Kenneth Hong 08 Feb 2019
In May 2016, The Federal Circuit Court imposed a $272,850 penalty against Sydney-based media company AIMG BQ Pty Ltd to send it a “serious message” not to disguise employment relationships as unpaid internships. The Court handed down the penalty against the company following an investigation and legal action by the Fair Work Ombudsman.
Judge Tom Altobelli also penalised the company director $8,160 over his failure to comply with a Notice to Produce document for Fair Work inspectors. Further, the Judge imposed a three-year injunction restraining the director from contravening workplace laws.
AIMG BQ admitted in Court that it underpaid two event co-ordinators a total of $18,767 between October 2013 and June 2014.
AIMG BQ required the student to do an ‘internship’ of 180 hours of productive work over a period of four months, with duties ranging from administration and office cleaning to event organising and magazine editing - before it started paying her wages.
It was unlawful for the internship to be unpaid because the student was performing productive work that was not a formal part of her studies. After the internship period, AIMG BQ paid the student an unlawfully low flat rate of $50 a day, or just $6.56 an hour. In total, the student was underpaid $8,387.
When is an internship legal?
Internships and work experience placements are not unusual and are an important experience for young people seeking exposure to the industries in which they wish to be employed. These arrangements are legal, and minimum wage requirements will not apply as long as:
Lessons for Employers
Internships and unpaid work experience arrangements are a good way for employers to attract potential future hires and provide valuable industry exposure for young people. However, employers must take care to avoid creating an employment relationship. Employers should:
Generally, the unpaid work experience placement or internship is less likely to be classified as employment if they mainly benefit the intern, if the duration of the placement or experience is relatively short and if the intern is not expected or required to complete productive work.
This particular case highlights the importance of using an intern agreement. As set out in this article, the consequences of getting it wrong can cause significant financial and reputational damage.
H & H Lawyers can assist you with the classification of workers and the preparation of suitable documentation to mitigate any risks associated with engaging non-employee workers, including unpaid interns.