A recent decision of the Federal Circuit Court of Australia highlights that the courts and the Fair Work Ombudsman (FWO) will crack down on employers that use ‘work experience’ as a cheap substitute for employment. 

Background

Two university students initially performed three weeks of unpaid work experience for a media company.  They were both subsequently employed by the company on a casual basis, for six months and 12 months respectively, to perform the duties of a ‘producer’.  The Company continued to categorise the casual employees as ‘volunteers’ and paid them only 80% of their minimum wage entitlements (referring to these payments as ‘expenses’). 

The FWO alleged that the company had breached the Fair Work Act 2009 (Cth) (FW Act) by failing to pay the casual employees minimum wages and, subsequently, failing to pay casual loadings, failing to pay in full and at least monthly, and failing to provide pay slips.

Court’s decision

The Court ordered the company to pay a penalty of $24,000 for breaching the FW Act, notwithstanding that the Court found that the company’s breach was not intentional, the company was cooperative, took corrective action quickly and showed genuine remorse. 

The company also had to pay a total of $22,168.08 to the employees, which represented their full minimum wage entitlements for the duration of their casual employment.  The company was unable to offset the wages due to the employees against the amounts that the company had already paid the employees because it had referred to those payments as ‘expenses’.

Reasons for the Court’s decision

The use of unpaid interns to perform work that would or could otherwise be performed by paid employees ‘threatens the integrity of the standards and protections established by the Fair Work legislation’.  Further, the principle of ‘a fair day’s pay for a fair day’s work’ underpins our system of minimum labour standards.

A number of factors were relevant to the Court’s determination of the appropriate penalty, including the circumstances in which the conduct took place and the nature and extent of the conduct, the nature and extent of the loss, whether the company had engaged in similar previous conduct, the size of the company, whether the conduct was deliberate, whether senior management was involved, whether the company took corrective action, was cooperative and demonstrated remorse, and the need for deterrence.

Lessons for employers

It is critically important to ensure that workers are correctly classified as employees, contractors, volunteers, or otherwise, and to pay them no less than their minimum entitlements under applicable legislation, industrial instruments and contracts.

If the nature of a worker’s role or the circumstances of a worker’s engagement changes, the worker’s terms and conditions should be reviewed.

Additionally, employers should ensure that any entitlements provided to employees are accurately identified and described and, where relevant, offset provisions in contracts and company policies are clearly drafted.