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The Nature and Prevalence of Unlawful Unpaid Work Experience in Australia

Under Australian law, unpaid work experience (UWE) will usually be unlawful if it is undertaken as part of an employment arrangement, since employees are generally entitled to be paid at the minimum rate set by an award or minimum wage order. There have been various legal challenges to UWE in the Australian context, which highlight exploitative organisational practices. Yet there has been very little empirical evidence of the extent of, or patterns associated with, unlawful UWE across industries or workplaces. Utilising data from a nationally representative survey of UWE reported by working age Australians, we investigate the extent of potentially unlawful UWE. Potentially unlawful UWE was identified by looking for instances in which the work experience was reported to involve the same work as that done by regular employees and which did not predominantly involve observing or performing mock or simulated tasks. By confining attention to such cases, and subsequently excluding those doing UWE for a reason that would likely bring them within exemptions in labour or social security legislation, we estimate that at least 10% of the UWE reported in the survey was potentially unlawful. This equates to over half a million Australians being involved in unlawful placements or internships between 2011–16. Respondents undertaking potentially unlawful UWE were more likely to do so for longer periods than those with apparently lawful arrangements, but were less likely to secure an offer of paid employment from the organisation hosting them.

Introduction

In 2016, a national survey of working age Australians, the first of its kind, was undertaken by the present authors to explore the prevalence and characteristics of unpaid work experience (UWE) arrangements in this country.1 The headline results were striking. Around a third (34%) of all respondents reported at least one episode of UWE in the last five years, with the proportion rising to 58% for those aged under 30. Of those undertaking UWE, 36% reported that their most recent period had lasted over a month. A similar proportion (37%) had undertaken UWE once, while 26% had two such experiences. One in five participants had undertaken five or more episodes in the past five years. Half of all UWE experiences were associated with some form of formal education or training, whether at university (20%), as part of vocational education and training (VET) (19%), or at secondary school (10%). Nearly one in 10 (8%) had participated as a requirement of maintaining access to Youth Allowance or Newstart payments from the government, or as part of an unpaid trial while applying for a job (9%). A further 4% said they had been offered a paid job and the UWE was part of their training or orientation. Almost one in three (30%) nominated some other reason for undertaking UWE. This latter category appears to cover ‘open market’ internships organised by participants themselves or established by the organisations hosting them, without any formal connection to an education or training program.

The survey results confirm that UWE has become common in Australia, something previously apparent only from anecdotal evidence and small-scale studies.1 Its prevalence can in part be seen as a response to a deteriorating youth labour market, but also a recognition of the value of what is often now called ‘work integrated learning’.2 Work integrated learning is defined by the Tertiary Education Quality and Standards Agency (TEQSA) as ‘any arrangement where students undertake learning in a workplace outside of their higher education provider ... as a part of their course of study’.3 TheAustralian Learning and Teaching Council stated that:

A commonly expected outcome of these student [work integrated learning] experiences is gaining new knowledge, understandings and capabilities, and mastering skills considered essential to particular workplace practices. The underlying assumption is that students cannot learn these skills and knowledge in formal classrooms.4

1 See, eg, A Stewart and R Owens, Experience or Exploitation? The Nature, Prevalence and Regulation of Unpaid Work Experience,

Internships and Trial Periods in Australia, Fair Work Ombudsman (FWO), Melbourne, 2013, at 53–61; D Grant-Smith and P McDonald, ‘The Trend toward Pre-Graduation Professional Work Experience for Australian Young Planners: Essential Experience or Essentially Exploitation?’ (2016) 53 Aust Planner 65.

2 See, eg, C-J Patrick et al, The WIL [Work Integrated Learning] Report: A National Scoping Study, Final Report to the Australian Learning and Teaching Council, Queensland University of Technology, Brisbane, 2008; J F Turcotte, L Nichols and L Phillips, Maximizing Opportunity, Mitigating Risk: Aligning Law, Policy and Practice to Strengthen Work-Integrated Learning in Ontario, Higher Education Quality Council of Ontario, Toronto, 2016.

3 TEQSA, Work-Integrated Learning, Version 1.2, Guidance Note, Australian Government, 11 October 2017, at 1, at <www.teqsa.gov.au/sites/g/files/net2046/f/guidance-note-workintegrated-learning-v1-2.pdf?v=1508210872> (accessed 20 July 2018).

4 J Orrell, Good Practice Report: Work-Integrated Learning, Australian Learning and Teaching Council, Sydney, 2011, at 5.

 

The growth of internships and job placements in Australia reflects a global trend with which many other countries are grappling.5

One of the key issues raised about certain types of UWE, in particular job trials and open market internships, is their legality. This was highlighted in a 2013 report commissioned by the Fair Work Ombudsman (FWO), the agency responsible for enforcing Australia’s main labour statute, the Fair Work Act 2009 (Cth) (FW Act). The report noted the difficulty in determining whether certain arrangements complied with the FW Act. It suggested that the FWO refine its education materials and work with stakeholders (including educational institutions and industry groups) to help develop ‘best practice’ approaches that would improve the quality of work experience programs and reduce the potential for exploitation of jobseekers. But it also recommended that test cases be instituted to clarify the legal status of UWE arrangements.6The report’s proposals were accepted by the FWO.7As we will see, the agency has initiated a number of proceedings against businesses for unlawfully underpaying their interns,8 although for reasons to be explained it cannot yet be said that the uncertainties noted in the 2013 report have been resolved.

