Special Feature - “Unpaid work and the legal position in Australia”
Unpaid work takes many forms and can be called many things including, vocational placements, work experience, internships or volunteering.
In Australia, individuals are entitled to be paid a minimum wage when they are employed to perform work.
An engagement to perform unpaid work is only lawful in certain circumstances. Where an engagement to perform unpaid work is not lawful, it is likely that an employment relationship exists and the individual in question is entitled to employment benefits, such as pay and leave.
In 2016, the Commonwealth Department on Employment conducted a study into the prevalence of unpaid work in Australia. The study found that in the previous five years, over half a million Australian had been engaged in unlawful unpaid work experience.
More recently, ABC News has examined the nature and prevalence of advertising for internships and discovered that between 8 January 2018 until 12 April 2018 more than 1,000 unique advertisements for internships were posted in Australia and 88% were advertised as either unpaid or did not specify whether the position would be paid or unpaid.
Anecdotally, issues with unpaid work and internships have appeared prominently in the media. Earlier this month, Fairfax reported that a student who worked for 12 months as part of an “Industry Based Learning” program with NAB was suing the bank for more than $80,000 in unpaid wages and superannuation.
A number of academics and advocacy groups have recently raised concerns about the growing number of unpaid (and potentially unlawful) internships being offered in Australia. The concerns voiced include the exploitative nature of unpaid work and the potential social inequality perpetuated by unpaid internships where only those who can afford to work for free can accept unpaid positions.
There are also serious risks for employers who improperly engage individuals to perform unpaid work. When an individual who is in fact an employee is engaged as an unpaid intern or volunteer, the employer who engaged that individual may be open to claims for unpaid wages and other entitlements and may also be vulnerable to prosecution for breaches of the Fair Work Act 2009 (Cth) (FW Act).
However, not all unpaid work placements are unlawful. In fact, many unpaid positions provide useful work experience and practical skills training to individuals and are of great benefit.
The key to successful unpaid work arrangements is understanding the legal position in Australia, which we outline below.
Vocational placements and the FW Act
Under the provisions of the FW Act, an individual who is undertaking a “vocational placement” is not an employee and is therefore not entitled to remuneration for work they perform during their placement. In this sense, a vocational placement is a lawful form of unpaid work.
Under the definitions section of the FW Act, a “vocational placement” is defined as a placement that is:
a) undertaken with an employer for which the individual is not entitled to be paid any remuneration; and
b) undertaken as a requirement of an education or training course; and
c) authorised under a law or an administrative arrangement of the Commonwealth, a State or Territory.
Other forms of unpaid work that fall outside these set requirements will be unlawful if they, in reality, amount to employment.
Where an employment relationship exists, the individual engaged in “unpaid” work experience will be entitled to employment benefits, such as a minimum wage.
There have been a number of interesting decisions in recent years that have examined specific unpaid work arrangements to assess whether or not an employment relationship actually exists. Many of those cases set out important principles for employers.
For example, in 2015 the decision of Fair Work Ombudsman v Crocmedia Pty Ltd  FCCA 140 was handed down. In that case, the employer engaged two unpaid interns for 6 months and 12 months, regarded them as volunteers and only paid them for minimal expenses. The interns performed duties, including working the graveyard radio shift, that paid employees would otherwise have performed.
The Federal Circuit Court of Australia held that the interns were actually employees.
The employer was found to have breached the FW Act and received a $24,000 penalty for its “exploitative” actions.
In Fair Work Ombudsman v AIMG BQ Pty Ltd & Anor  FCCA 1024, an employer and its director were also found to have contravened the FW Act for underpaying two employees, one of whom had commenced as an “unpaid intern.” In this case, the director and the employer had prior dealings with the Fair Work Ombudsman (FWO) and were aware of their obligations under Australian workplace laws.
Accordingly, both the employer and the director were penalised. The director was also restrained for a period of three years, by way of injunction, from being “involved in” conduct which contravenes the Clerks – Private Sector Award 2010, the FW Act and the National Employment Standards.
In Klievens v Capello Rowe Lawyers  FWC 5126, the FWC found that a graduate lawyer’s period of unpaid “practical legal training” did not amount to employment and could not be included in calculating the employee’s service. The graduate lawyer did not satisfy the minimum employment period and was therefore not protected from unfair dismissal.
In this decision, the Fair Work Commission set out five questions to consider in assessing whether unpaid work is employment:
- Is the reason for the engagement to give the person work experience or to require than to help with the ordinary operation of the business? If the person is doing more than simply observing or learning whilst in the workplace, it is more likely that the relationship will be considered an employment one.
- How long does the employer intend the engagement to operate? A person is more likely to be an employee the longer the engagement operates.
- Does the employer need the work to be done and would it normally be done by a paid employee? If the answer is yes, the person is more likely to be an employee.
