Do you legally have to pay an intern?

Legal expert offers tips for employers on how to stay compliant with internships

Do you legally have to pay an intern?

Internships in Australia are a popular option for as they are seen as a ‘win-win’ for both the employer and the student undertaking the internship.

The employer gets (generally) free labour and a chance to see what talent is coming through the university ranks, while the student gets an opportunity to see what the career they have been studying for in the past three years actually involves.

But what are the legal rights with regards to interns? What is an employer required to do under the respective legislative work laws?

What is an intern? And do you have to pay them?

“The first thing a business needs to ask itself is what kind of relationship it is entering into,” Jo Alilovic, director, 3D HR Legal said.

“There are lots of people who use words like volunteers, interns, work experience and traineeships interchangeably without understanding the nuances between them.”

An intern is someone completing an internship which is a fixed period of time during which the intern undertakes work experience.

Where the work is substantially observing others, learning, and developing skills, there will not be a legal obligation to pay the intern, however, where the intern is doing work that is required to be done in order for the business to run, and which the business would otherwise be paying an employee to do, then the relationship may change from one of work experience to one of employment, said Alilovic.

“In that case, the intern will be legally entitled to payment for their work.”

An initial simple question to help decide if payment needs to be made is to ask: “Who is getting the main benefit of the arrangement? The intern or the business?’” she said.

“An exception to this is people who are in a vocational or student placement. For example, some university degrees require a person to complete one or more placements in order to complete their degree such as teachers and physiotherapists for example. Given this is a requirement of a degree, the placement can be lawfully unpaid, even where the individual is performing valuable work.”

Employers taken to court over internships

If an employer fails to properly understand the relationship with a worker, this can lead to significant cost for a business. For example, if an intern is found to be an employee, they can bring a claim against the business for unpaid wages and entitlements, and the business may also be subject to prosecution for breach of the relevant award and legislation.

In the case of Fair Work Ombudsman v AIMG BQ Pty Ltd & Anor, it was deemed Nan Shen, who was engaged as an ‘events coordinator intern’ was in fact an employee, while Yue ‘Cindy’ Ma was underpaid.

The judges ruled that the company breached the Clerks – Private Sector Award 2010 and the Fair Work Act 2009 - and did not pay minimum amounts of pay, casual loading, overtime, annual leave loading, did not classify the positions in writing or the hours of work, and fined the company $272,000.

“If the intern is not an employee, then none of the employment benefits apply to them,” Alilovic said. “But they do have other rights. For example, they have the right to work in a workplace free from harassment and discrimination. Vocational/student placements organised by higher education facilities also usually place conditions and responsibilities on host employers.”

If a business is wanting to maintain a true intern relationship, then it is important that the intern (and those working with them) understands their role, she said.

“Conditions need to include ensuring that work activities are primarily observational such as attending and watching meetings or designed to help the intern learn or develop work skills.”

Time limits for internships

There are no time limits on how long a company can engage an intern, with employers generally utilising the services for under a month; however, the longer an employer keeps an intern working for them, the more likelihood they will be classified as an employee and forced to start paying them all the legal requirements that an employee is entitled too.

“Most vocational/student placements tend to range between two weeks and three months,” said Alilovic.

If wishing to hire an intern, it is recommended that a business create an intern program that specifically describes the type of work the intern will be involved in, which team they will work with, who they will report to and how long the program will last, she said.

“All working arrangements, including internships, are subject to the minimum working age in each state or territory. For example, in Western Australia, children as young as 13 can work in a shop, fast food outlet, café or restaurant so long as they meet conditions including having written permission from their parent.”

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