The purpose of this article is to shed new light on the prevalence and characteristics of potentially unlawful forms of UWE in Australia. It does this by drawing on data from the 2016 national survey. The article is divided into four sections. The first provides a definition of UWE and summarises some of the research and policy developments both in Australia and internationally which have informed our study. The second section reviews the current Australian legal situation, including relevant provisions in the FW Act and other legislation, and recent decisions by the Federal Circuit Court. The third section presents data from the 2016 survey to provide an estimate of the prevalence of potentially unlawful UWE and to identify the personal and workplace characteristics that may be associated with a higher likelihood of potentially unlawful UWE. The fourth and final section discusses some of the policy and legal implications of these findings.

Definition of UWE and Policy Overview

The concept of UWE is variously defined in international literature.9 Terms used to describe different kinds of UWE include work integrated learning (also referred to as supervised work experience or practicum placements); volunteering; internships; (unpaid) traineeships; and

5 See R Perlin, Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy, revised edn, Verso, London, 2012; R

Owens and A Stewart, ‘Regulating for Decent Work Experience: Meeting the Challenge of the Rise of the Intern’ (2016) 155 Int’l Lab Rev 679; C Roberts, The Inbetweeners: The New Role of Internships in the Graduate Labour Market, Institute for Public Policy Research, London, 2017; A Stewart et al, The Regulation of Internships: A Comparative Study, Employment Policy Department Working Paper No 240, International Labour Office, Geneva, 2018.

6 Stewart and Owens, above n 2, at chap 9. For similar proposals, see Committee on Children and Young People, Volunteering and Unpaid Work Placements among Children and Young People in NSW, Parliament of New South Wales, Sydney, 2014, at chap 5. Cf Productivity Commission, Workplace Relations Framework, Inquiry Report No 76, Vol 2, Productivity Commission, Canberra, 2015, at 823–6, expressing a reluctance to recommend further action in the absence of clear evidence as to the scale of the problem.

7 See, eg, FWO, Internships & Unpaid Work — Update, Media Release, 12 August 2014. 8 See the cases referred to below, nn 63–6.

9 For an extended survey of the relevant literature, see Oliver et al, above n 1, at 12–19. See also P Gardner and K R Bartkus, ‘What’s in a Name? A Reference Guide to Work-Education Experiences’ (2014) 15 Asia-Pac J Coop Ed 37.

unpaid trial work. Depending on the national context, discipline of study or author’s perspective, the definitions and characterisations of these terms are often blurred, overlapping or sometimes not articulated at all. For example, a recent parliamentary inquiry in Australia into volunteering and unpaid work placements among children and young people suggested that volunteering should be universally promoted and supported.10 Unpaid work placements on the other hand, whilst acknowledged as an effective means of exposing young people to the workforce and providing them valuable experience if ‘legitimate’ and ‘lawful’, 11 were considered to create concerns due to ‘the impacts of unethical and unlawful unpaid work placements on young people and the wider work force’.12 However, nowhere in the inquiry report was there any clear attempt to distinguish between these two terms.

The definition of UWE adopted in this article follows the operational definition used in the 2016 national survey. Work experience is taken to be ‘any period of time spent in a workplace to develop skills and gain experience’.13 This could be part of a course of study at university, a technical college or another registered training organisation, or at school. It could be part of a formal placement or internship program at an organisation. It could be work mandated in order to retain unemployment benefits or another activity organised by an employment services provider. Or it could be an informal period of work experience personally arranged by the work experience participant. Whatever the context, work experience is treated as unpaid if the participant does not receive an hourly or weekly wage. Reimbursement of expenses or a small allowance is not considered as a wage for this purpose.

By contrast, instances of genuine volunteering are treated as outside the scope of UWE. Volunteering is used here in the sense of ‘unpaid work’ undertaken ‘with the primary purpose of benefiting someone else or benefiting a particular organisation ([such as] a church, charity or club), rather than to gain experience or contacts that may improve the prospects of future employment’.14 This approach follows that adopted by Stewart and Owens in their research for the FWO.15 As they acknowledged, the distinction is far from a perfect one. It is apparent that some unpaid work is undertaken for non-profit organisations with a view both to assisting others and enhancing employability. This may be the case, for instance, when law students perform work at community legal centres. Nevertheless, if the work can be regarded as primarily altruistic in nature, it is not considered to be UWE for present purposes. On the other hand, the mere fact that a jobseeker may have ‘volunteered’ to undertake an internship or job placement will not of itself prevent the arrangement from being regarded as one of UWE. The significance of this point is one to which we return later in discussing whether such arrangements may be characterised as involving employment.

Internships , as that term is typically used in industrialised economies, can be seen as sitting at the boundary between employment and formal education and training. They may be paid or

10 Committee on Children and Young People, above n 7, at vii. 11 Ibid, at v. 12 Ibid, at ix. 13 Oliver et al, above n 1, at 21. 14 Ibid, at 13 (emphasis in original). 15 Stewart and Owens, above n 2, at 4–5.

 

unpaid, but in their unpaid form are clearly captured in the definition of UWE used in our research. The more established notion of an apprenticeship involves — at least in its ‘ideal’ modern form — a structured combination of practical work experience and periods of theoretical learning as part of an indentured period of paid employment. 16 Formal apprenticeships are not UWE, as apprentices are (or at least should be) paid for their labour.17

By contrast, internships are characterised by a student, graduate or other jobseeker spending anywhere from days to months in an organisation, performing actual or mock tasks or assignments, shadowing or observing a more experienced worker, or performing menial tasks for those who have secured positions in the occupation or profession, with the purpose of gaining entry to a job, profession or industry. Research undertaken for the European Commission distinguishes between three types of internship (or ‘traineeship’). They may be associated with a formal education or training program. They may be mandated, funded or facilitated by governments as part of proactive labour market policies designed to assist the unemployed. Or they may be ‘open market’ arrangements of the type mentioned earlier, established by an organisation for its own purposes, without any direct link to an educational institution or government program.18

