The student becomes the master: When work experience turns into paid employment

Earlier this year, we wrote about the growing concern of an increasing number of people being engaged in unpaid work that was unlawfully described as work experience, a vocational placement or an internship (see our blog “The Intern”).

When engagements of this kind are legitimate, the engaged person obtains the primary benefit of experience in the actual workforce. They observe, learn and develop but do not perform the work of or replace actual employees. The person is therefore not considered an employee within the business and does not have the benefit of an employment relationship which would ordinarily carry a whole range of entitlements, the most notable being the entitlement to remuneration.

Work experience placements, vocational placements and internships can be particularly beneficial to students as they not only provide invaluable experience in a workplace but can often lead to opportunities for permanent employment.

In such cases, there must be a clear distinction between the initial unpaid engagement and the ensuing employment relationship.

A recent decision of the Fair Work Commission (the FWC) has again indicated that it will assess the substance of a particular engagement when determining whether an engaged person is in fact an employee, regardless of what the engagement is actually called.

In Klievens v Capello Rowe Lawyers [2017] FWC 5126, the FWC dismissed a graduate lawyer’s unfair dismissal application on the basis that his unpaid “practical legal training” placement (or PLT) prior to the commencement of his paid employment with the firm did not amount to employment. The FWC found that his period of unpaid work could not be included when calculating his length of service and the graduate lawyer had therefore not reached the minimum employment period required in order to be protected from unfair dismissal under the Fair Work Act 2009 (Cth).

In dismissing the graduate lawyer’s application, the FWC confirmed there are five key questions for consideration when determining if an unpaid work engagement amounts to employment:

 

  1. Is the reason for the engagement to give the person work experience or to require them to help with the ordinary operation of the business? 

If the person is doing more than simply observing or learning whilst in the workplace, it is more likely that the relationship will be considered an employment one.

In this case, the engagement was to provide the graduate lawyer with PLT – a mandatory program that law graduates must complete before they can become a lawyer. As the purpose of PLT is to provide training and workplace experience as well as “real work”, the FWC found that the graduate lawyer could have been engaged in productive work, which was entirely within the scope of the PLT engagement.

  1. How long do you intend the engagement to operate? 

A person is more likely to be an employee the longer an engagement operates.

In this case, the engagement was relatively short before the graduate lawyer commenced paid employment – 31 days over 10 weeks.

  1. Do you need the work to be done and would it normally be done by a paid employee? 

If the answer is yes, the person is more likely to be an employee.

In this case, the graduate lawyer argued that he was doing the same work that a paid employee was doing. The FWC acknowledged that the firm had obtained some benefit from the graduate lawyer’s work, however, this work was not inconsistent with the PLT program which included engaging in productive work.

  1. Is the person expected to come to work and do productive activities, such as generate revenue for the business? 

Again, if the answer is yes, the person is more likely to be an employee.

In this case, whilst the graduate lawyer argued that the firm had charged clients for reviewing his work, the FWC noted that he was neither expected nor obligated to do such work to generate revenue for the firm.

  1. Who is getting the benefit of the work? 

The primary beneficiary of a work placement engagement should be the engaged person – if the business is obtaining the benefit from the person’s work, they will most likely be considered an employee.

In this case, the graduate lawyer was engaged in the PLT program because he required it to be admitted as a lawyer. Whilst the firm obtained some benefit from the graduate lawyer’s work, the primary beneficiary was at all relevant times the graduate lawyer.

Lessons

Before engaging a person in work experience, a vocational placement or an internship, employers should be asking the above questions to satisfy themselves that it is a lawful engagement and not an employment relationship.

The primary purpose of the engagement should be made clear to the engaged person in writing at the outset, that is, to provide them with practical learning experience in a workplace.

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

02 9256 7500 | sydney@workplacelaw.com.au

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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