Warning to employers about unpaid work experience arrangements

Many electrical contractors make use of persons gaining “work experience” without reward. Unpaid internships, work experience and some unpaid work trials are lawful under the Fair Work Act 2009. However, it is important to be sure that any person doing unpaid work is not in an employment relationship with your company. 

If there is an employment relationship, then your company has the obligation to pay them the minimum wage and applicable Award entitlements.

In a recent decision by the Federal Circuit Court, a company was fined more than $200,000 and its director more than $8,000 for disguising an employee as an unpaid intern. The Court found the worker had performed 180 hours of work over four months for the company and that the company had exploited the worker by not paying them after deriving a benefit from their work. 

In imposing the significant penalties, the Court said it is important to send a clear message to employers to not “disguise employment relationships as unpaid internships and thus deny employees their required minimum entitlements”.

So how do you determine whether there is an employment relationship? Here are a few questions that will help you.

If you answer ‘yes’ to the following questions, it is more likely to be an employment relationship

  • Does your company benefit more from the relationship than the person does? Yes/No.
  • Was the purpose of the arrangement to obtain the person’s assistance with the ordinary operation of your business? Yes/No.
  • Does the work involve productive work for your business? Yes/No. 
  • Is the person expected to attend and perform work? Yes/No.
  • Would your business have otherwise engaged a paid employee to perform the same role? Yes/No.

If you answer ‘yes’ to the following questions, it is more likely to be a legitimate unpaid work experience arrangement:

  • Does the person benefit more from the relationship than your company does? Yes/No.
  • Is the person’s role mostly observational? Yes/No.
  • Does the arrangement involve meaningful learning, training and skill development for the person? Yes/No.
  • Is all productive work done by the person important to this learning or training process? Yes/No.
  • Does the role form part of the formal work experience component of an authorised educational or training course? Yes/No.

[Fair Work Ombudsman v AIMG BQ Pty Ltd & Anor (2016)]

Disclaimer: The above information is not legal advice but a very brief summary of some indicators of a legitimate workplace experience arrangement. You should contact NECA Legal (WA) Pty Ltd to discuss legislative obligations on (08) 6241 6129 or email necalegalwa@ecawa.org.au.