Business group warns employers are exposed through unpaid internships as IR watchdog starts investigation

Business groups have warned of the dangers of engaging unpaid interns and work experience students following the announcement this week of a Fair Work Ombudsman investigation into unpaid work.

The ombudsman announced it was teaming up with University of Adelaide Law School professors of law Andrew Stewart and Rosemary Owens to identify opportunities for increasing public awareness about laws relating to unpaid work.

However, the Victorian Employers Chamber of Commerce and Industry (VECCI) has warned employers are potentially exposed to underpayment claims from interns and work experience students.

Lisa Burrell, workplace relations manager at VECCI, told SmartCompany unpaid internships were now less prevalent than they used to be “due to a lot of attention on labour laws at the moment”.

“Our advice to members is to proceed with caution unless the internship is under an educational program,” says Burrell.

“There is little protection for employers if a later claim is made that it was actually paid work, the test the ombudsman applies is whether there was a value add to the business and it is very difficult to prove in retrospect what may or may not have been.”

“So there is a potential exposure to an underpayment claim.”

Burrell says VECCI hopes the review will end the current situation of uncertainty in relation to unpaid work.

“We would absolutely welcome the review to be able to clarify the arrangement so both parties can enter into it with a bit more certainty.”

“People generally want to do the right thing in this area but the line between what is observing and what is doing work on behalf of the employer is unclear.”

Rosemary Owens, who is assisting the ombudsman with his investigation, told SmartCompany it was still “early days” in the investigation which aims to survey the range, nature and prevalence of unpaid work arrangements in Australia and examine international best practice for dealing with these arrangements.

“We know that anecdotally this issue of internships is one that has grown enormously in recent years,” says Owens.

“Often it comes with either an express or explicit problem that such internship will lead to a paid position and we understand that is very often not the case and these internships often involve working for very extended periods of time.”

“If it would be wrong to overpay such people then surely it is wrong not to pay them at all.”

“We are interested in looking at the question, there is no prejudgement at all as we know internships are often components of courses that students undertake.”

Owens says she understood internships were commonplace in a broad range of industries including teaching, law, media and journalism, engineering and the beauty industry following the international popularity of internships.

“If you have a search of websites in Australia you can find quite a lot promoting internships to young people, they have become more common in Australia,” says Owen.

“This is a phenomenon that is now reasonably well established in the United States and we have also noticed it in Europe and the UK.”

Fair Work Ombudsman Nicholas Wilson said the project will help to inform the agency’s education and compliance processes in relation to the issue of unpaid work arrangements.

“We want to make sure we are doing everything within our power to ensure the relevant workplace participants are aware of laws relating to unpaid work arrangements,” he said.

“A basic principle of workplace laws that business operators can overlook when considering taking on an unpaid intern is that generally when a person performs work for a business, they are lawfully entitled to be paid for it.”

“While there are some legitimate internship arrangements available, business operators who view unpaid interns as a source of free labour are at the greatest risk of breaching workplace laws.”

The report to the Fair Work Ombudsman is expected in the next six months.