Steve Jobs’ first experience of the workplace was aged 12 following an unsolicited application to the President of Hewlett-Packard. Likewise, Xerox CEO Ursula Burns started out as an intern and, years later, went on to become the first black woman to head up a Fortune 500 company. As we came to the end of a fortnight of work experience here (and I must give thanks to Iman, who was with our team, for the work she did on this blog), I started thinking about the practical implications for employers when taking on interns and work experience students.
Work placements have clear mutual benefits for both employers and those on work experience. The organisation gets to benefit from the time and skills of someone eager to learn, whilst the intern has the chance to gain valuable experience of the workplace or a particular industry in a competitive job market. However, there are legal implications to this relationship, which can vary depending on how the intern scheme is run.
What’s in a name?
“Work experience”, “internship” and “volunteering” (or in our case at Farrers, “vacation scheme”) are terms which are used interchangeably by students and employers alike. But the implications of each can be vastly different, especially when it comes to deciding whether or how much to pay for that work. For instance:
- Employers are not obliged to pay students on “work experience” but, as a minimum, reasonable travel expenses should be covered
- Children under 16 or still at school are not entitled to National Minimum Wage (NMW) for any “work experience” they undertake, but “young workers” have a specific rate – currently £4.20 per hour
- Government guidance entitled “National minimum wage: work experience and internships” suggests that “work experience” is elevated to an “internship” (and so may attract the NMW) where a higher level of qualification is required and/or where it is associated with gaining experience for a professional career. Conversely, where someone is on a placement which only involves observing work, rather than performing any work (such as work shadowing), that will not come within the NMW legislation
- If an “intern” has a contract (whether written or oral) then s/he may well be considered a “worker” and therefore should be paid at least the NMW
- “Voluntary workers”, a term which exclusively applies to those working for charities and voluntary organisations who are not paid, are not entitled to the minimum wage.
So, as all my quotation marks show, the real question is whether or not the person undertaking the work can be classed as a “worker”, since employers are legally obliged to pay all workers NMW. As we all know, calling someone an “intern” or “on work experience” does not magically stop them being a worker and so being entitled to payment.
Determining whether someone is a “worker” can be fraught with difficulties, as we have discussed before (see, for example, Eleanor Rowswell’s blog on the Supreme Court’s decision in Pimlico Plumbers). To put it (very) simply, pursuant to section 230(3) of the Employment Rights Act 1996, those with “worker” status will have:
- A contract of employment or any other contract (whether express or implied, oral or in writing) whereby the individual undertakes to provide work or services for another party to the contract
- The service must also be a personal service, and
- There must be mutuality of obligation between the employer and the worker.
If the person undertaking work experience or an internship meets the definition of worker, then the employer should be aware that such workers have corresponding rights which could potentially be enforced, as set out below. Should employers be concerned about interns being considered workers, then they can reduce the risk by ensuring they do not create any legally binding contracts with interns and volunteers.
While workers have fewer rights than employees, the law grants them greater protections and rights than someone who is genuinely self-employed and this will be the same for workers who are undertaking work experience and internships. In addition to being paid NMW, those workers would be afforded:
- Sick pay and paid annual leave
- Rest breaks and a maximum working week
- Protection against unlawful deductions from wages
- The right to receive pension contributions from the employer under the auto-enrolment scheme
- The right to be accompanied at a disciplinary or grievance hearing
Controversy – internship or internment?
Media interest in internships was recently sparked by the “Taylor Review of Modern Working Practices” to which the government published its response on 7 February 2018. We reported that this Review highlighted the trend of organisations employing unpaid interns to avoid paying NMW. The review then set out proposals for reform to help eradicate "illegal and exploitative" unpaid internships. Commentary in the media and in the legal press which flowed from the Review underscored the idea that internships favour the socially advantaged and well-connected, whilst leaving those who cannot afford to work for free to become disadvantaged in an increasingly competitive labour market. To resolve this issue, the government has said it will enforce workers’ rights from their first day in a job and is also encouraging organisations to pay interns regardless of whether they are a worker and qualify for the NMW.
Of course, by ensuring that work experience is paid at least at NMW - and that specific out of pocket expenses are reimbursed at the very least - organisations can also avoid the reputational embarrassment of being accused of being exploitative, as well as any legal ramifications of a formal finding of “worker” status.
Other considerations: Intellectual Property and Safeguarding issues
More relevant to specific industries is the issue of intellectual property (IP) when it comes to the work created by volunteers and interns, as IP rights for non-employed workers will not automatically vest in the organisation. To counteract this, organisations to which this issue is relevant might consider asking such individuals on placements to sign an assignment of their IP rights from day one in the job.
In terms of safeguarding, especially when it comes to volunteers and interns working with children and vulnerable adults, organisations need an enhanced Disclosure and Barring Service (DBS) check to ascertain whether the volunteer has a criminal record. On the flip-side, where organisations are taking on work experience students who are under 18, then such employers will need to be live to any safeguarding responsibilities they have for these students.
Practical steps for employers
To avoid repeating the mistakes of those organisations which have come under the scrutiny of the Taylor Review, employers may wish to:
- Advertise internships and work experience opportunities more widely, rather than requiring individuals to rely on their connections
- Ask interns to sign and internship agreement. There is no legal obligation to have an internship agreement (or any other volunteer agreement, for that matter) but having one in place will help to clarify what is expected of both parties. Such an agreement could include:
- an outline of the volunteer/intern’s role;
- details of their supervision and training;
- other considerations, such as expenses, insurance and health and safety; and
- preferably, it should also be made clear in the agreement or offer letter that the purpose of the placement is to provide the individual with valuable work experience.
Finally, it goes without saying that by treating interns well (and also asking interns for feedback on the quality of the placement with a view to continually improving) organisations are likely to ensure that their workplace is one which is well talked about amongst their peers. This includes any discussions of the organisation more widely on social media and makes it all the more likely that any publicity about the organisation that is generated by the individual is positive.
Employers would do well to remember this: your next intern may very well be the next Steve Jobs or Ursula Burns…
If you require further information please contact Kathleen Heycock or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, August 2018