Concerns have routinely been expressed that, if not appropriately regulated, unpaid or underpaid internships have the potential to depress wages and conditions for those in work and contribute to the exploitation of young people. 19 Standing, for example, has argued that internships are a source of cheap labour that exerts ‘downward pressure on the wages and opportunities of others who might otherwise be employed’.20 Perlin similarly makes the point that even if an individual is prepared to take an unpaid position, this reinforces the perception that certain kinds of work have lost all value; a decision that has consequences for everyone.21

An additional concern associated with the growth of UWE is that it will entrench the stratification of certain industries on socio-economic lines. In essence the argument is that only those with family support or independent means can afford to undertake extended periods of unpaid work, and those who cannot afford to work unpaid are consequentially excluded from the opportunities that unpaid work might deliver. A proliferation of UWE therefore risks promoting ‘inequalities of opportunity that we have been striving diligently to reduce in courts,

16 See, eg, A Fuller and L Unwin, Contemporary Apprenticeship: International Perspectives on an Evolving Model of Learning, Routledge,

London, 2013. Cf A Jeannet-Milanovic, N O’Higgins and A Rosin, ‘Contractual Arrangements for Young Workers’, in N O’Higgins (Ed), Rising to the Youth Employment Challenge: New Evidence on Key Policy Issues, International Labour Office, Geneva, 2017, p 113 at pp 126–43, noting that in some countries, apprenticeships are considered to include training schemes that do not conform to this model.

17 At least in Australia, apprentices are generally considered to be employees: see, eg, Rowe v Capital Territory Health Commission (1982) 39 ALR 39; [1982] FCA 4; Australian Railways Union v Public Transport Corporation (Vic) (1993) 47 IR 119.

18 K P Hadjivassiliou et al, Study on a Comprehensive Overview on Traineeship Arrangements in Member States: Final Synthesis Report, European Commission, Brussels, 2012, at 4–5. See also D Lain et al, ‘Evaluating Internships in Terms of Governance Structures: Contract, Duration and Partnership’ (2014) 38 Eur J Training & Development 588.

19 See, eg, K Allen et al, ‘Becoming Employable Students and “Ideal” Creative Workers: Exclusion and Inequality in Higher Education Work Placements’ (2013) 34 Brit J of Sociology of Educ 431; Sutton Trust, Research Brief: Internship or Indenture?, 2 November 2014, at <http://dera.ioe.ac.uk/30245/1/Unpaid-Internships-1.pdf> (accessed 20 July 2018).

20 G Standing, The Precariat: The New Dangerous Class, revised edn, Bloomsbury Academic, London, 2016, p 88. 21 Perlin, above n 6, p 62.

schools and communities’.22 This has potentially broad implications within society. The British Low Pay Commission has noted the ‘potentially damaging impact ... on social mobility’ of unpaid internships for university graduates, because they inhibit ‘labour market access for particular groups who cannot afford to undertake them’.23These access and equity issues may compound the exclusive nature of recruitment for particular careers, particularly those in which experience is necessary.24

Cautions associated with the acknowledged value of work-based learning were also raised in a 2012 International Labour Conference resolution, where trade unions and employers were encouraged to engage in collective bargaining as to the working conditions of interns and apprentices and raise awareness about the labour rights of young workers.25 In a European Union Council Recommendation it was noted that while quality traineeships often deliver ‘productivity benefits, improve labour market matching and promote mobility’,26 there are potential socio-economic costs when they replace regular employment, especially entry-level positions.27 Other research has also demonstrated the potential for unpaid workers to displace regular workers.28

The European Union Council Recommendation also asserted that ‘low-quality traineeships ... with little learning content, do not lead to significant [skill development or] productivity gains’ for the trainee.29Substandard learning outcomes may also result from other exploitative practices that have been uncovered in UWE, such as unreasonable workloads,30 being asked to undertake unethical tasks, 31 or engaging in risky activities without proper precautions. 32

Furthermore, information asymmetry means that applicants for work experience opportunities have real difficulties assessing the quality of placements before committing to them.34 Prior to the 2016 national survey, little had previously been known about the quality of unpaid work placements in Australia. However, a 2013 European survey of traineeships revealed that 30% of programs were deficient in terms of either learning content or working conditions and that

22 Ibid, p xv. 23 Low Pay Commission, National Minimum Wage: Low Pay Commission Report 2012, Cm 8302, Low Pay Commission, London, 2012, at

[3.52]. 24 See, eg, Sutton Trust, above n 20; Roberts, above n 6; W Hunt and P Scott, ‘Participation in Paid and Unpaid Internships among Creative

and Communications Graduates: Does Class Advantage Play a Part?’, in R Waller, N Ingram and M R M Ward (Eds), Higher Education and Social Inequalities: University Admissions, Experiences, and Outcomes, Routledge, London, 2017, p 190.

25 International Labour Conference, The Youth Employment Crisis: A Call for Action, 101st sess, Resolution, International Labour Conference, Geneva, 2012.

26 Council Recommendation of 10 March 2014 on a Quality Framework for Traineeships [2014] OJ C 88 E/1, at 2. 27 Ibid. 28 See, eg, Grant-Smith and McDonald, ‘Essential Experience or Essentially Exploitation?’, above n 2. 29 Council Recommendation, above n 27, at 2, para 4. 30 Eg, Nike interns regularly report long hours and excessive work as ‘cons’ of their unpaid internship experience: see Glassdoor, NIKE

Intern Reviews, at <www.glassdoor.com.au /Reviews/NIKE-Intern-Reviews-EI_IE1699.0,4_KO5,11.htm> (accessed 20 July 2018). 31 See, eg, TechCrunch, Cheating the App Store: PR Firm has Interns Post Positive Reviews for Clients, 22 August 2009, at

<https://techcrunch.com/2009/08/22/cheating-the-app-storepr-firm-has-interns-post-positive-reviews-for-clients/> (accessed 20 July 2018); A M Moorman, ‘Legal Issues and the Supervised Internship Relationship: Who is Responsible for What?’ (2004) 75 JOPERD 19.

