Unpaid interns – Her Fashion Box – Case study

Her Fashion Box took on a graphic designer for a 2 day a week “unpaid internship”. The FWO investigation revealed that the tertiary educated graphic designer was in fact an employee. In fact, she was performing productive work and was not receiving vocational training. The start-up allegedly owes this employee $6,913 in unpaid wages. The two other employees were grossly underpaid by Her Fashion Box. Another graphic designer was consistently underpaid for 2 years and is allegedly owed $15,511. An employee engaged as the brand partnership manager was also significantly underpaid to the tune of an alleged $18,119.

Unpaid interns – Shark Tank backed – Her Fashion Box – Lessons? Progressive Legal has the know how!

Do’s and don’ts with unpaid work

Never assume work may be performed but not paid for. This is rarely the case!

Unpaid work comes in a range of shapes and sizes – a work trial, volunteer work, work experience, a vocational placement, an internship – the list goes on.

It is important to ascertain whether an employment relationship exists by considering. The FWO suggests looking at the following factors, as a minimum:

• The nature and purpose of the arrangement;
• Length of the arrangement;
• How important the arrangement is to the business;
• The obligations on the worker; and
• Who benefits from the arrangement.

The more a relationship appears to be that of employment (i.e. not a short- term training placement), where the employer is benefiting from the productive (but free) work being performed by the worker, the more likely it is that the worker is an employee entitled to be paid their minimum statutory entitlements.

A legitimate vocational placement is the same as a formal work experience program (as long as these arrangements are part of a genuine educational or training course). Most of the time, registering educational providers facilitates these placements. And if they meet the legislative definition in the Fair Work Act, such placements may be lawfully unpaid.

Work trials may also be legitimately unpaid if they are brief and required to make an assessment about a person’s capacity to perform the role. Of course, a twice a week work trial for a period of 8 weeks is unlikely to be legitimate and may constitute employment.

The bottom line

It is essential that business owners know that an individual’s agreement to work unpaid does not mean that they do not have to pay them. It is essential to interrogate the nature of the unpaid work (as outlined above) to see whether the work must be paid or whether it may lawfully be unpaid.

The worst case scenario isn’t just back-paying the employee. In addition to the back-pay, employers face large fines and rigorous investigation by the FWO.

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Disclaimer. This article is meant to be informational only and should not be taken to constitute legal, commercial or financial advice. Specific legal advice should be obtained for each individual business to make sure it is correctly applied.