No appetite for unpaid work experience

The Court recently imposed severe penalties on an employer who exploited employees by treating them as unpaid interns or volunteers.

Background

The employer, Crocmedia Pty Ltd (Crocmedia) develops radio and television programs. Two  university students were initially engaged on unpaid work experience for around three weeks and thereafter continued working as interns/volunteers.  One employee undertook work on this basis for one year, the other for 6 months.

During the intern/volunteer period, the employees worked as producers in various radio programs, predominately on a program entitled "All Night Appetite". The employees main shifts were midnight to 6.00am.  However, they also worked additional shifts where required. The employees agreed to undertake the work for free in an effort to gain experience and to 'get established in the industry'.

Crocmedia described the employees as 'volunteers' and paid them varying amounts between $75 to $120 per shift as 'reimbursement for expenses'. No wages were paid. 

Proceedings were commenced in the Federal Circuit Court by the Fair Work Ombudsman for the following contraventions:

• failure to pay minimum wages; 

• failure to pay casual loadings; 

• failure to pay in full, at least monthly; and 

• failure to provide payslips.

Finding

All four contraventions were made out. Judge Riethmuller noted in the decision that:

"On balance I am not persuaded that the Respondent has been openly defiant of the law, but rather engaged in an arrangement that the respondent believed avoided the consequences of the minimum wages requirements under the Act. However, the Respondent cannot avoid the proposition that it is, at best, dishonourable to profit from the work of volunteers, and at worst, exploitive."

Penalties totalling $24,000 were imposed on Crocmedia as follows:

• failure to pay minimum wages - $12,000; 

• failure to pay casual loadings - $9,000; 

• failure to pay full, at least monthly - $2,000; and 

• failure to provide payslips - $1,000. 

Crocmedia had rectified the underpayments to the employees in a timely manner which was a mitigating factor in the penalties imposed. 

Other matters

In 2013, Professor Andrew Stewart and Rosemary Owens prepared a report titled "Unpaid Work in Australia".  After that report was issued, the Fair Work Ombudsman announced that it would focus on unpaid work arrangements [click here to see our prior article]. Judge Riethmuller's decision made significant references to the report and noted that "Profiting from 'volunteers' is not acceptable conduct within the industrial relations scheme in Australia" and "…there can be little doubt that the penalties are likely to increase significantly over time."

Lessons for employers

Employers should ensure they implement and maintain clear and appropriate procedures to ensure that persons who are properly classed as employees are not wrongly referred to as interns or volunteers.  When persons are inappropriately classified as here, not only will there be a liability for unpaid entitlements payable to employees but a significant risk of penalties being imposed. The Fair Work Ombudsman has as one of its focuses, pursuing employers who inappropriately classify employees as volunteers or interns. 

Although the Fair Work Act 2009 allows for "vocational placement" which allows students to perform work on an unpaid basis, when the work performed is productive work from which the business could gain some commercial gain or value and is not required as part of an education or training course, it is unlikely the work could be described as "vocational placement".  Businesses should seek legal advice in these circumstances.

If you would like to know more about this case or the engagement of interns or unpaid persons in the workplace generally, please contact National Workplace Lawyers on +61 2 9233 3989.

National Workplace Lawyers

Note — this is for information purposes only and does not purport to be comprehensive or to render legal advice.