32 See, eg, Perlin, above n 6, p 15.

 

those who had participated in a substandard traineeship were significantly less likely to find a subsequent job.33

The regulatory challenges posed by UWE are increasingly being acknowledged by policy-makers overseas.34 In Australia too, there is a growing awareness that unpaid internships and even work integrated learning occupy an ambiguous space in employment and workplace law.35 Higher education and VET quality assurance regimes set threshold standards for work placements, but play a smaller role in regulating the application of those standards. For example, the Tertiary Education Quality and Standards Agency Act 2011 (Cth) (TEQSAAct) requires entities to be registered before they are able to offer an Australian higher education award. Registered higher education providers must then have each of their courses of study accredited, including all work integrated learning arrangements,36 or be authorised as self-accrediting (all 40 Australian universities fall into this category).37 Those institutions that must seek accreditation for their courses of study are required to provide evidence of appropriate supervision arrangements, assessment

34 See European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Towards a Quality Framework on Traineeships — Second-Stage Consultation of the Social Partners at European Level under Article 154 TFEU, COM(2012) 728 final, at 8, at <http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri =CELEX:52012DC0728&from=EN> (accessed 20 July 2018).

schemes, and relevance of work integrated learning to course learning objectives. While higher education providers that are authorised to self-accredit do not have to provide evidence of these factors in advance, they remain responsible under the TEQSA Act for ensuring that their self-accredited courses of study comply with the accreditation standards. These form the basis of compliance assessments under the TEQSA Act.38Compliance audits occur up to every seven

33 TNS Political and Social, The Experience of Traineeships in the EU, Flash Eurobarometer 378, Directorate-General for Employment,

Social Affairs and Inclusion, European Commission, Brussels, November 2013. 34 Owens and Stewart, above n 6. 35 Stewart and Owens, above n 2. See also Anne Hewitt, ‘Avoiding the Trap of Exploitative Work: A National Approach to Making Work-

Integrated Learning Effective, Equitable and Safe’ (2018) 31 AJLL 101. 36 TEQSA, Application Guide for Registered Higher Education Providers: New Course Accreditation, Renewal of Course Accreditation for

Existing Providers, Version 3.11, 2017, <www.teqsa.gov.au/sites/g/files/net2046/f/applicationguide_courseaccredreaccred3.11.pdf?v =1507676288> (accessed 23 July 2018). See also the elaboration of ‘Accreditation of a Course of Study’: TEQSA, Glossary of Terms in Part A of the Higher Education Standards Framework 2015, at <www.teqsa.gov.au/glossary-terms-part-higher-education-standardsframework-2015> (accessed 20 July 2018). TEQSA can accredit a course of study that leads to a higher education qualification against Levels 5–10 of the Australian Qualifications Framework: TEQSA, TEQSA and the Australian Qualifications Framework: Questions and Answers, at 1, at <www.teqsa.gov.au/sites/g/files/net2046/f/teqsa-and-the-aqf-questionsand-answers.pdf?v=1506492752> (accessed 20 July 2018). Accreditation usually lasts for seven years and can be renewed before expiry: TEQSA, Renewing Course Accreditation, at <www.teqsa.gov.au/renewing-course-accreditation> (accessed 20 July 2018).

37 TEQSA, National Register, at <www.teqsa.gov.au/national-register> (accessed 20 July 2018). Guidance about the process for being registered as self-accrediting is available at TEQSA, Application Guide for Self-Accrediting Authority, Version 3.2 — Consultation Draft, 2016, at <www.teqsa.gov.au/sites/g/files/net2046/f/application-guide-saa-3-2.pdf? v=1507677285> (accessed 23 July 2018).

38 TEQSA Act s 59.

years.39 If a compliance audit reveals that a provider has failed to comply with the standards, TEQSA can impose sanctions by shortening or cancelling the period of accreditation for the course of study.40 However, because compliance audits occur irregularly and because TEQSA takes a light-handed approach with regard to providers with no history of regulatory issues,41

students are largely dependent on the local policies and practices implemented by their education or training provider to ensure the quality of their work integrated learning placements.42A notable development in this regard has been the concerted efforts by activist groups of young people to raise awareness of the vulnerability of interns and other unpaid workers via social media. Such advocacy groups include Interns Australia, Pay Our Interns in the US, the Geneva Interns Association, the Canadian Intern Association and, in the UK, Intern Aware.43

Australian Law Governing Unpaid Work

Generally speaking, whether it is lawful in Australia for an organisation to permit someone to undertake work experience without being paid depends on whether the arrangement can be characterised as one of employment. Although that term is not formally defined in labour statutes, it has been interpreted to require some form of contract, or legally enforceable agreement, to work under the direction and control of an employer. This need not be in writing, but there must be an arrangement that a reasonable person would regard as involving mutually binding commitments — whether to work for wages, or some other benefit.44 In principle at least, there is no reason why an agreement to provide training or work experience could not be good consideration for a promise to attend and perform work.45 Moreover, as the High Court of Australia has stressed, it is the objective reality of an arrangement that determines whether it is to be classified as contractual in nature, not necessarily how it is described or understood by the parties themselves.46

Under the FW Act, which covers most Australian businesses and non-profit organisations,47

an individual undertaking a ‘vocational placement’ is not regarded as an employee.48 As such,

39 TEQSA, A Risk and Standards Based Approach to Quality Assurance in Australia’s Diverse Higher Education Sector, 2015, at 2, at

<www.teqsa.gov.au/sites/g/files/net2046/f/risk-andstandards-based-approach-to-quality-assurance-in-australias-diverse-he-sector.pdf?v=15088 91448> (accessed 20 July 2018).

