“It can be particularly difficult to distinguish between internships, unpaid work experience, or clerkships (as they are more commonly known in the legal industry) and employment. However, it is important to do so to ensure the integrity of the standards and protections established by the [Fair Work Act].” — Deputy President Binet[1]
According to the old proverb, the shoemaker’s son often goes barefoot. Lawyers do not have that luxury. Just as we advise our clients on the law, so too must we ensure that we practice what we preach in our workplaces. When it comes to the intricacies of employment law, that can pose some challenges.
This article is about one such challenge: the proper legal classification of junior individuals who are present in a legal workplace on a short-term, unpaid basis. While these arrangements are often labelled ‘work experience’ or ‘internship’, such terms have no legal meaning. In most circumstances, that will have no consequence — ordinarily, there will be no legal relationship between the workplace and the individual. But sometimes an intern may, as a matter of law, be an employee. That can have many negative consequences — with an unpaid internship potentially giving rise to legal liability.
This article will begin with a brief summary of key principles. It will then outline a recent Fair Work Commission case of Barbour v Derbas T/A Derbas Lawyers,[2] where the question of whether an individual in an internship-like arrangement was an employee or not was squarely relevant, before concluding with some practical tips for avoiding pitfalls. While it is not our intent to discourage legal workplaces from providing crucial training opportunities to the next generation of lawyers, practices would be well-advised to structure the nature of such opportunities in a manner that minimises risk.
Industrial protections in Australia, including those located in the Fair Work Act 2009 (Cth), are largely predicated on the existence of an employment relationship. If such a relationship exists, an employee is entitled to minimum wage, leave entitlements, protections from unfair dismissal and so on. If not, there is no legal content to the relationship between the organisation and the individual. Accordingly, rather than talking of interns, volunteers or work experience, it is more precise to speak of a binary: employees and everyone else.[1]
In turn, the employment relationship is predicated on a contract of employment. The contract does not necessarily need to be in writing, but it must meet the traditional requirements of a contract. For an employment contract to exist, there must be consideration between the parties. If the internship is wholly
unpaid, this would at first-glance seem difficult to satisfy. However, there is British jurisprudence suggesting the provision of training can constitute good consideration (the case arose, aptly enough, in the legal context: a pupil barrister suing for minimum wage).[2] A report by two eminent labour law academics for the Fair Work Ombudsman reached the same conclusion.[3]
Another barrier to establishing an employment contract between an intern and employer is the requirement that both parties intended to create legal relations. Since the High Court’s decision in Ermogenous v Greek Orthodox Community of SA Inc, the search for necessary intent has required ‘an objective assessment of the state of affairs between the parties’.[4]
There have been a number of decisions exploring whether short-term workplace engagements will give rise to the necessary intention, often in the context of workers’ compensation claims. In Teen Ranch Pty Ltd v Brown, an individual volunteered their time at a religious youth camp in return for food and accommodation. The court held that there was no intention to create legal relations, because ‘altruism was a substantial motive for each party’s entering the arrangement.’[5]
In a more recent case, Fair Work Ombudsman v Crocmedia Pty Ltd, two individuals undertook work experience with a media company. They were subsequently offered ongoing, casual-style work over a course of many months, receiving a payment for each shift characterised as a reimbursement for expenses. While the company conceded liability, and so the issue of intention to create legal relations was not explored in detail, Judge Riethmuller took the view, for the purpose of determining penalty, that as soon as the initial three-week work experience period had concluded, both were employees.[1]
These issues arose squarely in the legal profession context in Derbas Lawyers. In December 2020, the applicant, Adam Barbour, filed da dismissal-related general protections claim in the Fair Work Commission.
The respondent, Derbas Lawyers, filed a jurisdictional objection on the basis that Barbour was not an employee. In June 2021, Deputy President Binet issued her decision dismissing the application.
Barbour was a newly-admitted lawyer based in south-west Sydney.[1] Through a friend, he connected with Memtaz Derbas, the principal of a small practice, Derbas Lawyers. Derbas agreed that Barbour could join the firm initially on an unpaid basis. In the subsequent proceedings, there was much dispute about the nature of the arrangement — Barbour alleged that he joined the firm on an initial unpaid trial period to prove himself, on the basis that he would subsequently be paid on a part-salary, part-commission basis; Derbas denied this and claimed that Barbour had joined to gain unpaid work experience.
