2 min read

6 factors that mean an internship is illegal

In a highly competitive job market, the offer of an internship can appear like a win-win for the employer and a jobseeker looking to gain experience.

The intern gets a much-needed step on the ladder of their chosen career and the organisation has an opportunity to trial a potential new employee for free, or for much less cost and risk than immediately hiring someone.

But if the intern is used as an employee, it is illegal.

As internships have become increasingly common in Australia, the Fair Work Ombudsman has stepped up its efforts to prosecute companies that use interns unlawfully.

Penalties can reach up to six figures.

In one case earlier this year, a company was fined nearly $200,000.

While some businesses deliberately exploit internships to save on labour costs, there are other employers who may inadvertently be breaking the law, even if they do intend to provide genuine work experience.

What’s the difference?

Do you know what differentiates an internship from an employment relationship?

Here are 6 factors that could indicate your intern is actually an employee.

  1. There is an expectation or obligation for the intern to perform work

While interns can take on work as part of the learning process, there should be no expectation or requirement of output.

  1. The work undertaken is productive for the company

Your business should not derive any significant commercial gain or value from the arrangement.

  1. The business benefits most from the internship

The purpose of the internship is educational and the intern must benefit most from the relationship.

  1. The internship is for a long period of time or indefinite

An intern is more likely to be classed as an employee the longer the internship lasts. The duration should be agreed to at the outset and not be indefinite. Most internships are typically up to 3 months.

  1. The internship is not a requirement of a university or training course

If the intern is fulfilling a requisite of their educational course, and you are providing them with beneficial training, knowledge or skill development, it is less likely they’ll be classed as an employee.

  1. The intern is being paid

Interns can be paid for out-of-pocket expenses, but any payments in excess of that, particularly if they are relative to amounts of time worked, could be deemed as wages, and may indicate the intern is an employee.

When taking on an intern it is important to have a written agreement in place.

Your agreement must stipulate precisely what relationship your business and the intern will have and should outline any learning aims and both parties’ responsibilities. In particular, you will need to address confidentiality and your organisation’s intellectual property rights and, if applicable, establish that the intern will not be covered by your workplace insurance.

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