40 TEQSA Act s 99. 41 They are required to satisfy ‘a lower burden of providing evidence of compliance with the standards’: TEQSA, A Risk and Standards

Based Approach to Quality Assurance, above n 41, at 2. 42 See also C Cameron, ‘The Vulnerable Worker? A Labor Law Challenge for WIL and Work Experience’ (2013) 14 Asia-Pac J Coop Ed

135. 43 See, eg, Interns Australia, at <www.internsaustralia.org> (accessed 20 July 2018). 44 A Stewart et al, Creighton & Stewart’s Labour Law, 6th edn, Federation Press, Sydney, 2016, chaps 8–9. For an example of a worker being

found to be an employee when receiving benefits other than wages, see Cudgegong Soaring Pty Ltd v Harris (1996) 13 NSWCCR 92 (1 January 1996) (live-in caretaker and instructor at flying club). Note, however, that under some labour statutes a worker may not be treated as an employee unless they are entitled to be paid: see, eg, Fair Work Act 1994 (SA) s 4(1) (definitions of ‘employee’ and ‘remuneration’).

45 Edmonds v Lawson [2000] QB 501 at [23]–[25]. See, eg, Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 (12 December 2014).

46 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; 187 ALR 92; [2002] HCA 8. 47 As to the position under equivalent state laws, see Stewart and Owens, above n 2, at 89–95. 48 FW Act ss 13, 15, 30C, 30M.

 

they are not entitled to the minimum wages, leave entitlements or other benefits and protections offered by the Act. A vocational placement is defined by s 12 to mean:

a placement that is:

(a) undertaken with an employer for which a person is not entitled to be paid anyremuneration; and

(b) undertaken as a requirement of an education or training course; and (c) authorised under a law or an administrative arrangement of the Commonwealth, a State

or a Territory.

This definition is not as clear as it might be. 49 None of these words or phrases, except ‘employer’, are defined elsewhere within the FW Act, and the definition has not been extensively discussed in case law. Where some aspect of it has been in issue, there has been a tendency to pass over it rapidly, without considering each of the elements of the definition.50

But it can generally be taken to apply to UWE undertaken as part of a university or technical college course, or a program of training legally required to enter a profession.51 The exclusion may also cover placements undertaken as part of government assistance for jobseekers, such as the National Work Experience Programme introduced in 2015.52 But it would arguably not extend to the ‘internships’ that form part of the recently introduced PaTH (Prepare-Trial-Hire) Programme.53 This is because participants in that programme are paid an allowance of $200 per fortnight on top of their unemployment benefits, which could possibly constitute ‘remuneration’.54 It is possible that provisions such as ss 544B(8) and 631C of the Social Security Act 1991 (Cth) would preclude any possibility of an employment relationship arising in such a case. These provide that certain laws, including the FW Act, do not apply to work undertaken as part of an ‘approved programme’. However, it remains to be seen whether these provisions would protect the ‘host’ business, and not just the Commonwealth, from any liability for paying interns something less than the minimum wage otherwise applicable to their work.

Where an internship is not formally connected to education or training so as to constitute a ‘vocational placement’, or where it is not exempted under the Social SecurityAct, its legal status may be uncertain. The 2013 research report commissioned by the FWO noted that Australian courts had previously taken different approaches to the status of UWE arrangements.57 In some instances, it was held that the lack of any ‘mutuality’ or apparent intention to create a contract was fatal to any claim to employment status.58 But in other cases employment contracts were found to exist, especially with arrangements of longer duration.59

The view expressed in the report was that:

49 See Stewart and Owens, above n 2, at 75–82. 50 See, eg, Corner v SkyCity Adelaide Pty Ltd [2010] FWA 9259 (7 December 2010), discussed in Stewart and Owens, above n 2, at 76–7. 51 See, eg, Upton v Geraldton Resource Centre [2013] FWC 7827 (11 October 2013); Klievens v Capello Rowe Lawyers [2017] FWC 5126

(3 October 2017). 52 See M Cash, Work Experience to Help Job Seekers into Work, Media Release, 5 October 2015. See also Department of Jobs and Small

Business, National Work Experience Programme, at <www.jobs.gov.au/national-work-experience-programme> (accessed 20 July 2018). 53 See Jobactive, Youth Jobs PaTH, at <https://jobactive.gov.au/path> (accessed 20 July 2018); Social Security Legislation Amendment

(Youth Jobs Path: Prepare, Trial, Hire) Act 2017 (Cth).

54 As to the likely meaning of ‘remuneration’ in this context, see Stewart and Owens, above

where a person is performing productive work for an organisation, under an arrangement whereby they will either gain experience or be considered for an ongoing job, it is appropriate to assume that they are doing so under an employment contract — unless there is clear evidence to the contrary. Such an approach is consistent with the purposes and policy of the Fair Work Act.60

This accords with the approach taken in recent years by the FWO. Its view has been that an intern should be treated as an employee if they are expected to perform tasks that an organisation needs to be done, and they are not altruistically offering their services as a true ‘volunteer’ would. A factsheet on the FWO website suggests that UWE or trial work undertaken without a connection to an authorised education or training course may still be lawful — but only if the person on placement is not doing ‘productive’ work, or if the main benefit of the arrangement is for that person and they are receiving a meaningful learning experience, training or skill development.61

In accordance with that view, the FWO has instituted a number of proceedings against businesses using unpaid or underpaid ‘interns’ to do the work of employees.62 In 2015, for example, a media company was fined $24,000 for underpaying two university students who worked as radio producers.63 The breaches were acknowledged not to be deliberate and were quickly rectified after the Ombudsman intervened. However, the judge

n 2, at 77–8. It is suggested there that the term would cover any recompense or reward, including non-cash benefits — but not, for instance, gratuities or the reimbursement of expenses.

