The Fair Work Ombudsman has announced an investigation into the way Australian businesses and organisations are approaching work experience placements, internships and unpaid 'trial periods'. There is concern that many young people undertaking these arrangements are actually performing the roles of 'employees' and should be entitled to be paid for their services. The investigation may result in changes to the Fair Work Act 2009 (Cth) (FW Act).

Who is an employee?

Any person, whether engaged as an intern, work experience student or volunteer, should be paid a wage if that person can be defined as an 'employee' of the business.

The FW Act does not define who is an employee, but does expressly exclude from the definition of an employee any person undertaking a 'vocational placement'. Vocational placements are unpaid placements undertaken as a requirement of an education or training course (section 12 of the FW Act).

If you receive a request from a university, TAFE or individual student to complete a work experience or internship placement for academic credit or as a prerequisite to graduation, then in most circumstances it will be a vocational placement and the student will not be considered to be an employee under the FW Act.

For all other prospective interns, employers must ensure the arrangement does not give rise to an employment relationship at common law or they will be legally entitled to employee benefits. A number of factors will need to be considered.

If the employer and intern intended the arrangement to be unpaid, then this will be relevant, but not determinative. It may be outweighed by factors such as the duration of the arrangement and the type of work performed.

For example, the longer the internship, the more likely the intern will learn skills and be able to produce sophisticated work rather than simply observing and trialling tasks. A full-time internship compared to a part-time internship may also indicate the intern is engaged to perform productive work. If an intern is engaged in a professional services firm and the intern's work is charged out to clients, then this will be indicative of the intern undertaking normal employee work.

Failing to pay an intern who would be properly defined as an employee constitutes a breach of the civil penalty provisions of the FW Act, which can result in penalties being imposed for the breaches and orders requiring the business to back pay the intern for time worked at an appropriate wage rate for the work performed.

The challenge for businesses is to properly categorise the relationship before commencing the internship to ensure that both parties are clear about why the student or young person is taking on the internship and what the parties expect from each other... and then stick to it. Shorter period internships are less likely to be challenged as interns should not be used as a substitute for work that might otherwise be performed by employers.

Additionally, in many Australian states and territories paid and unpaid interns are also considered to be employees for the purpose of equal opportunity legislation, including prohibitions on sexual harassment in the workplace. Businesses will also have occupational health and safety obligations towards interns and work experience students under the new model work health and safety laws or the relevant state or territory health and safety laws.

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