- Is the person expected to come to work and do productive activities, such as generate revenue for the business? If the answer is yes, the person is more likely to be an employee.
- Who is getting the benefit of the work? The primary beneficiary of a work placement should be the engaged person – if the business is obtaining the benefit from person’s work, they will most likely be considered an employee.
Lessons for employers
Before engaging a person in work experience, a vocational placement or an internship, employers should be asking the above questions to satisfy themselves that it is a lawful engagement and not an employment relationship.
The primary purpose of the engagement should be made clear to the engaged person in writing at the outset, that is, to provide them with practical learning experience in a workplace.
Where an employer engages a person in unpaid work but fails to properly consider the true nature the relationship, the employer can be liable not just for the back payment of wages or other entitlements but may also be liable for penalties for contraventions of the FW Act.
Contraventions carry serious penalties. Currently, the penalty per offence for a corporation can be up to $63,000 or for an individual (such as a director or HR manager) $12,600. Where a contravention is considered especially serious it can carry a penalty of up to $630,000 for a corporation or up to $126,000 for an individual.
Unfair Dismissal/Adverse Action
“Federal Court confirms broad scope of workplace right to make a complaint”
Fatouros v Broadreach Services Pty Ltd  FCCA 769
An employer has been ordered to pay more than $130,000 in compensation and penalties to an employee after the Federal Court of Australia (the Court) found that it had engaged in unlawful adverse action by dismissing the employee for his complaint about a senior executive.
Mr Fatouros (the Employee) was a project manager at Broadreach Services Pty Ltd (the Employer). At the time of his dismissal, he had responsibility for the installation of audio visual digital equipment at the University of Melbourne. The projects had fallen behind under previous project managers and the Employee had been tasked with (and had been largely successful in) getting the projects back under control.
The Employee had become aware that the Employer’s CEO (and his direct report) had stopped paying the invoices of one the significant subcontractors on the project. The subcontractor had stopped work on the project claiming that it was owed approximately $30,000 for this project and about $120,000 for work it had performed on other projects.
The CEO was concerned that the subcontractor was “cornering” them into paying the invoices. The Employee was concerned that this non-payment would jeopardise the completion of the projects and could potentially lead to lawsuits against the Employer.
As a result, the Employee sent two emails as follows:
- The first email was sent to the CEO, in which the Employee stated that he was disappointed in the way that the CEO had handled the situation. The Employee offered a temporary solution that part-payment be made for the outstanding fees so that the subcontractor could return to work and any issues regarding payment could be sorted out at a later time.
- The second email was sent to two other senior executives. The Employee stated that he was concerned that the CEO was not acting in the “highest and best interests of the business”. He went on to further state:
“From a personal standpoint, if disciplinary action is the follow-on effect of my actions here then so be it. However, please be assured, my intent is purely driven by the interests of the business, its employees, our customers and suppliers, all of whom we have obligations to that are presently not being met.”
The Employee was dismissed the following week. One of the reasons for his dismissal was that he had sent an email to other senior executives in which he suggested that the CEO was not acting in the highest and best interests of the business.
The Employee commenced proceedings alleging that the Employer had engaged in unlawful adverse action by terminating his employment as a result of his exercise of a workplace right to make a complaint in relation to his employment, as contemplated in section 341(1)(c) of the Fair Work Act 2009 (Cth) (FW Act).
The Employer argued that the right to make a complaint as set out in the general protections provisions of the FW Act was underpinned by the contract of employment and the legislation. It therefore only extended to matters such as salary and leave entitlements and so on. It did not, however, extend to “entitling commentary or criticism of the direction of which the owners of the business choose to take the business”.
The Court found in favour of the Employee and confirmed that there was no basis in the legislation or in relevant case law to circumscribe an employee’s workplace right to make a complaint in relation to their employment.
The Court had concluded that:
- The management of the projects at the University of Melbourne was a part of the Employee’s employment duties; and
- The complaints that he had made arose directly out of the performance of his work and had impacted upon him as an employee.
As the emails were a substantive and operative reason for the Employee’s dismissal and those emails were also complaints and enquiries within the meaning of the general protections provisions. Therefore the Employer has engaged in unlawful adverse action when terminating the employment as the result of the complaints.
The Employer was ordered to pay the Employee $131,723.22 in lost wages and entitlements (plus interest) and $1,266.12 as reimbursement of outstanding expenses.
The Court also ordered a penalty of $12,500 to be paid to the Employee noting that the Employee had to initiate proceedings to achieve resolution of the matter. It considered there was a need for specific deterrence as the Employer had not accepted that there was a breach of the FW Act and had expressed no remorse or contrition.
What can your business learn from this decision?
An employee’s workplace right to make a complaint in relation to their employment, as contemplated by the general protections provisions in the FW Act, is to be read broadly. The protection is therefore not limited to an employee’s right to complain about their employment entitlements (such as salary and leave). It also includes an employee’s right to complain about issues that affect the performance of their employment duties.