For three months, Barbour worked variable hours at the firm — while also working as an Uber driver. Barbour claimed that he worked 20 hours across three days per week; Derbas alleged that Barbour was free to come and go as he pleased. On one occasion, Barbour entered an appearance at the Magistrates Court on behalf of a client of the firm In late November, Derbas sent Barbour a text message: ‘Adam I am restructuring the firm to meet the current economic crisis as such I am no longer able to offer you volunteer work.’[2]
As ‘dismissal’ for the purposes of the Fair Work Act ‘only occurs if a person’s employment with his or her employer is terminated’, it was necessary for Binet DP to ‘determine whether Mr Barbour was an employee of Derbas Lawyers.’ That exercise is fundamentally grounded in the common law:
‘An employment relationship can only be said to exist where a person agrees to perform work pursuant to a ‘contract of service’ or contract of employment. If there is no contract of employment identified between the parties then Mr Barbour can not be an employee.’[3]
To frame her consideration of the relationship between Barbour and Derbas Lawyers, Binet DP set out ‘factors’ relevant to ‘distinguishing work experience from employment’ (in addition to the core contractual factors). These included:
Binet DP considered each of these factors in turn. While much of the complexity in Derbas Lawyers came about due to factual disputes (with Binet DP largely siding with the respondent), her consideration of each factor provides helpful guidance.
Accepting Derbas Lawyers’ position that it never agreed to any form of remuneration for Barbour (contrary to his evidence), Binet DP held that there was no consideration.
Binet DP noted that there was no evidence any payment was made: ‘whether it be by way of wage, honorarium, reimbursement, or some other form of payment’.[1] She also highlighted various cases where ‘payment in kind’ had been found to constitute consideration for the purposes of an employment relationship, including free accommodation, a slab of beer and meat from slaughtered cattle. No such non-financial consideration was present in this case.
Significantly given the contrary authority in England and the views expressed in the report for the Fair Work Ombudsman, Binet DP noted ‘I am not satisfied that the training or supervision Mr Barbour received from Derbas Lawyers was in law or in fact sufficient to constitute consideration to support a finding of employment.’[2] However, given the issue does not appear to have been extensively argued before her, it is possible that such a finding might be distinguished in another case where the ‘value’ of the training is of more significance.
Barbour submitted that an intention to create legal relations was evidenced by, among other things, the firm printing business cards for him and issuing a social media post welcoming him to the firm Derbas said these things were done to be welcoming and boost Barbour’s ‘self-esteem’, not to demonstrate a legal relationship. Binet DP accepted those submissions, although noted that the ‘appropriateness of such a practise is questionable given the potential for clients to be misled as to the skills, experience, qualifications sand employment status of volunteers or work experience placements’.[1]
One of the difficulties in Derbas Lawyers was that much of the case law is based on a distinction between paid employment and voluntary labour motivated by altruistic intentions, for religious or community groups. The focus in those cases on the motive of the putative volunteer is less helpful in the case of someone agreeing to work without pay in a commercial enterprise, presumably with a longer-term objective of gaining paid employment. Nevertheless, Binet DP observed:
[108] …The provision of the opportunity of an internship or clerkship might be considered ‘moral’ in nature in that it permits law students or recent law graduates who haven’t secured employment an opportunity to observe the practise of law to guide their decision to become a legal practitioner and/or their choice of practise area. … [110] Mr Barbour is a trained and admitted lawyer. He does not suffer from the vulnerabilities of the very young, the illiterate, the uneducated, those whose English skills are poor or who reside in Australia by virtue of a visa. There is nothing in his circumstances which would suggest that he was unaware of his legal entitlements to be paid if he was engaged as an employee…[2]The balance of evidence, Binet DP held, indicated the placement was predominantly for Barbour’s benefit His work was supervised by an employee of the firm and required substantial amendment. ‘The benefit to be gained by such an arrangement is largely in the nature of experience which improves Mr Barbour’s employability,’ said Binet DP. ‘The time spent reviewing and amending his work is a business cost not a business benefit.[1]
Binet DP observed: ‘The period of placement was fourteen weeks which would be the outer limits of what might be described as a relatively short period.’[1]
Binet DP held that, while Barbour had been ‘offered the opportunity’ to do productive work, it had been neither expected nor required.[1]
Similarly, Binet DP did not accept Barbour’s evidence that work he said he had done — ‘such as drafting letters, affidavits, statement of claims, filing in court, attending client conferences, legal research’ — was predominantly for the firm’s commercial gain.
