2017 Recap on the Positives and Perils of Unpaid Work Placements

A recent study undertaken by UTS, QUT and the University of Adelaide reviewed the prevalence of unpaid work placements within the current Australian labour market.

The study, reported in ‘Unpaid Work Experience in Australia: Prevalence, nature and impact[i], revealed that almost 60% of respondents aged 18-29 and over 25% of respondents aged 30-64 had participated in at least one episode of unpaid work experience in the last five years with 60% agreeing that an unpaid work placement would be helpful towards securing paid work in the future. However, only 27% of respondents actually secured paid employment by their host employer or organisation after completing an episode of work experience.

The report noted that exposure to the working world through well-designed work experience programs may assist in the transition from education to employment. Federal government initiatives like the National Work Experience Programme and PaTH (Prepare-Trial-Hire), to be introduced in April 2017, are also placing increasing reliance on unpaid work experience in an attempt to address the needs of the long-term unemployed.

However, on the flipside, many arrangements do not fall within permitted “intern” practices under the Fair Work Act 2009 (Cth) (Act), exposing businesses to potential penalty for failure to provide interns with minimum benefits. The Fair Work Ombudsman has successfully prosecuted a number of businesses over unpaid intern schemes, asserting that interns were in fact employees (see previous posts on this topic at Recapping Australian Workplace Regulator Trends for 2016, January 2017 and Unpaid interns leave $24,000 hole in organisation’s pocket, February 2015)

Organisations seeking to allow unpaid work experience must continue to be mindful of restrictions on genuine intern arrangements under the current drafting of the Act.

Unpaid Work Providers beware

Unpaid work placements can be lawful – provided that the arrangement is a “vocational placement” within the meaning of the Act or alternatively, no employment relationship can be said to exist. Under the Act, a vocational placement is lawfully unpaid if:

  • the placement is either arranged by an educational or training institution or a student;
  • there is no entitlement under contract, industrial award or agreement for the organisation to pay for the work the student undertakes;
  • the placement is done as a requirement of the student’s education or training course; and
  • the placement is approved under a Commonwealth, State or Territory law or administrative arrangement (courses offered at Australian universities, TAFE colleges and schools will generally satisfy this requirement).

If the placement does not meet all of the above criteria, it may still be a lawful unpaid work arrangement provided no employment relationship exists. Unpaid work arrangements are less likely to be considered employment relationships if:

  • they are mainly for the benefit of the person (not the organisation);
  • the periods of the placement are relatively short;
  • the person is not required or expected to do productive work; and
  • there is no significant commercial gain or value for the organisation derived out of the person’s work.

[i] “Unpaid Work Experience in Australia: Prevalence, nature and impact” by Dr Damian Oliver (UTS), Professor Paula McDonald (QUT), Professor Andrew Stewart and Associate Professor Anne Hewitt (University of Adelaide), Department of Employment, December 2016.

Changes to the Fair Work Act

The Fair Work Amendment Act 2015 (Cth) (the Act) commenced on 27 November 2015, introducing changes to unpaid parental leave arrangements, and requirements for greenfields agreements and protected action ballot orders.

Requests for extended unpaid parental leave period

An employee has the right to request up to an additional 12 months’ unpaid parental leave from their employer (subject to certain requirements) after the employee has taken an initial 12 months’ unpaid leave. An employer may only refuse such a request on “reasonable business grounds”.

An employer will now be required to give an employee a reasonable opportunity to discuss the employee’s request to extend their unpaid parental leave period before the employer can refuse the  request. This obligation will not apply where the employer has already agreed to the request.

Whilst the term “reasonable opportunity” is undefined, discussions need not be face-to-face if a such a meeting is not possible or convenient. Rather, this discussion can occur by other means, (for example, a teleconference or videoconference).  However, the Explanatory Memorandum to the text of the Act indicates that text message or email communication will most likely not satisfy this new requirement.

Other changes

The Act also introduces good faith bargaining obligations to greenfields agreements. Employers are now able to take a proposed greenfields agreement to the Fair Work Commission for approval if a deal has not been struck with relevant union parties within 6 months of the bargaining process commencing.

The Act also creates a clear rule such that employees cannot seek to apply for a protected action ballot order (required before seeking to take protected industrial action) unless a bargaining period has commenced.

Requests for Flexibility – when can employers say no?

In today’s workplace, the right to flexibility at work is not only protected by both federal and state laws, but notions such as “flexible work practices” and “work – life balance” are commonly pitched by employees in their increasing requests for flexible working arrangements.

As a general rule, employers can only reject an employee’s request for flexible working arrangements on “reasonable business grounds”, which is now helpfully defined in the Fair Work Act 2009 (Cth) (Fair Work Act), and extends to considerations including cost, practicality and capacity. 

The concept of “reasonable business grounds” was considered by the Fair Work Commission (FWC) last week in an unfair dismissal case in which the employer had refused an employee’s request to return part-time after maternity leave.

Facts giving rise to request

After several periods of maternity leave commencing in February 2011, in May 2015 the full-time Business Development Executive requested that she return to work on a part-time basis. Upon considering the request, the employer, a travel agency, responded that the business was unable to facilitate the request as it would be “unable to maintain the necessary service standards and expectations within the sales division“. In short, (and despite recognising the employee’s long tenure), the employer stated that it could not offer the employee her pre-maternity leave position on a part-time basis, nor were there any current part-time roles of a similar level available. The employer gave the employee two options: to accept her pre-maternity leave position on a fulltime basis or to resign. The employee unwillingly chose the latter.

Employee’s right to request

In this case, the employee’s right to request flexible working arrangements arose under the parties’ enterprise agreement. Similarly to the general right to request provisions of the Fair Work Act, this agreement provided that the employer could only refuse a request from an employee returning from parental leave to work part-time until their child reached school age on “reasonable business grounds”. The agreement stated that such grounds “might include cost, lack of adequate replacement staff, loss of efficiency and the impact on customer services“.