57 Ibid, chap 6. 58 See, eg, Pacesetter Homes Pty Ltd v Australian Builders Labourers Federated Union of

Workers (WA Branch) (1994) 57 IR 449. 59 See, eg, Cossich v G Rossetto and Co Pty Ltd [2001] SAIRC 37 (26 October 2001). 60 Stewart and Owens, above n 2, at xxiii. 61 FWO, Unpaid Work, Fact Sheet, June 2017, at <www.fairwork.gov.au/Article

Documents/723/Unpaid-work.pdf.aspx> (accessed 20 July 2018). 62 Besides the cases listed below, see also FWO, Reality TV Contestant Faces Court over

Alleged Unpaid Internship, Underpayments, Media Release, 1 June 2017; FWO, Migrant Workers Allegedly Paid No Wages for a Year’s Work under “Work Experience” Scheme, Media Release, 8 June 2018.

63 Fair Work Ombudsman v Crocmedia Pty Ltd [2015] FCCA 140 (29 January 2015). described the arrangements as ‘exploitative’ and emphasised that ‘[p]rofiting from “volunteers” is not acceptable conduct’.55 Similar views have been expressed in two other cases. One involved three internships at a marketing firm.56The business had advertised for internship

55 Ibid, at [32], [45]. 56 Fair Work Ombudsman v Aldred [2016] FCCA 220 (10 February 2016).

 

applicants who would initially be unpaid for a three-month period. The proprietor was fined $17,500. In another case, a jobseeker answered an advertisement for an event planner internship and had to do 180 hours of unpaid work before being given paid employment.57 The company and its director, who had previously been warned for purporting to engage employees as volunteers, were fined over $280,000.

In each of these cases, the organisation or employer conceded the interns’ status as employees. In future proceedings, that issue may be contested, and it is possible different conclusions may be reached. Clearly, however, an organisation that relies on interns to do productive work, without a connection to an authorised education or training course, should be aware that it risks breaching Australia’s workplace laws.

The 2016 National Survey and the Incidence of Unlawful UWE

This 2016 Survey of Unpaid Work Experience was a nationally representative online survey of working-age Australians funded by the Commonwealth Department of Employment.58 The survey examined the prevalence of UWE in Australia, the characteristics of UWE placements and participants, the experiences of those participants, and the self-reported impact of UWE on employment outcomes.

Respondents were recruited to the survey from the research panel maintained by The Online Research Unit (ORU), an Australian social and market research company. The survey entered the field on 19 April 2016 and closed on 4 May 2016. Australians already registered with ORU between the ages of 18–64 (inclusive) were invited to take part. There were 3,800 usable responses, which included valid answers to whether the respondent had participated in UWE in the last five years and essential demographic information (age, sex, state/territory). The sample was representative by sex and broadly representative by state (Victoria was over-represented by 5% and other states under-represented by a smaller amount). Younger respondents (18–29) were deliberately over-sampled, on the basis that this group was more likely to have recently participated in UWE. The sample was subsequently weighted to reflect the distribution of the Australian working age (18–64) population by sex and age.

A questionnaire was developed based on previous surveys undertaken internationally and inAustralia. The draft survey was provided to the members of a project reference group, and then tested with a small group of university and technical college students. The survey was designed to capture a broad array of unpaid work experiences, including (1) university, VET or secondary school sanctioned work experience placements; (2) unpaid work undertaken to maintain an entitlement to social security benefits; and (3) ‘open market’ internships or other UWE arranged privately or through an internship broker, without a formal connection to a course of study. Unpaid work experience was defined as ‘any period of time spent in a workplace to develop skills and gain experience’ for which the participant did not receive an hourly or weekly wage. Respondents were asked to exclude any instances of volunteering, defined as occurring when the unpaid work was undertaken for ‘the primary purpose of

57 Fair Work Ombudsman v AIMG BQ Pty Ltd [2016] FCCA 1024 (31 May 2016). 58 As to the details that follow, see Oliver et al, above n 1, at 20–3.

benefiting someone else or benefiting a particular organisation (e.g. a church, charity or club)’.59

All respondents were asked whether they had undertaken any UWE in the last five years. If they answered yes, they were then asked a series of questions about the number of episodes of UWE they had undertaken, as well as more detailed questions about their most recent episode. An important question for this analysis was the reason for undertaking the most recent episode of UWE. Respondents were given these options:

(1) it was organised as part of a degree or other course at university or another higher education provider;

(2) it was organised as part of a certificate or diploma course at TAFE or another registered training organisation;

(3) it was a requirement of maintaining Youth Allowance or Newstart; (4) it was organised as part of secondary school work experience;

(5) I was applying for a paid job at the same company or organisation and it was a trial to see if I was suitable;

(6) I had been offered a paid job at the same company or organisation and it was part of my training or orientation; or

(7) none of the above.

The full question text is included at Appendix A.

As noted earlier, the survey found that UWE was very widespread. More than half (58%) of respondents aged 18–29 and a quarter of respondents (25%) aged 30–64 had participated in at least one episode of UWE in the last five years. Overall, a third of Australians (34%) aged 18–64 reported at least one episode of UWE in the last five years.60

To examine the possible extent of potentially unlawful UWE, we begin by looking at respondents who:

• agreed or strongly agreed that for most of the time the work they didwas the same as that done by regular employees; and

• disagreed, strongly disagreed or answered ‘not applicable’ that theyspent most of their time observing or performing mock or simulated tasks.

Once again, the full text of the question can be found in Appendix B.

