The Case

AIMG BQ Pty Ltd (AIMG) engaged a university student as an unpaid intern. The student worked a total of 180 hours, which included performing productive work, such as organising events, editing magazines, cleaning the office and performing administrative tasks. AIMG also employed and underpaid a permanent full-time events coordinator.

In addition, AIMG had failed to issue pay slips, comply with notices to produce documents and did not agree in writing on the hours and days to be worked.

The Verdict

The Federal Circuit Court found that AIMG should have treated the intern as an employee and paid them as such. The Court found the intern was engaged in productive work, from which AIMG derived a benefit and, by not paying them, AIMG had exploited the intern. The Court found that AIMG had underpaid its events coordinator by $10,380 and its intern by $8,390.

The Court fined AIMG $272,850 and its director $8,160, and imposed a 3-year injunction on the director from engaging in further contraventions.

In imposing the significant penalties, the Court said there was a “need to send a serious message … that the Court will not countenance attempts to disguise employment relationships as unpaid internships and thus deny employees their required minimum entitlements”.

The Lesson

Unpaid work is only permitted if one of the following applies:

•  a student is undertaking a vocational placement, as defined in the Fair Work Act 2009 (Cth) (i.e. a formal work experience arrangement forming part of an approved educational/training course);
• no employment relationship exists. This is determined by looking at the particular arrangement – its nature, purpose, length, whether the work is productive and whether the organisation receives a benefit from the work;
• the relationship is one of an unpaid internship in which the person is meant to learn training or skills. However, if productive work is being performed and the organisation derives a benefit from this work, it is likely this person will be categorised as an employee; or
• the person is a volunteer. A person is a volunteer if:
  • there is no intention to create an employment relationship;
  • the person is under no obligation to perform work; and
  • the person does not expect payment and is performing the work for philanthropic purposes.

If none of these criteria can be met (and the person is not a contractor), the person is likely to be classified as an employee, and therefore entitled to all the minimum entitlements contained in the National Employment Standards and in any applicable award or enterprise agreement.

Given the significant penalties that can be imposed for failing to correctly categorise work arrangements, it is prudent to check any unpaid arrangements you have with workers. If you are unsure, obtain legal advice.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.