When a business takes on interns, there are many things to be mindful of regarding intern pay, the length of the internship and the internship agreement, in order to avoid becoming tangled up in employment law and other legal issues. Those preparing to look for work, or currently job hunting, in Australia also need to be clear about the rights they are entitled to as an intern.

Today’s article shares the rights of interns in Australia, along with the various guidelines businesses need to keep in mind.

1. What is the purpose of an internship?

If a business’s internship agreement stipulates that the intern is obliged to perform work for the business, this may indicate that the business intends to establish a legally binding relationship with the intern. Keep in mind that the primary benefit from an internship should flow to the individual, not the business. The main role of an internship should be to provide the intern with a genuine opportunity to observe and learn.

2. Does a business need to pay an intern wages?

Sometimes, a business will provide an intern with reimbursements or a stipend, for example for travel or lunch expenses. However, businesses should proceed carefully and ensure that any such payment cannot be equated with wages. Payments equivalent to wages are typically paid on a regular basis and calculated by reference to the intern’s hours of work.

Regarding unpaid internships:

In fact, in Australia, most internships are unpaid. Under the relevant provisions for unpaid internships in the Australian 《Fair Work Act 2009》, an unpaid internship offered by a business is lawful if the following conditions are met:

1. The work performed by the intern is not work that brings direct or indirect benefit to the business — that is, it is not productive work;

2. The primary beneficiary of the work performed is the intern themselves, for example in gaining experience of a particular industry or role;

3. The intern is engaged in meaningful training, skills development, learning and similar activities.

Regarding paid internships:

If a business and an intern have entered into an employment contract, whether orally or in writing, and the work involved extends to productive work for the business rather than merely training and development of personal skills, then this can be regarded as an employment relationship and amounts to a paid internship. Accordingly, the business should pay the employee appropriate wages, along with benefits such as annual leave and sick leave.

3. What are the pay standards?

Whether the wages a business pays an employee must meet the Australian minimum wage depends on whether an employment relationship exists between the business and the employee. If no employment relationship exists, then the pay does not need to meet the minimum wage. As to whether a specific person meets the definition of an employee, the Fair Work Act does not provide a specific definition, so in practice this is often determined by reference to whether an employment contract exists, and will otherwise be analysed on a case-by-case basis.

4. Should internships required by a course of study be paid?

An internship required as part of university studies is a vocational placement, forming part of the educational programme and helping the student prepare for employment. In other words, this type of internship is focused on helping the student accumulate experience and improve their skills, and therefore does not involve an employment relationship — the host business is not required to pay the student wages.

Under the Australian Fair Work Act, a person undertaking a vocational placement is not regarded as an employee. A lawful vocational placement must satisfy the following elements:

1. There must be a placement arrangement in place. The student may find a host business themselves, or may participate in a placement arranged by an education or training provider.

2. The institution offering the placement to the student must be authorised under Australian law.

3. The placement the student takes part in must form part of the requirements of their course of study.

4. The student has not actively sought payment of wages from the host.

5. How long should the internship be?

As noted above, the main role of an internship should be to provide the intern with a genuine opportunity to observe and learn, rather than to have them directly contribute to the company’s productivity. Accordingly, the business and the intern should agree on the length of the internship before it begins (for example, a 4-12 week placement), rather than leaving the intern on an open-ended internship. For example, two intern doctors in Australia originally agreed with a hospital on 15 working hours per week, but were in fact required to work 25 hours per week; following intervention by the relevant authority, the internship agreement was terminated. Of course, the internship can also be ended early — if the intern wishes to end it early, it is recommended that they give the business two weeks’ notice.

6. Should a business put an internship agreement in place?

Attention should be given to whether the business has put in place an internship agreement that sets out the relationship between the business and the intern, including the roles of both parties and their respective obligations. Businesses should take care to avoid the trap of informal internship arrangements and ensure there is an internship agreement template so that, when the intern starts, they can be asked to complete it and thereby understand each party’s role, objectives, functions and obligations, including the position, scope of work and working hours. Businesses should also note that, as an employer, they owe health and safety duties to unpaid interns.

7. What are the consequences of treating an employee as an intern?

Where the relationship between the business and the worker is in substance one of employer and employee, but the business treats the worker as an intern and affords them the same conditions and remuneration as an intern, the business will be liable to pay the outstanding remuneration and to provide the worker with their other lawful entitlements. What is more, the business may also face penalties of up to AUD 51,000 to 54,000 for each contravention of the Australian Fair Work Act. The business’s directors or managers may also face personal penalties for contravening the Fair Work Act.

8. How is an employment relationship determined?

To determine whether the person engaged is an intern or an employee — in other words, whether an employment relationship exists — the following questions should be considered:

– Is the internship part of a vocational placement required by university studies?

– What is the purpose of the work arrangement?

– How long does the work arrangement last?

– What are the person’s duties and responsibilities in the role?

– Who benefits from it?

Finally

An internship is almost an unavoidable step on the way into the workforce, and many businesses inevitably recruit interns and run internship programmes on a regular basis. Accordingly, interns should be clear about the lawful rights and obligations that apply to them — for example, whether their internship is paid or unpaid, what level of pay they are entitled to, how long the internship will last, and so on. And businesses should put in place lawful and compliant internship agreements that clarify the roles, objectives and obligations of each side, distinguish interns from employees, and avoid unnecessary employment disputes. If you are unsure whether an internship is compliant, or have any questions about internship agreements, employment contracts or similar matters, we recommend seeking professional legal advice.