The recently decided case of The Fair Work Ombudsman v Crocmedia Pty Ltd provided a hard learned lesson for employers about the importance of correctly classifying and remunerating employees. The case highlights the importance of understanding that employment relationships have a legal definition and employer’s cannot simply dressed up employment as an unpaid internship or work experience in order to escape any obligation to remunerate pursuant to the Fair Work Act 2009 (“FWA”).  

The decision in this case followed a report released for the Fair Work Ombudsman conducted by Adelaide University Law School in January 2013, which examined whether unpaid work engagements are considered experience or exploitation. The report noted the rise of unpaid work arrangements in Australia. It also found a corresponding increase in employers engaging in illegal work practices in this regard contrary to the requirements of the FWA.

The report identified the main group of workers who are susceptible to risk are younger people looking to get a start in employment (including university graduates and migrant workers). The two main potentially exploitative unpaid categories of work were identified as work experience placements and internships.

The Fair Work Ombudsman is the body that  investigates and commences proceedings against businesses that breach their obligations under the FWA. Although there are some legitimate exceptions permitting unpaid arrangements, for example genuine vocational placements. These exist when the placement is undertaken as a requirement of an educational or training course through an institution such as a TAFE, or university at the instigation of the educational provider or student. However, employers must carefully assess every placement against a range of factors to ensure compliance with the FWA.

Ultimately, a flawed placement could result in a legally binding employment relationship, which entitles the worker to minimum wage and other benefits typically associated with employment. Employers are encouraged to consider at a bare minimum the following, prior to entering into a work experience internship or voluntary arrangement:

(a) the purpose of the relationship – is it the relationship truthfully tailored to providing work experience to the person or is it to get the person to do work to assist with the business outputs and productivity? An example would be a work experience placement being asked to do universal mailing while undertaking a marketing placement post university qualification;

(b) the length of time the placement continues over is also a guiding litmus test for employment. Generally, the longer the placement, the more likely the person is considered a statutory employee;
 
(c) does the person have productivity obligations imposed upon them? Although the person may do some productive activities during a placement, they are less likely to be considered an employee if there is no expectation of productivity in the workplace;
 
(d) does the person benefit or the business from the arrangement, if the main benefit of a genuine work placement or internship is not considered as flowing to the person doing the placement and the business is gaining a significant benefit as a result of engaging the person, this may indicate an employment relationship has been formed.

As previously mentioned, if the placement was a vocational placement (as defined) then it is less likely that an employment relationship can be shown to exist. Another factor that may guide employers is considering whether the unpaid work experience placements are primarily observational.

This article is designed to draw attention to the traps that employers may unwittingly find themselves in when considering an unpaid work experience or internship role, it is by no means a substitute for considered legal advice. If you are in doubt as to whether a work experience or intern placements may expose your business to possible prosecution, please contact Tim Trezise on (02) 9390 8337 for further advice.

Tim Trezise
Senior Associate
T: 02 9390 8337
E: tim.trezise@holmanwebb.com.au