In today’s difficult job market employers are often fielding calls from candidates willing to work for free just to get a foot in the door.  Accepting such an offer may expose the employer to considerable risk in light of the current focus on the issue of unpaid internships by the Fair Work Ombudsman.

There are only limited circumstances in which an employer can legally engage someone in an unpaid role. They are:

  1. where the person is undertaking a vocational placement which is a requirement of an education or training course; or
  2. where there is no relationship of employment.

According to a report commissioned by the Fair Work Ombudsman into unpaid work in Australia, Stewart and Owens, Experience Or Exploitation?, Report for the Fair Work Ombudsman, January 2013, if one or more of the following questions is answered in the affirmative, the person could be a paid employee:

  1. Does the organisation benefit from the work?
  2. Is the placement for an extended period?
  3. Is the person required or expected to do productive work?
  4. Does the business derive significant commercial gain or value from the work?
  5. Is the unpaid worker performing work that would or might otherwise be performed by paid employees?

If, after considering the questions outlined above, an employer is concerned that its unpaid interns are employees who are entitled to be paid, it is important that the employer obtains proper advice in order to assess and adjust the arrangements which are in place for those individuals.

The consequences of non-compliance are serious. Apart from the obvious requirement to pay the workers for their work at the applicable minimum rate and other entitlements, the courts can impose civil penalties of up to AUD54,000 for each contravention by a corporation.  A person who is knowingly involved in the contravention (for example, a director or senior manager) could be fined up to AUD10,800.

In the recent case, Fair Work Ombudsman v Crocmedia Pty Ltd [2015] FCCA 140, the employer corporation was fined $24,000 for failing to pay two individuals who were engaged on a “work experience” basis. In setting the penalty, the Court recognised that the employer expressed remorse for its actions and took corrective action quickly.

The Fair Work Ombudsman has identified particular industries, including the advertising, marketing, PR and event management industries, which Stewart and Owens found were “disproportionately represented in recent advertisements for unpaid internships“ as possible subjects of targeted campaigns, compliance audits or test cases, which would be used to further bring the issue into the spotlight.

Other industries that are potentially on the Ombudsman’s radar are accounting, finance and architecture.