Is unpaid work ever okay?
HR in Practice looks at the subject of unpaid work after it was recently brought into the spotlight.
A recent case involving a fashion industry start-up being penalised around $330,000 for underpaying staff has brought the issue of unpaid work into the spotlight. This came only weeks after a prominent Australian company director was slammed for making comments about millennials ‘not wanting to work for free’. These situations, while very different, raise the question: is unpaid work permissible?
It is important to ﬁrst outline exactly how and why this particular fashion start-up ran into trouble with the Fair Work Commission. Over a two-year period, it was reported that the business underpaid three separate employees around $40,000. One particular worker was said to be on an ‘unpaid internship’ for a six-month period, even though the nature of their engagement was that of an employee. The Commission found that the business had failed to pay the workers their minimum entitlements under relevant employment legislation including minimum hourly rates, penalty rates and leave entitlements. As a result of the underpayment, the company was penalised around $275,000 and the sole director was individually penalised a further $54,000. Back pay was also ordered in full to the three workers. The severity of the penalty was largely due to the fact the company were said to have known they were underpaying staff, with the Commission labelling the underpayments ‘signiﬁcant and deliberate’.
Is unpaid work ever okay?
In short, yes, but be careful. As highlighted by the Fair Work Ombudsman, Sandra Parker, in the wake of the case, ‘unpaid placements are lawful where they are part of a vocational placement related to a course of study. However, the law prohibits the exploitation of workers when they are fulﬁlling the role of an actual employee.’
If you have been approached by a student looking for work experience, ensure it is part of a genuine placement through their learning institution. It might also be prudent to contact the institution (TAFE, university etc) directly to discuss the ﬁner details including insurance and whether it can genuinely be unpaid.
Other than student placements, is unpaid work permissible? There may be other situations where work can be unpaid, but this is assessed on a case-by-case basis and PBA members should check with the HR in Practice service before offering any unpaid work. When the work is not part of a vocational placement, some of the major factors when considering whether work can be unpaid include:
- will the work be for the beneﬁt of the individual, or the business? If the work primarily beneﬁts the business, it is likely to require payment
- how long did the arrangement last? The longer the arrangement, the more likely it is to requirement payment
- what was the nature of the work?
- productive work that is meaningful to the business will almost certainly requirement payment.
- observing, learning and performing very rudimentary tasks that give the individual a general feel for a role or industry may form part of an unpaid working arrangement.
Considering the above, unpaid work (when not part of a vocational placement) should almost solely beneﬁt the individual (not the business), should only be for a brief period and should be largely observational.
What about unpaid trials?
An unpaid trial can be permissible if it is purely to demonstrate a skill or skills associated with a particular role. The engagement should be brief (maximum one shift) and the individual should be under direct supervision the entire time. Let it be clear that this is unrelated to a probation period, which is sometimes referred to as a trial period. A probation period is generally between three to six months and must be paid when an employment relationship has already commenced.
If you are considering engaging someone to perform unpaid work, ensure what you are doing is lawful and permissible. Ask yourself if it is part of a vocational placement related to a course of study? If so, check with the learning institute to ensure it is unpaid. Is it an individual wanting to gain experience in the industry (no vocational placement)? Ensure they do not perform any productive work, and their engagement is brief and observational. Is it a trial? It must be purely about the individual demonstrating skill/s relating to the role, it must be brief and the individual must be directly supervised for the entire engagement.
Wentworth Advantage operates the HR in Practice workplace relations advisory service for APA Business group members. If your plan to engage someone doesn’t match any of the above, it is likely they will be an employee and will require payment. If you are unsure about anything in this article, contact the HR in Practice Service on 1300 138 954 or email email@example.com.
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