When does work experience become exploitation? When is an unpaid internship a ‘vocational placement’ (which is legal under the Fair Work Act (Cth) 2009) and when is it not? These questions were at the heart of a recent prosecution by the Fair Work Ombudsman (FWO) of TV and radio producer Crocmedia Pty Ltd, for failing to pay minimum wages to interns.

In a bid to break into the media industry, two young and eager university students approached Crocmedia for work experience. After an unpaid three week trial, they were taken on as volunteers, with Crocmedia reimbursing them for ‘expenses’ rather than paying wages. One intern received only AU$13,970 over a year and the other just $3,750 over six months. These amounts represented about 80% of the minimum wage for the hours worked.

The FWO’s investigation of the working arrangement focused on the nature of duties undertaken by the interns, the duration of the program, and the business outputs generated by the so-called volunteers.  Despite Crocmedia fully cooperating with the FWO investigation and quickly complying with the hefty back-pay order, legal proceedings were nevertheless instituted as a matter of public interest and the case was escalated to the Victorian Federal Circuit Court to ensure an appropriately high profile for the resulting heads on spikes outside the FWO’s door.

The Court identified the tipping points between ‘exploitation’ and ‘work experience’ to include:

• the nature of the duties conducted – the less the learning and the more the doing (and especially where, if the interns had not carried out those tasks, someone else would have needed to do so), the weaker the “work experience” argument;

• the level of control wielded by the employer – a genuine volunteer or work experience person will be subject to little direct control or instruction (not least because he/she should not be doing any real work), so evidence of material supervision of tasks will militate against such a status;

• duration of the scheme – no fixed time limit applies but if the intern/volunteer keeps doing a task beyond the period required to “experience” it, the obvious inference will be that this has become “a job”, so attracting the minimum wage; and

• the resulting productivity for the organisation’s commercial objectives – perhaps the most persuasive factor is whether the organisation benefits commercially from the intern’s activities. Bearing in mind that most genuine work experience people end up as, at best, a mild irritation, anyone who provides a positive economic contribution is therefore always likely to be seen as something else.

With these factors in mind, the Court found that the interns could not genuinely be characterised as volunteers or contractors and were, in fact, casual employees.  Crocmedia was fined AU$24,000 (€17,100, US$18,300, £12,200).

Interestingly, the Court acknowledged that it did not consider Crocmedia to have engaged deliberately in exploitative treatment.  It was enough that it had profited from the interns’ work and that the arrangement itself, when viewed objectively, was exploitative.  There was not even any need for the interns themselves to have complained about it.

This decision serves as a staunch reminder of the legal risks associated with unpaid arrangements. Employers should be mindful of the tipping point between learning and productivity. In essence, when it comes to a point that you are profiting from the work of a volunteer, you’ve likely entered exploitation territory.