Last week Reuters reported a former intern at Harper’s Bazaar is suing the magazine’s publisher, Hearst Corporation, saying her internship violated US labour laws because it was unpaid. The intern, who worked 40-hour weeks between August and December last year, is seeking minimum-wage pay and overtime pay in damages.
For US college students, unpaid internships are increasingly sought after, especially “glamour” internships in media, fashion or in Washington DC. These internships are usually secured by those who already have family connections they can call upon. If unpaid work reeks of exploitation, here it is exploitation mixed with a peculiar element of privilege.
Last year, Ross Perlin offered a critical appraisal of this world of unpaid internships in his book Intern Nation: How to Earn Nothing and Learn Little in the Brave New Economy.
Perlin argued Britain was not far behind the US in the growth of internships, and some commentators have suggested internships will become increasingly common in Australia.
If we accept unpaid internships are growing in number, as anecdotal evidence suggests, what might be driving this?
Perlin’s analysis points to several converging trends.
One is the “human capital” theory of work. Workers are increasingly seen as needing to “invest” in themselves, to build up a resume that will render them more employable. Undertaking unpaid work is an “investment” that will yield a return in the future.
Associated with this is the idea that education should primarily be about employability. Accordingly, “book learning” in the classroom needs to be supplemented by real-life work experience if a student is to be genuinely “work ready”.
Finally, there is a global trend by employers to use precarious or contingent workforces to drive down wage costs. Employers can save money by employing someone as a casual rather than an ongoing worker, or as a contractor rather than an employee. But what better than to take on a willing worker and pay them nothing at all?
A new way of training
Human capital theory has some affinity with the reasoning underlying the apprenticeship, a training system that dates back to medieval times. Apprentices accept less than a full wage in return for on-the-job training, which will ultimately increase their earning power.
But apprenticeships in Australia – and the US – have traditionally been highly regulated, and have been concentrated in highly unionized trades and industries.
Apprentices and now a broader class of “trainees” are governed by detailed State legislation. Apprentices and trainees are usually regarded as employees, which means they’re entitled to minimum rights conferred by employment legislation – including a minimum training wage LINK set by Fair Work Australia
The American experience
In the US, “trainees” are exempt from the Federal Labour Standards Act. But “trainee” is strictly defined. The training must be for the benefit of the trainee and not the employer, and trainees cannot displace regular employees, but work under close observation. The problem Perlin and others identify is that a lot of unpaid internships don’t meet this definition.
Part of the point of the Australian and US regulation is to ensure training arrangements are genuinely about training. But how easy is it for an Australian employer to use unpaid “work experience’ arrangements to simply source unpaid work?
The legal perspective
Outside of apprenticeships or formal traineeships where the worker is considered an employee, or vocational placements undertaken pursuant to an accredited education course, informal or ad hoc internships and "work experience” arrangements pose a regulatory conundrum.
For example, courts will only find a contract of employment where the arrangement consists of a quid pro quo or exchange of some sort.
In a contract of employment, the typical exchange is the payment of wages in return for the provision of work. So when the work is unpaid, generally there won’t be a contract of employment.
This is the case even though the volunteer worker might be deriving some other sort of benefit from the arrangement. For example, the bingo caller at the local sports club might get a free jug of beer, or the person helping out at summer camp might get free accommodation and meals. Many volunteers will indeed see themselves as getting the benefit of valuable work experience.
But absent a more directly bargained exchange, there will usually be no contract of employment and therefore no enforceable employment-related rights – including the right for the recovery of wages. Conversely, someone who undertakes paid work experience is going to find it easier to establish that an employment relationship exists.
The grey areas
But each case will turn on its merits. There have been examples of paid work experience that don’t amount to employment, usually because although the “trainee” received payment for the work performed, they were under no obligation to do the work in the first place.
Similarly, whilst fairly short-term unpaid work experience might not create any employment obligations or entitlement to an award wage, the longer the arrangement goes on and the less it resembles a genuine training arrangement, the more likely it will give rise to an employment contract.
All the indications are that the culture of internship will continue to grow in Australia. How regulators react will come to define the initial experiences of work for many of us.