As it stands, this is a wide-ranging interpretation of this section of the FW Act and has the potential to cover almost any kind of complaint made by an employee - as long as the subject matter of the complaint affects their employment.
“Long term injured employee not unfairly dismissed”
Kothandan v Transdev Melbourne Pty Ltd T/A Transdev  FWC 2119
The Fair Work Commission has upheld the dismissal of a bus driver with an extensive history of medical problems, finding that the employer did not have to continue the employee’s employment in circumstances where he could no longer perform his employment duties.
Mr Kothandan (the Employee) was employed as a bus driver with Transdev (the Employer). In July 2016, the Employee complained of left wrist and thumb pain he experienced whilst driving and subsequently made a worker’s compensation claim. The Employee was certified with having capacity for suitable duties but was not able to drive a bus due to the injury in his hand and arm.
In September 2016, the Employee was diagnosed with left sided neck pain. He was certified as having capacity to return to his pre-injury employment, however it was recommended that the return to work be in an administrative role which did not require the Employee to move his neck. Although he was cleared to return to work, the Employee went on a period of carer’s leave.
The Employee also began to experience mental health symptoms as a result of his workers compensation claim. In November 2016, a Consultant Psychiatrist assessed the Employee and provided a diagnosis of adjustment disorder with anxious mood. The Psychiatrist provided that the Employee’s capacity to perform bus driver duties was affected by his anxiety and opined that the Employee only had capacity for modified or alternate pre-injury duties with a gradual return to pre-injury duties.
Between November 2016 and March 2017, the Employer supported the Employee in his return to work performing suitable duties. During this time, the Employee did not undertake any bus driving duties as a result of his anxiety. His anxiety was such that at the end of March 2017, when the workers compensation insurer contacted the Employee to request that he attend an independent medical assessment in Melbourne, he suffered a panic attack and required assistance to return home. The Employee was subsequently certified as having no capacity for employment due to his severe anxiety.
Upon re-examination by the Consultant Psychiatrist in May 2017, the Employee was diagnosed with adjustment disorder with anxious mood and panic attacks with mild agoraphobia. The Psychiatrist was of the view that the Employee did not have capacity to return to his pre-injury duties for three to six months. In relation to a return to work, the medical opinion provided that a graduated return could be considered, as the Employee could not drive a motor vehicle independently. Subsequent medical reviews and examinations of the Employee were undertaken and return to work plans were proposed but never implemented.
From August 2017 to October 2017, the Employee’s capacity alternated between having capacity for suitable employment and having no capacity for employment. Importantly, the Employee’s capacity to drive was restricted.
In October 2017, the Employer requested that the Employee obtain a report from his General Practitioner regarding his capacity for work. The General Practitioner issued a Certificate of Capacity which diagnosed the Employee with a left shoulder injury, anxiety and panic attacks with lifting restrictions. The Employee was certified with having capacity for suitable employment performing light duties three days per week. The Certificate of Capacity also noted that the Employee’s judgement was “affected”.
In November 2017, the Employer met with the Employee to advise that, based on the medical evidence, it was considering the termination of his employment as his restrictions prevented him from working as a bus driver. The Employee’s employment was subsequently terminated on this basis.
The Employee lodged an unfair dismissal application, alleging that there was no valid reason for the dismissal. The Employee also claimed that the dismissal was harsh because the Employer did not provide him with appropriate treatment or support in his recovery and rehabilitation and failed to provide him with a safe working environment.
Applying the recent Full Bench decision of CSL Limited T/A CSL Behring v Papaioannou  FWCFB 1005, which set out the approach the FWC is to take when considering an unfair dismissal application where the employee has been dismissed as a result of their capacity to perform the inherent requirements of the role, Commissioner McKinnon held that there was a valid reason for dismissal.
Commissioner McKinnon noted that the Employee’s substantive role required him to regularly drive buses for periods of at least one hour and possess sustained attention, concentration and judgement. After considering the medical evidence, it was found that the time of the dismissal, the Employee’s medical condition prevented him from performing the duties of position and accordingly, the Employee did not have the capacity to perform the inherent requirements of his role as a bus driver.
Noting the Employer’s efforts to rehabilitate the Employee were substantial and that over 18 months, the Employer took reasonable steps to support the Employee, Commissioner McKinnon commented that: “Transdev was not obliged to maintain his employment indefinitely in circumstances where he could no longer do the job he was employed to do.”
The dismissal was held not to be harsh, unjust or unreasonable and the application was dismissed.
What can your business learn from this decision?
The dismissal of an employee as a result of their incapacity to perform the inherent requirements of their position may not be found to be unfair where, at the time of dismissal, the medical evidence supports that view. The decision also provides some comfort to employers managing long term injured employees, noting that an employer is not required to maintain the employment relationship indefinitely where the employee cannot perform the inherent requirements of their substantive position.
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