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Nothing comes for free: Is unpaid work experience lawful?

Nothing comes for free: Is unpaid work experience lawful?

The REEF Helpline often receives calls from members asking if unpaid work experience is OK. Unfortunately, except in very limited circumstances, the answer is a resounding "no".

It’s not uncommon for someone looking to get a start in the real estate industry to ask an agency Principal if they can do some unpaid work experience. What’s the harm? After all, it benefits everyone – the agency gets free labour and the person gets a valuable leg up as they’re starting out in the industry. Right? Wrong!

 

What is a “vocational placement”?

The only way an employer can enter into an unpaid work arrangement with complete certainty is when it is done as part of a “vocational placement”, as defined by the Fair Work Act 2009 in section 12:

“a placement that is:
(a) undertaken with an employer for which a person 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 a Territory.”

A vocational placement is a formal, unpaid work experience arrangement that forms part of an education and training course the person is undertaking with an educational provider, such as a university, TAFE, college or school. It must be arranged by the educational provider and, before the start of the placement, the provider needs to give the employer documentation detailing the arrangements for placement.

A common example of a vocational placement is work experience for a high school student that’s arranged by the student’s school.

 

Is there an employment relationship?

An unpaid work experience arrangement that doesn’t fall within the definition of “vocational placement”, will be unlawful where there is an employment relationship.

When determining if a person is an employee, each case must be considered on its own facts. Some of the factors indicating that an employment relationship may exist include:

  • the person performs any work
  • the work performed is for the benefit of the business
  • the person receives any pay, commissions, bonuses or other remuneration
  • the work the person performs is normally performed by paid employees
  • the business needs the work to be done
  • the person is to get something in return (which might simply be experience or training)
  • the arrangement lasts for more than one shift.

If a person who is not on a vocational placement is actually an employee, it’s unlawful for the employer not to pay them any of their award or statutory entitlements (such as wages, allowances, superannuation, National Employment Standards entitlements etc).

 

What’s the exception?

Although it’s seldom the case, there are some limited circumstances where it may be possible for a person to do an unpaid work trial lawfully. For example, where a person is asked to perform work or undertake a trial to evaluate a person for a vacant position.

A brief work trial can legally be unpaid as long as it’s necessary

to evaluate the person’s suitability for the position and:

  • it involves no more than a demonstration of the person’s skills, where they are relevant to a vacant position;
  • it’s only for as long as needed to demonstrate the skills required for the job. This will depend on the nature and complexity of the work, but could range from one hour (or less) to one shift; and
  • the person is under the direct supervision of the potential employer (or other appropriate individual) for the entire trial.

As a general guideline, the longer a work trial lasts the more likely it will be that the person must be paid the minimum award and statutory entitlements for the time worked.

 

What’s the risk?

If an employer engages in an unlawful unpaid work arrangement, the risks are great.

In addition to back-paying wages and entitlements, employers (and other individuals who are involved in contraventions) may also face large financial penalties for breaches of the Fair Work Act or an award.

In one case, the Federal Court issued a $272,850 penalty against Sydney-based media company AIMG BQ Pty Ltd to send it a “serious message” not to disguise employment relationships as unpaid internships. AIMG BQ admitted in court that it had underpaid two event coordinators a total of $18,767 between October 2013 and June 2014. The court also penalised a company director $8,160 for failing to comply with a Notice to Produce that was issued by Fair Work Ombudsman inspectors.

 

Example of a lawful unpaid work trial

John applies for a job as a trades assistant at a local panel beaters. As part of the applicant screening process, he’s advised by the owner that on the day of the interview, he’ll need to show that he knows his way around a car and a workshop because it’s a minimum requirement of the job. John agrees.

After the interview, John is asked to follow one of the tradesmen doing body repairs. The tradesman watches John to make sure he knows how to work safely and use the right tools. The work trial lasts for one hour. John shows he meets the minimum criteria for the role and the owner offers him the job.

John’s brief trial was reasonable to demonstrate his skills and is a lawful unpaid work trial.

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The Real Estate Employers’ Federation is the leading workplace advisory service for real estate employers in New South Wales. REEF is also the only industrially registered organisation providing services to real estate employers in Victoria, Tasmania and the Australian Capital Territory. 1,500 members can't be wrong!

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