Media company fined $270,000 for underpaying interns: Lessons for your business

A strong warning on underpaying interns has been passed down by the Federal Court, which fined international media company AIMB BQ $270,000 for the conduct.

The court found AIMB BQ, which is part of the Chinese company Ostar International Media Group and publishes BQ magazine, underpaid two event coordinators a sum of $18,767 between October 2013 and June 2014.

One of the workers was found to have completed an “internship” of 180 unpaid hours of work for which they should have been paid. The court also found the “internship” was not related to their tertiary studies.

The court slammed the company, saying the fine should send a “serious message” to companies to not disguise employment as unpaid internships. The company’s director Zhao Qing Jiang was also fined $8160 for not producing documents for inspectors from the Fair Work Ombudsman’s office and is subject to a three-year injunction from contravening workplace laws.

The penalties come at the same time as the Ombudsman initiated legal action against a take-away food outlet in regional New South Wales outlet, which it alleges used an unlawful “internship” program to underpay three Koreans on working holiday visas more than $50,000.

Fair Work will allege Kjoo Pty Ltd, trading as the ‘Masaki’ sushi outlet in the Stockland Shellharbour Shopping Centre in Wollongong, paid the international workers flat rates of between $12 and $13.50 an hour for their work, which averaged more than 38 hours a week.

Workplace lawyer Peter Vitale told SmartCompany “in most cases” internships are built around “mutually beneficial relationships.”

However, he says “the temptation of low or zero cost labour” causes some employers to become “fast and loose” with exploiting workers.

How do internships work?

Vitale says “there are no fixed rules” when it comes to internships, which is where some companies get caught up.

He says businesses need to make sure people they are taking on know why they’re doing the internship, and to be aware there is a clear demarcation between interning and working.

“The critical thing about internships is… the internship is not an employment relationship,” Vitale says.

“There is a difference between expecting an intern to provide work and productivity towards the business and being there to watch and learn.

“Expecting someone to come in on fixed hours is approaching the requirements for an employment relationship, interns should be free to come and go as they please.”

The Fair Work Ombudsman says there is no specific criteria that defines an employee, but says if someone is doing the same work others that are paid to be doing, they should also be paid.

However, when interns are brought on as part of gaining accreditation, such as through a university degree or TAFE certification, then employment conditions are allowed.

How to avoid taking advantage of interns

Vitale says his advice is to keep intern programs as simple as possible.

He says businesses should make sure to communicate with interns about what the expectations and requirements are from both parties before an internship is agreed to, much less begins.

However, he says employers may be best placed to bring in students seeking qualifications over others to avoid complications.

“Look at taking on people attaining this for a legitimate course of education,” he says.

Vitale says this removes a lot of the murky “grey area” problems associated with unpaid internships.

He also says businesses should ensure there is a time limit on any internship.

“One shouldn’t go for more than 4-6 weeks, or else the Fair Work Ombudsman has cause to get involved,” he says.

Will the government define internships in legislation?

Vitale believes we might see a legislated definition of internships should the Coalition win the upcoming federal election and implement the proposed PaTH program.

The $750 million PaTH program was proposed as part of the federal budget in May this year and will aim to provide 120,000 young people with “industry experience”.

This involved giving those who signed up to the program an extra $200 a fortnight on top of existing welfare benefits for four to twelve week internships. Businesses will receive a $1000 payment to take part in the program.

“The government will have to put the PaTH program in legislation in order give businesses an even playing field,” Vitale says.

“We may well see legislation based on a series on indicators, on duration, on being tied to course outcomes or on social security benefits.”

SmartCompany contacted AIMB BQ but did not receive a response prior to publication. SmartCompany was unable to contact Kjoo Pty Ltd prior to publication.