
In handing down an aggregate penalty of $24,000 to Crocmedia, Judge Riethmuller stated that the concerns noted in the Report were "well founded" and warned that profiting from volunteers is not acceptable conduct, and that penalties will likely increase due to the increase in public awareness about the issue of unpaid work schemes.
Key lessons for employers
In light of the FWO's increasing focus and interest in pursuing unlawful unpaid work schemes, particularly in the media industry, employers should take stock of their current volunteer arrangements to ensure that these arrangements either fall within the specific exception in the Fair Work Act for vocational placements, or can genuinely be regarded as unpaid internships or work experience that do not involve an employment relationship.
The Fair Work Act 2009 provides that a worker who is engaged under a vocational placement is not a national system employee, and therefore is not required to be paid wages.
A "vocational placement" is defined as a placement that is:
- Undertaken with an employer for which a person is not entitled to be paid any remuneration; and
- Undertaken as a requirement of an education ortraining course; and
- Authorised under a law or an administrative arrangement of the Commonwealth, a State or a Territory.
A key aspect of a vocational placement is that it is required by the student's education provider.
Genuine unpaid internships or work experience
If an unpaid work arrangement is not a vocational placement, it can only be considered a genuine unpaid internship or work experience if no employment relationship has been created. If an employment relationship has been created, your business will be required to pay the person wages.
Unpaid work experience placements and internships are less likely to create an employment relationship if:
- The arrangement is mainly for the benefit of the person – if the arrangement involves a requirement of productive work from the person, rather than simply providing an opportunity for learning and observation, the arrangement is likely to be an employment relationship;
- The period of the placement is relatively short – generally, the longer the period of the arrangement, the more likely that an employment relationship will be created; and
- The arrangement is insignificant to your business – if the arrangement involves the person performing work which might ordinarily be performed by paid employees, or your business needs the work to be done, the arrangement is likely to be an employment relationship.
1FWO media release, 'Company fined $24,000 over unpaid work scheme', 29 January 2015.
2 Andrew Stewart and Rosemary Owens, "Experience or Exploitation? The nature, prevalence and regulation of unpaid work experience, internships and trial periods in Australia". Report for the Fair Work Ombudsman, January 2013.
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