Many employers understandably believe that their business can
provide valuable training, experience and education to unemployed
individuals and students, and therefore see a mutual benefit to
hiring unpaid "interns". However, employment standards
legislation in most jurisdictions only permits interns to be unpaid
in very limited circumstances, and employers can find themselves
facing significant fines or court damages for failing to pay and
provide employment benefits to people they called interns, but who
are in fact deemed to be employees at law.
In addition to the potential legal liabilities, unpaid
internships in Canada and the U.S. are now posing a risk to
employers' reputations as well. Indeed, a national news story
from Canada released just this week highlights a growing backlash
against unpaid internships, framing them as
"exploitation" and alleging harsh practices on the part
of employers, including refusals to provide references to interns
who will not work over 50 hours a week without pay.1
A decision from the State of New York in 2013 exhibits the
reputational and legal damage that may result from improper use of
unpaid interns. In Glatt v. Foxsearchlight Pictures
Inc.,2 ("Glatt") a number of
unpaid interns who had worked on the production of films including
"Black Swan" and "500 Days of Summer" brought
an action against Fox Searchlight and related companies, alleging
that the interns had in fact been employees and were entitled to
pay. The Court sided with the interns, granting judgment to certain
of them and certifying a class action on behalf of others. Not only
was this decision picked up by several news outlets, but one can
imagine the potentially enormous liability that a class action by
unpaid interns could impose on a large employer.
The recent Canadian news story indicates that there are an
estimated 300,000 unpaid interns in Canada working for some of the
"biggest, and wealthiest corporations." The story also
notes that Federal NDP MP Andrew Cash has now tabled a private
members bill to crack down on the practice, with similar pressure
being placed on Ontario's government. Such developments will be
important for employers to follow.
However, even without new legislation to crack down on unpaid
internships, employers hiring unpaid interns in Ontario must tread
carefully. The Employment Standards Act, 2000
("ESA") and regulations, which, among other things,
prescribe minimum wage, overtime entitlements and required rest
periods, apply to all "employees" who work in Ontario.
The ESA defines "employee" broadly and specifically
includes "a person who receives training from a person who is
While certain types of employees are excluded from certain
provisions of the ESA, the only exceptions applicable to unpaid
internships are for educational work placements. In order to
qualify as an educational work placement, the intern must be a
student and the placement must be approved by the intern's
school board, college or university to be used in connection with
the intern's specific educational program. Further, even where
an unpaid internship is approved, it must be properly papered
between the employer, educational institution and intern to cover
off respective obligations, including who will be providing
Workplace Safety Insurance, if applicable.
With a growing class of largely young, skilled and educated
unemployed individuals in both Canada and the U.S., along with the
still recovering economy, it is inevitable that there will continue
to be a growing supply and demand for willing unpaid interns.
However, this is likely to lead to serious problems for employers
who fall into the trap as, just with the Glatt case,
interns may pursue legal recourse after having agreed to
and having received the full benefit of the unpaid internship.
Indeed, an agreement to contract out of minimum rights under the
ESA is invalid. Employers should therefore be wary of hiring any
unpaid interns and we recommend that legal advice be sought before
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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