Unpaid Interns - Are you within the law?

In recent times, unpaid internships have become commonplace, particularly in highly competitive industries such as fashion, media and PR. With so many talented graduates entering the marketplace, competition for entry-level roles is at an extremely high level and therefore the promise of experience, especially in 'trendy' industries is often enough to entice individuals to work for free. Indeed, employers can afford to be selective in recruiting unpaid interns as there seems to be no shortage of individuals willing to provide services for no remuneration.

It sounds like a win win situation for employers; free labour from talented and eager staff. However, when something sounds too good to be true, it often is.

Employers in the UK are bound by the National Minimum Wage Act 1998, which provides workers the right to receive a minimum hourly rate of pay. The rates are regularly updated (generally in October each year), with the current rate for workers over the age of 21 being £5.93. Employers (including small employers) are obliged to pay workers the National Minimum Wage (“NMW”). Whilst employees and workers attract this statutory protection, volunteers do not.

Accordingly, the legal status of an individual is important in determining the extent of any applicable statutory employment rights. The question is therefore whether interns are regarded as 'workers,' and as a result entitled to receive the NMW (as well as a whole host of other employment rights, including but not limited to paid holiday), or if they are volunteers and consequently fall within the exclusion. In answering this question, the label given to an intern by an organisation will not be the determining factor of his/her legal status; rather it will be the nature of the relationship that is key.

As with many pertinent legal queries, the position is not clear cut, as there are different types of relationships, ranging from the purely voluntary to clear contractual engagements. This ambiguity makes it more difficult for organisations taking on interns to appreciate the legal obligations that may affect them.

However, to minimise their risk, organisations taking on interns with the intention of doing so on an unpaid basis, should ensure that the nature of the relationship is truly voluntary, with minimal obligation on the part of the intern. To that end, organisations should aim to adhere to the following guidelines:

  • Avoid making payments to volunteers that could be construed as wages. Payments to cover actual expenses should be clearly identified, and ideally reimbursed against receipts.
  • Minimise perks that could be seen as remuneration.
  • Reduce obligations on the part of the volunteer. Genuine volunteers should have the ability to refuse tasks and choose the hours they work. This will help move away from any inference of a binding contract between the parties.
  • Avoid using language in an internship arrangement, which sounds contractual. The language should be flexible such as 'suggested' and 'usual.'
  • Treat all individuals (including unpaid interns) fairly. Individuals who enjoy their experience at an organisation are less likely to raise contentious disputes.

In circumstances where an organisation is or becomes more reliant on the services of an intern, there is every likelihood the intern will be construed as an employee or worker. In these cases, engaging them on an unpaid basis exposes a business to litigation risk, as it is likely to be in breach of the NMW. Consequently, organisations should take time to consider the status of the internships they offer, in order to be satisfied that they not inadvertently falling foul of employment law.

For further information please contact:

Daniela Cohen
Solicitor
Employment
T: 020 7079 0111
E: dcohen@sheridans.co.uk
22 July 2011