Throughout the past decade, the issue of employee misclassification has garnered much publicity. In the past, Sherrard Kuzz has written about the “manager” vs. “employee” distinction within the context of overtime class-actions, and the “employee” vs. “independent contractor” distinction in pay for services arrangements.
Recently a new classification battleground has emerged, focussed on the “unpaid intern or trainee” and the extent to which the law permits the existence of these roles. Although not restricted to the summer months, unpaid interns and trainees are especially prevalent when school is out and students are looking for a summer workplace experience. But what may seem like a good idea, benefitting both intern/trainee and organization, may create undue risk for the organization.
Unpaid Positions – What’s the fuss?
Historically, an unpaid internship represented a legitimate and highly sought after training opportunity en route to paid employment. Benefitting both intern and organization, internships traditionally, though not exclusively, were associated with industries such as journalism, broadcasting or fashion.
However, in the current economic climate, the prevalence of unpaid internships has greatly increased and their character changed. This has caused some to argue that the modern internship represents little more than corporatized slavery. In his provocative style, television satirist Stephen Colbert used the euphemism “cotton intern” as a commentary on the exploitative aspects of modern internships. While this analogy is at best unhelpful (it ignores the element of free choice to accept or not accept an internship), it demonstrates the spotlight being put on the issue.
Closer to home, the issue of unpaid work has recently received some high profile scrutiny. In April of 2013, the University of Toronto Students’ Union alleged the existence of more than 300,000 unpaid positions in Canada and demanded action from the Ontario Ministry of Labour. Soon after, Toronto City Councillor, Ana Bailao, removed a posting on her Facebook page which solicited an unpaid intern to assist in her constituency office.
The legal risk to an organization of an unpaid internship is a claim under applicable employment standards legislation for unpaid wages. The public relations risk to an organization can be equally if not more damaging.
How, then, can an organization protect itself from being on the receiving end of one of these claims? What are an organization’s obligations with respect to the use of interns and trainees?
Who is an “employee” under the Employment Standards Act?
There is no definition of “intern” or “trainee” under the Ontario Employment Standards Act (the “Act”). However, an “employee” is defined as including an individual who “receives training from a person who is an employer”; and an “employee” is entitled to be paid for work done. All of which means, as a general rule, an intern or trainee cannot legally provide services for free.
Can an intern/trainee ever be without pay?
There are limited exemptions under the Act which carve out unpaid internships, such as a secondary student performing work under a work experience program authorized by a school board and an individual who performs work under a program approved by a college of applied arts and technology or a university.
Apart from these statutory exemptions, there are circumstances in which an intern/trainee can be “trained” without an organization incurring an obligation to pay wages. In these cases the experience for the intern/trainee must provide little, if any, workplace benefit to the organization and cannot be a stepping stone toward the intern’s future paid-employment with the organization. More specifically, each of the following six (6) criteria must be met:
The training is similar to that which is given in a vocation school.
The training is for the benefit of the individual.
The person providing the training derives little, if any, benefit from the activity of the individual while he or she is being trained.
The individual does not displace employees of the person providing the training.
The individual is not accorded a right to become an employee of the person providing the training.
The individual is advised that he or she will receive no remuneration for the time he or she spends in training.
Best practices for employers
Aside from putting every intern and trainee on the payroll, there is no guaranteed way to avoid the risk associated with these unpaid positions. At the very least, organizations seeking to host interns and trainees should consider the following proactive steps:
Perform a workplace self-audit: Identify positions from which the organization derives benefit or has services performed by unpaid interns or trainees.
Ensure compliance: Consider the six criteria listed above and ensure your workplace is compliant with the law. If in doubt, consult with experienced employment counsel who can help identify issues and suggest solutions.
Use written agreements: Ensure every unpaid internship/trainee is the subject of a written agreement that identifies and addresses the six criteria noted above, and expressly states that the unpaid individual has no expectation of future employment or compensation.
One final note: Even in the case of a properly structured unpaid intern/trainee, keep in mind that whether or not an individual is paid or provides services for free does not necessarily affect the applicability of other employment-related legislation, such as human rights and occupational health and safety legislation. When in doubt please check with experienced employment counsel.