Unpaid Internships – Lawful?

 

It has been reported in the press this week that “nine companies have been forced to pay out almost £200,000 to interns who were required to work without payment”.  (The Times 3 June 2013).  The firms were fined for breaching National Minimum Wage legislation following an investigation by HMRC, and it is reported that HMRC is alarmed by the number of companies that are flouting the regulations and recruiting young people to work for nothing.

Whilst true volunteers are excluded from the right to receive the National Minimum Wage, there is a fine line between a true volunteer and someone who is in fact a worker within the meaning of employment legislation. The consequences for failing to pay the National Minimum Wage to workers are potentially very serious.  Sanctions can include the requirement to pay up to six years of backdated National Minimum Wage and also the potential liability for a criminal penalty if organisations have wilfully neglected to pay the National Minimum Wage.

Although some work experience/interns placements are genuinely designed to let individuals try out a job and gain valuable experience for their CV, internships often in fact appear to be normal jobs, which companies or organisations use, particularly during the summer months, as unpaid labour.

It is reported that the number of HMRC National Minimum Wage investigations has already more than doubled in this tax year and that the Department for Business, Innovation and Skills has referred 100 organisations to HMRC for hiring unpaid interns in contravention of the National Minimum Wage legislation. Whilst HMRC acknowledges that “unpaid internships can provide valuable opportunities” they also make it clear that “when an intern makes a complaint to the Pay and Work Rights Helpline about their pay conditions, that case is prioritised within HMRC to ensure their employer is complying with the law”.  Complainants remain anonymous.

There is a particular category of “Voluntary Workers” who are specifically excluded from the National Minimum Wage, these being volunteers who work for charities, voluntary organisations and associated fundraising bodies.  This category does not include interns working for commercial organisations.

However, volunteers, for commercial enterprises may still be exempt from the National Minimum Wage provided they are not, in fact, workers in disguise.  It is not a question of the label applied to the role, but the duties undertaken.  Work shadowing, which does not involve any work being performed, is unlikely to qualify for the National Minimum Wage.  However, placements which include performing work (particularly if the intern is subject to the direction and instruction of the company), the assignment of duties and set working hours, are likely to require the payment of National Minimum Wage on the basis the intern is a worker.  Workers also have the right to receive paid annual leave.

Every situation is different, but assuming work experience students or interns can be unpaid, or just paid minimal ‘expenses’ may come at a hefty price.