No forced resignation by Employer

The FWC took into account evidence from the employer’s general HR manager regarding the business reasons for the employer’s refusal to convert the employee’s employment status to part-time.

The FWC ultimately determined that the employer’s refusal to accommodate the request was reasonable. The FWC also noted feedback received by the company from travel agents to the effect that there was a need for the Business Development Executive to be available on a fulltime basis.

The FWC rejected the employee’s argument that it was the employer’s action in denying her request that forced her to resign. Despite sympathising with the employee’s circumstances, the FWC considered that it was more likely the employee’s own personal circumstances, rather than the employer’s action in denying her request, that lead the employee to resign.

Responding to requests for flexibility

This decision will no doubt comfort employers who wish to rely on the “reasonable business grounds” exception to refuse employee requests for flexible working arrangements. However, employers need to carefully assess individual requests for flexibility against business roles and needs, and their own internal policies. When responding to requests, employers should also be mindful of formal requirements required under the Fair Work Act or an applicable industrial instrument.

Employers should also consider how flexibility might provide an opportunity, rather than a cost. Australian employers are increasingly seeking competitive advantage through flexible workforce arrangements not only through retaining and incentivising talent, but also through lowering overheads associated with a static office based workforce.

See: Ms Catarina Reale v Helloworld Ltd T/A Qantas Holidays and Viva Holidays Ltd [2015] FWC 7122

Unpaid interns leave $24,000 hole in organisation’s pocket

Unpaid work arrangements (often called “internships” or “work experience”) have received some attention in recent years. In 2013, Professors Andrew Stewart and Rosemary Owens from the Adelaide University Law School released a report regarding the significant numbers of workers being asked to undertake “unpaid trials”, and businesses increasingly using unpaid interns to perform work normally reserved for paid employees. Following on from this report, the Fair Work Ombudsman’s (FWO) recent successful prosecution of an organisation for failing to pay minimum wages to 2 interns will no doubt leave many organisations querying whether their internship programmes comply with industrial laws.

 

The FWO prosecuted a media organisation over its dealings with 2 university students. Following the students’ enquiries, the organisation agreed to provide them with 3 weeks’ unpaid work experience, during which time they worked as producers on radio programs broadcast on a network and performed duties which included preparing and delivering on-air content and sourcing and arranging interviews. The students were not provided payslips or paid minimum, regular wages and casual loadings but were reimbursed for their expenses. After 3 weeks, the interns were employed on a casual basis, but depending on the specific task were also characterised as “volunteers” and/or “contractors”.

 

Following the FWO’s investigation, the media organisation quickly admitted that it had failed to pay the employees their minimum wages and rectified the full wages due and owing ($22,168.08). The organisation also accepted that the payments it did make (characterised as “expenses” and equivalent to around 80% of their minimum wages), could not be offset against wages due and owing, enabling the employees to retain their “expenses” payments ($17,720).

 

Despite the organisation’s early admissions, full cooperation with the FWO’s investigation and early and full rectification of the underpayments, the FWO submitted that legal proceedings to obtain orders for penalties were necessary because of the strong public interest in deterring organisations from engaging in unlawful unpaid work arrangements. The Federal Circuit Court  determined, (as was agreed by the parties), that the organisation had breached the Fair Work Act 2009 (Cth) (Act) by failing to pay the interns their minimum wages and casual loadings, failing to pay their wages in full at least monthly and failing to provide pay slips.

 

Despite the organisation’s plea that it had not “knowingly” defied the law, the Court penalised the organisation $24,000 stating that its arrangements could not “on any view, be categorised as ongoing work experience or an internship”. In the Court’s view, the organisation had engaged in an “at best, dishonourable” and “at worst, exploitative” arrangement that it believed avoided the consequences of the minimum wages requirements of the Act.

 

This decision serves as a strong warning to think twice before entering into unpaid work arrangements and to re-consider those already in place to ensure that such arrangements are not in fact employment relationships posing as unpaid work experience or like arrangements.

 

For organisations left pondering, we note that unpaid work arrangements can be lawful – provided that the arrangement is a “vocational placement” within the meaning of the Act or alternatively no employment relationship can be said to exist. Under the Act, a vocational placement is lawfully unpaid if:

  • there is a placement either arranged by an educational or training institution or a student;
  • there is no entitlement under contract, industrial award or agreement for the organisation to pay for the work the student undertakes;
  • the placement is done as a requirement of the student’s education or training course; and
  • the placement is approved under a Commonwealth, State or Territory law or administrative arrangement. (Courses offered at universities, TAFE colleges and schools will satisfy this requirement.)

 

If the placement does not meet all of the above criteria, it may still be a lawful unpaid work arrangement provided no employment relationship exists. The Adelaide Law School report suggests that unpaid work arrangements are less likely to be considered employment relationships if:

  • they are mainly for the benefit of the person;
  • the periods of the placement are relatively short;
  • the person is not required or expected to do productive work; and
  • there is no significant commercial gain or value for the organisation derived out of the person’s work.

 

In the words of the Fair Work Ombudsman, Natalie James, “when a worker moves beyond merely learning and observing and starts assisting with business outputs and productivity, workplace laws dictate that the worker must be paid minimum employee entitlements”.

See Fair Work Ombudsman v Crocmedia Pty Ltd [2015] FCCA 140 (29 January 2015), and “The Nature, Prevalence and Regulation of Unpaid Work Experience, Internships and Trial Periods in Australia, Experience or Exploitation?”, Report for the Fair Work Ombudsman, January 2013, Andrew Stewart and Rosemary Owens, Adelaide Law School.