There was dispute between the parties as to whether a client had been charged fees of $2,000 for Barbour’s court appearance and associated preparation, but Binet DP noted that, even if it was charged, ‘I am not satisfied that a significant commercial gain or value was derived by Derbas Lawyers from the work performed by Mr Barbour.’[1]
In reaching her conclusion that there was no employment contract between the parties, and hence Barbour could not have been dismissed, Binet DP observed:
[133] …as Mr Barbour’s observations of the work performed by [an employee of the firm and Mr Derbas led to a capacity for him to perform ‘work’ for Derbas Lawyers and he performed work, (albeit perhaps of limited complexity and not of a particularly high standard) for an increasingly longer period of time there would come a tipping point at which he morphed from a volunteer to an employee. The tipping point was fast approaching and quite appropriately Mr Barbour raised this with Mr Derbas. Mr Derbas would have appeared to have understood this by informing Mr Barbour that he was no longer able to offer him the opportunity to volunteer.[1]While Binet DP’s factorial analysis does not supplement or replace the ultimate contractual questions, it provides helpful guidance for workplaces in structuring short-term work experience arrangements in a legally-sound manner.
Organisations seeking to offer work experience or internships should ensure they are short — the 14 weeks of approximately part-time equivalent hours were at the ‘outer limits’ in Derbas Lawyers. A month or so of full-time work might be considered a sensible maximum, beyond which legal risk would begin to arise.
The focus of the arrangement should be on training and learning for the intern. Any requirement or expectation of productive work should be focused on how such work will benefit the intern, rather than on meeting the business needs of the organisation. In private practice law firms care should be taken in permitting the intern to do work that is ultimately billed to the client. This is not necessarily a red-line — as part of the learning experience, permitting an intern to do some billable work is probably unproblematic. However, if the intern was to earn the firm many more than a nominal amount of money, while being unpaid, a court or tribunal may raise eyebrows.
Another element that emerged in Derbas Lawyers, and preceding cases, involves the mutuality of expectation in terms of attendance. While it may be necessary for administrative purposes and to ensure appropriate supervision that working hours are broadly agreed in advance with an intern, it should be made clear to them that their hours can be flexible and they are not required to attend at certain times. As Binet DP said, in distinguishing various cases Barbour had submitted where an employment relationship had been found, ‘[c]ritically in each of these cases there was an expectation by the employer and the applicant that the applicant would attend and perform the duties when rostered rather than at their will.’[1]
There are various ways to avoid these legal headaches, foremost being to provide paid internship/clerkship opportunities where the intern is a fixed term employee with all the usual benefits sand entitlements.
Alternatively, the Fair Work Act provides a significant exception to the application of ordinary employment standards in relation to vocational placements. These are defined as a placement that is:undertaken with an employer for which a person is not entitled to be paid any remuneration; and
a) undertaken as a requirement of an education or training course; 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.[1]
While there are some definitional ambiguities with this provision,[1] it is clear that workplace placements that come about either:
Finally, it must be noted that some legal obligations apply to workplace participants, regardless of their legal status. The Work Health and Safety Act 2011 (ACT) extends to any person who ‘carries out work in any capacity’, inclusive of ‘a student gaining work experience’ or ‘a volunteer’, while territory anti-discrimination law defines employment to include ‘work as an unpaid worker’. The application of sexual harassment law to non-employees in the workplace has also been clarified recently by amendments to the Sex Discrimination Act 1984 (Cth).
For hundreds of years, the legal profession has relied on experienced lawyers, barristers and judges to
mentor and train the next generation. Contemporary employment law does not provide a barrier to the continuation of that tradition — short-term work experience or internship opportunities are extremely unlikely to constitute employment. It is entirely appropriate for firms to allow a law student to shadow a lawyer, unpaid, for a few weeks.
But sometimes internships morph beyond a short-term opportunity for learning. The longer an internship lasts, and the more the work of an intern resembles the work of other employees, the greater the legal risk.
In an important 2013 report prepared for the Fair Work Ombudsman, that precipitated a greater enforcement emphasis on unpaid internships, an anonymous intern told the authors: ‘I don’t get paid, yet the firm still charges me out at $150/hour.’[1] That is exploitation — and carries with it significant legal risk.
For all employment related queries or concerns, please contact our Employment Law & Investigations team at BAL Lawyers.