As a shorthand, we have labelled respondents who fall into both categories as those who were performing ‘real work’ during the placement. As Table 1 shows, depending on their reason for undertaking UWE, between 7%–25% of UWE participants performed ‘real work’during most of their placement.

59 Ibid, at 13 (emphasis altered). 60 For a general summary of the survey results, see Oliver et al, above n 1, at 5–9.

 

Table 1: Whether respondent performed ‘real work’ during most recent episode of UWE, by age and reason (row %)

‘Real work’ was most common in aged care, child care, and other social/community services

(16% of recent placements), hospitality (15%) and retail (15%) as well as the ‘other industries’ category (23%).

Table 2: Whether respondent performed ‘real work’ during most recent episode of UWE, by industry (row %)

The reason for undertaking the placement is very important in relation to the legality of UWE, since the FW Act’s vocational placement exemption is likely (though not certain) to cover respondents undertaking UWE as part of a higher education or VET course, or as part of secondary school work experience, as well as participation requirements relating to benefits such as Youth Allowance or Newstart.61 Therefore, the scope of what we have characterised as ‘potentially unlawful UWE’ is limited to those performing an unpaid trial or unpaid training following an offer of employment, and those undertaking UWE for some other reason.

By confining attention to respondents performing real work, and then excluding those doing UWE for a reason that would probably bring them within the vocational placement or social security legislation exemptions, we are able to estimate that at least 10% of the UWE reported in the survey was potentially unlawful. This equates to approximately 505,000Australians in the last five years and 63,000 at the time the survey was conducted in April 2016 engaging in potentially unlawful UWE.

61 The latter may also be exempted from the operation of the FW Act by the ‘approved programme’provisions in the Social Security Act

1991 (Cth): see above, text following n 56.

 

As shown in Table 3, what we have characterised as potentially unlawful UWE is more common among older respondents and respondents undertaking UWE for some other reason (25%), compared to respondents undertaking UWE as part of an unpaid trial or period of unpaid training (17%).

Table 3: Incidence of potentially unlawful UWE, by age and reason (row %)

Looking at the distribution of potentially unlawful UWE by industry, the differences are

noteworthy. Unexpectedly, perhaps, the proportion of potentially unlawful UWE participants in the commercial and legal services, hospitality and retail industries is substantially lower than the figures above on ‘real work’ might have suggested.

Table 4: Potentially unlawful UWE by industry (row %)

As Table 5 shows, potentially unlawful UWE is also more likely to occur in smaller organisations and in not-for-profit organisations.

 

Table 5: Size and sector of host organisation or company by whether UWE potentially unlawful (row %)

Potentially unlawful UWE placements also differ from other types of UWE in that they tend to be longer, as Table 6 shows. It is both remarkable and concerning that nearly a quarter of placements that lasted for six months or more were potentially unlawful.

Table 6: Duration of UWE episode by whether or not potentially unlawful (row %)

There was a small difference in overall satisfaction levels between participants whose episode

of UWE was potentially unlawful and those whose UWE was apparently lawful. As Table 7 shows, similar proportions of both groups reported being very satisfied or satisfied with their experience, but a larger proportion of participants whose UWE was potentially unlawful

reported that they were dissatisfied or very dissatisfied (15% vs 10%), with a corresponding smaller proportion reporting that they were neither satisfied nor dissatisfied (11% vs 16%).

Table 7: Level of overall satisfaction with UWE episode by whether or not potentially unlawful (column %)

Finally, participants in episodes that were potentially unlawful were also less likely to receive an offer of paid employment from the host organisation than participants whose UWE episodes were apparently lawful (17% compared to 28%). This is obviously significant, given that UWE may often be undertaken with the hope not just of improving the participant’s skills, contacts or resume´, but of impressing the organisation hosting the placement or internship.

For those undertaking potentially unlawful UWE, the proportion who went on to full-time employment was considerably lower. As shown in Table 8, among those participants who undertook unpaid work experience as part of a trial, only slightly more than half (54.3%) were in full-time or part-time employment at the time of the survey if their placement was potentially unlawful, whereas more than three quarters (80.0%) were employed if the placement was apparently lawful. For the ‘other’open labour market category, the difference in employment outcomes was smaller (57.7% for potentially unlawful placements versus 64.1% for apparently lawful placements). There was no real difference among open labour market placements in the proportion who were unemployed at the time of the survey, but participants whose placements were potentially unlawful were more likely to be not working and not looking for work.

 

Table 8: Labour market status at time of survey by whether or not potentially unlawful UWE (column %)

Conclusion

Our analysis of data from the 2016 national survey that we conducted shows that at least one in 10 episodes of UWE in Australia potentially breaches the FWAct or equivalent industrial laws. However, the proportion is much higher when the exemption for vocational placements is excluded from consideration. Approximately one in four ‘open market’ placements or internships was found to be potentially unlawful. Further, within the potentially unlawful UWE category, there is a substantial proportion of long-term UWE participants. This may point to extended exploitation or, conversely, a blurred arrangement somewhere between an internship and what may be characterised as ‘genuine’ volunteering. The discussion of potentially unlawful UWE also does not take into account the potential for vocational placements that may be lawful under the FW Act, but which are nonetheless exploitative, such as by providing the participant with little valuable experience or exposing them to potential harm.

We say potentially unlawful UWE, because it would be necessary to investigate the circumstances of each arrangement to form a definitive view as to its legality. It must also be conceded that even after such analysis, opinions might still differ, given the uncertainty of the law in this area. But we have also added the qualifier ‘at least’ to our estimate, for two reasons.

