July 2019 | James Freidman

In January of 2013, the Fair Work Ombudsman report entitled Experience or Exploitation: The Nature, Prevalence and Regulation of Unpaid Work Experience, Internships and Trial Periods in Australia, found that ‘unpaid work exists on a scale substantial enough to warrant attention as a serious legal, practical and policy challenge in Australia.’ Since 2013, unpaid working arrangements and ‘internships’ have continued to rise in Australia.

What does the law say?

Under the Fair Work Act 2009 (Cth) whether any type of unpaid working arrangement is lawful will depend on

  • whether an employment relationship/contract exists, or
  • whether the arrangement involves a vocational placement.

Determining whether an employment contract exists requires a return to common law principles of contract. An employment contract will exist where:

  • the parties intended to create a legally binding agreement.
  • there is a commitment to perform work for the benefit of the business or organisation.
  • the person performing the work is to get something in return (this can be experience or training.
  • the person must not be performing the work as part of a business of their own.

There are various forms of unpaid working arrangements which are explained below.

1.   Vocational placements.

The Fair Work Act provides that ‘vocational placements’ are lawfully unpaid regardless of whether an employment relationship/contract exists. A vocational placement is one that is:

  • undertaken with an employer for which a person is not entitled to be paid any remuneration; and
  • undertaken as a requirement of an education or training course; and
  • authorised under a law or an administrative arrangement of the Commonwealth, a State or a Territory.

To avoid the risk of a Fair Work Ombudsman investigation, employers should always endeavour to align any vocational placements they offer with a university or school.

2.   Unpaid trials.

Unpaid trials are sometimes utilised by businesses to evaluate a person’s suitability for a vacant position.

Unpaid trials can be lawful under the Fair Work Act provided that:

  • it is necessary to evaluate someone’s suitability for the vacant position in question; and
  • it involves no more than a demonstration of the person’s skills; and
  • it is only for as long as is needed to demonstrate the skills required for the job; and
  • the person is under direct supervision of the potential employer for the entire trial.

Whilst unpaid trials can be useful, employers need to be extremely careful that any unpaid trial does not shift into an unpaid working arrangement where an employment relationship/contract exists.

CASE STUDY: Steve owns and manages a Mexican restaurant and allows prospective employee, Daniel, to undertake a trial shift. Daniel performs well and Steve decides that he possesses the requisite skills for the position. Daniel is told that he is a ‘good fit’ but that he needs to help out in the kitchen for the rest of the night if he wants to secure the job. Daniel is not paid for the entire night. In such a case, it is likely that the extra work Daniel performed in the kitchen would be viewed as performed under a contract of employment and, as such, it would be unlawful for Steve to not compensate him for his time.

3.   Unpaid work experience/unpaid internships

Unpaid work experience/unpaid internships can be lawful if they are categorised as vocational placements (see above) or if an employment relationship is not found to exist. An individual performing unpaid work experience or an unpaid internship

  • must not be performing any meaningful productive work; and
  • the main benefit of the arrangement must flow to that individual, not the employer; and
  • it must be evident that they are engaging in meaningful learning/training and/or skill development.

Further liability

Employers should also be aware that even when individuals aren’t considered to be employees because no employment relationship/contract exists or the vocational placement exception applies, other workplace specific legislation can apply such as the Work Health and Safety Act 2011 (NSW) and the Anti-Discrimination Act 1977 (NSW).

What’s next?

Employers should take care in assuming that any type of unpaid working arrangement is lawful. Expert advice should be sought to avoid any risk of legal liability. Call us today on 9231 2466.