Internships are of high value for both businesses and applicants. However, a recent employment law decision (Labour Inspector of the Ministry of Business, Innovation and Employment v Woop Ltd) highlights the importance of distinguishing the role of an unpaid intern from that of a business employee and ensuring the benefits being offered to an intern in exchange for their work is appropriate. This is critical to ensure unanticipated employment obligations are not created.
From a legal point of view, unpaid interns are essentially volunteers while paid interns are employees with rights and minimum entitlements under the Employment Relations Act 2000 (ERA). Whether or not an intern should be paid will depend on whether the nature of the relationship is that of an employee under section 6 of the ERA. This requires a factual enquiry into the type of work being performed by the intern, the value being exchanged in the relationship and the term of the arrangement.
Unpaid interns ordinarily undertake an observational role with the main benefit being education, training, and meeting course requirements. Their hours tend to be flexible around study and the arrangement is relatively short term. Unpaid interns tend to provide limited commercial value to the business and have a role that is distinct to employees of the business.
Where an intern is undertaking work that would otherwise be done by an employee if the intern were unavailable, and is adding commercial value, they should be compensated accordingly. Failure to do so is a breach of minimum entitlements for the employee and would create an unfair competitive advantage against other businesses who are paying at least minimum wage for the same work to be performed.
While the intention of the parties is a consideration, it is the reality of how the role was implemented that will determine whether payment is appropriate. In LMBIE v Woop six interns were found to be underpaid. The intention was for the interns to be paid for 50% of their time and for the other 50% to be unpaid learning time. However, the reality in practice was that the interns were working late nights and weekends and the nature of the work being performed by those interns was that of an employee. Therefore, the interns were entitled to wages and holiday pay in arrears and the employer was ordered to pay penalties.
For employers intending to open applications for internship roles, it is important to understand the circumstances in which you are obligated to pay an intern as an employee and whether the proposed exchange of training and experience in lieu of payment is adequate under the law to qualify as a voluntary arrangement.
For employees applying for intern roles offered by businesses it is important to fully understand what benefit you will be getting out of the role – the ability to put a reputable business’s name on your CV is not an adequate exchange of value. Ask the business what tasks you will be expected to perform, what training/mentoring is being provided and whether you will receive any payment.
For more information on your employment law rights and obligations in relation to the offer and acceptance of internship roles, please contact Jaime Lomas at DTI Lawyers: jaime@dtilawyers.co.nz.