One is the relatively conservative approach we have adopted to identifying ‘employee-like’ work. We accept that our estimates necessarily reflect the perceptions of respondents, who might have been unaware of the full range of duties and responsibilities of regular employees. There can also be a blurred line between ‘shadowing’ employees, training and the performance

of ‘productive work’. But it seems just as possible that respondents may have understated their performance of employee-like work, as overstated it.

The other reason for the qualifier is the possibility that UWE undertaken in conjunction with an education or training program might, depending on the circumstances, be unlawful. This might happen, for example, because the education or training program is not ‘authorised’, or because the organisation in question is covered by a state industrial law which, unlike the federal FW Act, has no exception for ‘vocational placements’. It is also possible that the 2016 survey has, because of its focus on unpaid work experience, missed unlawful placements or internships that attracted a payment below the minimum wage rates required under the FW Act or equivalent laws. Such arrangements could not, by definition, have been protected by the vocational placement exemption, even if connected to an authorised education or training course.

Our analysis revealed a number of patterns with respect to differential patterns of participation in potentially unlawful UWE according to demographic categories. These include, for example, that it is more common in the aged and childcare industries, and in small businesses. It is possible to speculate about the reasons for these patterns. For example, the aged/childcare industries are characterised by a prominence of not-for-profit organisations that typically experience high demand for services at the same time as constrained and cyclical funding arrangements. Such circumstances may lead to pressures to minimise workforce costs and utilise UWE participants in ways that may not be consistent with the FW Act. Meanwhile, employers in small businesses may be less aware of their legal obligations and receive less support in this respect. They may also be more inclined than larger organisations, due to their lower visibility, to see UWE as a means to utilise free labour. It is important to note however, that these explanations are speculative at best. Survey data offers the opportunity to see patterns between distinct variables, but it does not allow for confident explanatory claims.

There is ample evidence from other research that well-designed and managed UWE can develop valuable work-based skills and knowledge. This is indeed one of the reasons why there is such widespread enthusiasm for work integrated learning. 62 Yet as we have noted elsewhere,63 the longer-term impact of undertaking UWE on employment outcomes remains unclear. Empirical research addressing the effectiveness of placements or internships in facilitating longer-term and/or secure employment is scarce and the findings from the studies that have been conducted are mixed.64 According to the national survey, those who had participated in UWE in the previous five years and who were not currently studying were just as likely to be in full-time employment at the time of completing the survey as those who had not undertaken UWE in the last five years.65

62 See, eg, Turcotte, Nichols and Phillips, above n 3, at 11–13, summarising these advantages from a human capital perspective. 63 Oliver et al, above n 1, at 17; D Grant-Smith and P McDonald, ‘Ubiquitous yet Ambiguous:

An Integrative Review of Unpaid Work’ (2018) 20 Int J Man Revs 559. 64 R Price and D Grant-Smith, ‘What Evidence is There that Internships Secure Employment?’, The Conversation, 17 June 2016, at

<http://theconversation.com/what-evidence-is-therethat-internships-secure-employment-60716> (accessed 20 July 2018); Stewart et al, above n 6, at 22–3.

65 Oliver et al, above n 1, at 54.

 

At the very least, the results of our analysis underscore the importance of the FWO — not to mention trade unions or other community groups — taking a continuing interest in the detection and sanctioning of unlawful internships and job trials. There has, quite rightly, been a considerable emphasis recently on the underpayment of employees in certain industries — especially foreign workers vulnerable to coercion and manipulation because of their visa status, language difficulties or other personal circumstances. This has led the Australian government, citing ‘community concern’ about the exploitation of such workers by ‘unscrupulous employers’, to introduce important legal changes that, among other things, extend the FWO’s investigative powers and greatly increase the maximum penalties for employer contraventions.66

Yet it is just as important, we would suggest, to take action against businesses or other organisations that systematically use interns as a source of free labour, in place of what would otherwise be paid employees. The fact that many jobseekers are willing to work without pay, in what are often desperately tight labour markets for those with their qualifications, should not detract from the exploitative nature of at least some forms of unpaid UWE. Although there is a need in future research to explore how choices around unpaid work are practised and shaped, the fact that individuals choose to participate in UWE should not be dismissed as self-evident and simply a response to worsening labour market conditions, 67 where jobseekers are responsible for their own employment success.68 If labour standards are undermined when employers pay less than the legal minimum for particular work, then surely the threat is even greater when what is in substance an employment relationship is disguised as work experience.

66 See Explanatory Memorandum, Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth), Parliament of Australia, 2017,

at i. 67 See Grant-Smith and McDonald, ‘Essential Experience or Essentially Exploitation?’, above n 2. 68 See J Johnston, ‘Interrogating the Goals of Work-Integrated Learning: Neoliberal Agendas and Critical Pedagogy’ (2011) 12 Asia-Pac J

Coop Educ 175.

Appendix A: Text of Selected Questions from the

2016 National Survey

Reason for undertaking the most recent UWE episode

Which of the following best describes why you undertook your most recent period of unpaid work experience?

(1) It was organised as part of a degree or other course at university or another higher education provider

(2) It was organised as part of a certificate or diploma course at TAFE or another registered training organisation

(3) It was a requirement of maintaining Youth Allowance or Newstart (4) It was organised as part of secondary school work experience

(5) I was applying for a paid job at the same company or organisation and it was a trial to see if I was suitable

(6) I had been offered a paid job at the same company or organisation and it was part of my training or orientation

(7) None of the above

Experiences during the most recent UWE episode

The following questions relate to your most recent period of unpaid work experience.

For each statement, please indicate if you strongly agree, agree, disagree or strongly disagree with each of the following statements

(a) For most of my work experience, the work I did was the same as thatdone by regular employees.

(b) I spent most of my time observing the work of regular employees orperforming mock/simulated tasks.

 

Appendix B: Distribution of UWE Participants by Demographic and UWE Characteristics