No such thing as a free lunch? Unpacking the employment status of unpaid interns

In the lead-up to Easter, allegations were made regarding the mistreatment of interns and volunteers at Arise Church – one of New Zealand’s largest churches. Some of the allegations relate to the long hours expected of interns, the type of work undertaken and volunteer burn-out.

The church is currently the subject of two reviews.

In March, we discussed the importance of ensuring that volunteers are, in the eyes of the law, volunteers in light of the (yet to be released) Employment Court decision concerning the status of residents of the West Coast Gloriavale community. You can review that article here.

While we are not aware of any legal claims brought concerning the employment status of Arise Ministry School interns or volunteers of the church, the allegations made do warrant an important discussion about unpaid internships.

Classification of interns: volunteer or employee?

There is no legal definition of ‘intern’ or ‘internship’ under the Employment Relations Act 2000 (ERA). Internships are essentially a period of work experience and are offered by a variety of businesses, universities, charities and government agencies. They can be paid or unpaid.

For an internship to be legitimately unpaid, an intern must be classified as a volunteer.

As we set out in our previous article, the ERA describes a volunteer as someone who does not expect to be rewarded for work and receives no reward for work performed. By contrast, an employee is defined by the ERA as any person of any age employed by the employer to do any work for hire or reward under a contract of service.

Simply labelling an unpaid intern a volunteer will not be sufficient and could expose a business or organisation to considerable risk if the intern could establish in the Authority or Court that the real nature of the relationship was one of employment.

Factors considered in assessing the real nature of the relationship

In assessing the real nature of the relationship, the Authority or the Court will take into account all relevant factors, in particular whether the worker expected to be rewarded and is rewarded.

The following factors indicate that an intern should not be classified as a volunteer but is potentially an employee:

  • The worker is being paid for their work – including rewards such as free accommodation or food.
  • The worker expected to be rewarded for their work.
  • There is an economic gain to be made to the business from the work performed by the worker.
  • The work is integral to the business and is work an employee would normally perform.
  • The worker’s hours of work are controlled.

The primary purpose of the internship will also be relevant. For instance, if the activities undertaken are for the primary purpose of tertiary or vocational training, this will be a factor pointing away from a finding of an employment relationship. For example, trainee teachers and students are not employees.[1] Additionally, in Below v The Salvation Army New Zealand Trust,[2] Judge Corkill held that Mr and Mrs Below were students, not employees, of the Salvation Army and that the activities undertaken as a part of their residential course had the primary purpose of preparing them for officership.

Alternatively, if an unpaid intern is working for a for-profit business or organisation, the primary purpose of their work is likely to provide economic or operational benefit to the business or organisation. In such cases, the intern is more likely to be an employee.

In the Employment Court decision in Salad Bowl Ltd v Howe-Thornley,[3] it was held that Ms Howe-Thornley was an employee at the time of her 3-hour work trial and had been unjustifiably dismissed when she was told via text message that there was no further work available for her.

In that case, Ms Howe-Thornley was held to have engaged in work that Salad Bowl Ltd had gained an economic benefit from.

Although the context of this case is slightly different to our discussion on unpaid internships, the decision is relevant and applicable. Even if an intern is still developing skills and may undertake tasks inefficiently, if they are contributing to the business their status may well be that of an employee.

What next?

If you currently have interns working for you or are considering taking on interns, you should carefully consider how the internship role is structured and whether it would be more appropriate for the role to be a paid role. This is particularly important if the role will be within a for-profit business or organisation.

Please feel free to get in touch with our employment team if you have any questions or concerns. We would be happy to talk through your options with you.

Click here for more Employment law articles.

 

 

[1] New Zealand Educational Institute v Director-General of Education [1981] 1 NZLR 538  (CA).

[2] [2017] NZEmpC 87.

[3] [2013] NZEmpC 152.

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