Third sector employers may be able to lawfully engage unpaid interns, but could nevertheless face controversy
Tackling exploitation in employment is high on the government’s agenda, and non-payment of the national minimum wage is a hot moral, political and legal topic. The latest issue to hit the headlines is criticism of the National Trust’s rolling six-month unpaid internship schemes, which drew criticism despite a statutory exemption that specifically entitles charities not to pay ‘voluntary workers’ the national minimum wage.
So it seems a timely reminder of who interns are, and what their rights are, is in order.
‘Interning’ is popularly understood to mean a kind of work experience, generally undertaken for free with the implied quid pro quo that the intern can build up their CV and ‘get a foot in the door’. However, ‘intern’ is not a legal term and interns have no specific legal status.
Interns and the minimum wage
So from a legal perspective, should interns be paid?
The starting point is that a person will be entitled to the national minimum wage if he or she is a worker, ordinarily works in the UK under a contract and is above the compulsory school age. ‘Worker’ means someone who works under a contract of employment, or any other contract under which they undertake to perform the work personally for a company that is not their client or customer.
Whether or not an intern is a ‘worker’ for national minimum wages purposes, depends on the usual tests for employment status – looking at matters such as mutual obligations, the need to perform work personally and control over the work. Interns who are only work shadowing will find it harder to show they are workers who should be paid compared with those interns doing real work and being treated much like employees.
If an intern is a worker, they will be entitled to be paid the national minimum wage unless one of a few limited exemptions applies.
One exemption is specifically for people known as ‘voluntary workers’ working for ‘a charity, voluntary organisation, or associated fundraising or statutory body’. For the exemption to apply, the voluntary worker must receive no monetary payment (other than reimbursement of expenses). Generally, they must also not receive any benefits in kind, other than reasonable subsistence or accommodation. Assuming the National Trust’s internship arrangements meet these stipulations, as a charity it is legally entitled to engage interns without paying them.
Failure to pay the national minimum wage to any entitled worker (including interns) can be costly.
The worker themselves can bring a variety of claims in the Employment Tribunal, including for unlawful deduction from wages, breach of contract, and unfair dismissal or detriment related to their eligibility to receive the national minimum wage. To date there are two known cases of unpaid interns, supported by trade unions, successfully bringing tribunal claims, both for non-payment of wages and pay in lieu of holiday (Vetta v London Dreams Motion Pictures Ltd ET/2703377/08 and Hudson v TPG Web Publishing Ltd, 2011, unreported).
Separately, HMRC can issue a notice of underpayment requiring the company to pay minimum wage arrears from the last six years (calculated at the current rates) plus a fine of 200% of the underpayment, up to a maximum of £20,000 per underpaid worker. BIS will also ‘name and shame’ the employer in a press notice, unless the employer successfully makes representations as to why it should not be named.
Obstinate employers who persistently refuse to pay the national minimum wage or to co-operate with HMRC may even face criminal charges.
Beware the publicity…
As the National Trust story shows, the downsides of not paying interns can be as much about bad publicity as about the law. Charity employers may be able to rely on specific exemptions to lawfully engage unpaid interns, but nevertheless may face controversy. This makes it important for employers to weigh up all the implications – legal, social and PR – before advertising lengthy unpaid internship opportunities.
This article is published courtesy of HR magazine and was written by Richard Miskella is a partner and Rachel Rooksby a senior associate in the employment team at Lewis Silkin