When is unpaid work lawful?

With increasing financial and economic uncertainty ahead, it might be tempting for employers to engage workers on a “volunteer” or “internship” basis to cut costs. But what many businesses fail to recognise is that unpaid work is unlawful in most circumstances. Employees are entitled to be paid for all time worked, unless an exemption applies.

If your business engages unpaid workers, it’s important that you understand when unpaid work is lawful, or you risk significant underpayment claims, which may extend as far back as six years. In this article, we point out when unpaid work is lawful and the consequences if you get this wrong.

When is unpaid work lawful?

There are limited circumstances in which unpaid work is lawful. These include:

• Vocational placements.
• Unpaid trials.
• Work experience and internships.

Vocational placements refer to situations in which there is a link between the placement, and study, such as mandatory placements for university courses or a high school work placement. The placement must be a requirement of a specific module or subject of a course as required by an educational institution. The educational institution must be ‘authorised under Australian, State or Territory laws or an administrative arrangement of the Commonwealth or a State or Territory. This means that an employer can’t engage a high school worker and not pay them on the basis that it forms a vocational placement or other form of work experience.

Unpaid trials can be lawful where they’re limited to a demonstration of the worker’s skills. This should generally be no more than an hour or so in length or enough time for the employer to see if the potential employee possesses the skills for the job. If a trial spans over an entire shift, it’s likely that the candidate should be paid for the time worked. An example of a lawful unpaid trial would be a café owner asking a candidate who has applied for a barista position to demonstrate their ability to make a variety of coffees. The person should be supervised throughout this. It should also be noted that an unpaid trial does not count towards training.

Work experience and internships occur in situations where there is no employment relationship. The worker should not be performing work for the company that would ordinarily be performed by an employee. If they are, they should be getting paid for their time. For example, an internship may include shadowing a professional while they perform their role.

What are the penalties for getting this wrong?

The Fair Work Ombudsman (FWO) places significant focus on underpayments.

In 2016 the FWO ordered a Japanese fast-food retailer in regional NSW to repay more than $51,000 to three Korean workers after exploiting them to come and work in Australia on an ‘internship program’ where they were paid flat rates of between $12.00 and $13.50 for all hours worked.

As well as ordering a back payment, the company and its director faced penalties of up to $51,000 and $10,200 respectively.

The store owner organised for the three students to come out to Australia on an ‘internship’ arrangement which was not authorised under any Australian Law or administrative arrangement. The work the employees undertook wasn’t a requirement of their college course.

In a case from 2020, a childcare operator was fined more than $30,000 for failing to backpay two migrant workers who worked under the guise of a volunteer arrangement. The business failed to comply with two compliance notices issued which required it to backpay the workers, who had been paid nothing despite being entitled to a total of $54,752 in wages for work performed in 2016 and 2017. The workers had contacted the FWO for assistance. Upon investigation, FWO investigators found that the volunteer arrangement was not legitimate as the workers performed productive work under little supervision that was not a formal part of their tertiary studies.

These cases are a strong warning for employers who engage ‘volunteers’ in their business that the Fair Work Ombudsman doesn’t ‘go easy’ on those exploiting workers and contravening workplace laws.

If you have interns, unpaid trials or placements it’s important to make sure you’re getting it right. If any of this information has raised questions about these employer obligations or you have another workplace matter, reach out to our workplace relations experts here.