Aussie company under fire for unpaid interns: Where do you stand?

When does an internship turn into an employment relationship? That’s the question facing a Melbourne based media company that has come under fire for failing to pay interns.

Allegations against Aussie company Crocmedia have sparked debate over how much employers can allow interns to work without paying them before they are breaching the Fair Work Act. 

One intern who produced radio programs for Crocmedia, often working seven days in a week, was paid nothing during the six months she was working with the company.

Johnathan Wilkinson, who had interned for 15 months for the company, should have earned seven times more than the $2940 he was paid.

The case was taken to the Fair Work Ombudsman in June 2013.

According to Australian law, both interns should have been paid $18 per hour to comply with the minimum wage for casual workers.

Crocmedia has since paid both of the former interns all of their entitlements, but the Melbourne company may face fines for breaching workplace law. The outcome of the case could result in more legal action from any other underpaid intern who has worked for the company over the past six years.

Lucienne Gleeson, associate at PCC Lawyers, told HC that Crocmedia could have breached several sections of the Fair Work Act, including the requirement to pay the two individuals involved a rate at least equal to the national minimum wage as per the National Minimum Wage Order, and the requirement to pay casual loading applicable under the National Minimum Wage Order. Crocmedia is also alleged to have failed to provide the individuals with payslips. Penalties are being sought from the employer for each of these breaches.

“Significantly, the two individuals were at the time of their employment Award and Enterprise Agreement free,” Gleeson told HC. “If they had been covered by an Award on Enterprise then it could also have been alleged that the employer breached sections 45 (contravening a modern award) or 50 (contravening an enterprise agreement) of the Fair Work Act. If an employer breaches these provisions they can be liable for penalties of up to $55,000 for each breach.”

Gleeson also gave an explanation as to the reasoning behind Crocmedia’s legal obligation to pay the interns.

“Currently, a person that undertakes a ‘vocational placement’ within the meaning of the Fair Work Act is not considered to be an employee and is therefore not entitled to be paid for any work they undertake,” she said. “The key elements of a ‘vocational placement’ are that the placement is undertaken as a requirement of an educational or training course through an institution such as a TAFE, college or university, and it may be organised at the instigation of an educational institution or the student. If these elements are met then the individual involved is not entitled to receive pay for the placement. Outside of this arrangement unpaid internships are only legitimate if there is no employment relationship.”

Gleeson gave HC a list of questions which employers can ask to determine whether or not there is an employment relationship:

•             What work is being done?

•             Would the work usually be done by a paid employee?

•             What length of time is the internship?

•             Is much observation being carried out by the individual?

•             Who benefits from the arrangements?

“The Crocmedia case is expected to go a considerable way towards settling how much emphasis should be placed on each of these elements and whether there are any other additional issues to consider,” she said.

Vince Rogers, partner at Ashurst, told HC that employers should never assume that interns require no remuneration or support.

“Employers must ensure that they are meeting their remuneration obligations,” he said. “There can be arrangements for interns to receive certain treatments under relevant awards or schemes. Any employer needs to check what applies to their industry – the Fair Work Ombudsman would be a logical first port of call.”

Rogers added that employers’ obligations to interns are not restricted to remuneration.

“Aspects of liability, such as workplace health and safety or exposure to harassment or inappropriate conduct in the workplace are also the responsibility of the employer,” he said.

Kate Evans, executive manager of People Strategies at ISIS Group Australia, told HC that interns can prove invaluable – and that failing to remunerate them is wrong.
“My personal view is that unpaid internships aren’t fair – and you aren’t going to get someone’s true value if they’re unpaid and doing mundane jobs,” Evans told HC. “You need to give someone something that will give them a head start.”

Evans speculated about the impact on employers if there was a crackdown on remuneration for interns.

“I think that unpaid interns are often exploited for free labour – but you can’t always blame employers,” she said. “This could go two ways – it could result in interns getting meaningful work, increasing the array of things they’re exposed to, or it could result in companies choosing not to hire interns anymore.”

She added that her company works hard to source and employ paid work experience candidates. “90% of our recruitment goes on cadets,” she said.

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