Internships have become more common in the UK’s workplaces but employers might not realise they could be breaking the law if they do not pay those on work experience at least the national minimum wage.

Recent political and legal developments mean that internships are increasingly under the spotlight so employers need to review their use of any unpaid staff in their workplaces.

What is an “internship”?

“Internship” is not a term of art: there is no official or agreed definition of what an internship or intern is. It appears that this is a term which has been imported from North America.  When people refer to interns they generally tend to mean a student or recent graduate receiving practical experience and/or training in a working environment.  In the UK it has been more common to refer to “work experience” students than to interns; the two terms are interchangeable.

Internships are particularly prevalent in certain sectors such as:

• the media
• politics and public affairs
• charities/non-governmental organisations
• arts, heritage and entertainment

There has been a growth in internships since the start of the recession.  The CIPD’s Labour Market Outlook found that between April and September 2010, 21% of employers planned to hire interns, up from 13% of the employers surveyed in summer 2009.

Legal issues: the national minimum wage

Those who undertake unpaid internships (or who just receive expenses) could be entitled to the national minimum wage (NMW), which is set to rise this October to £6.08, if they come within the legal definition of “worker”.

A worker is defined in legislation as someone who works under a contract to provide work or services personally and this is not a genuine business to business relationship.

The courts and tribunals use the following tests to determine whether or not someone is a worker:

• whether there is a requirement on the individual to perform the work personally
• whether there is a sufficient degree of control exercised over the individual by the organisation?
• Whether there is “mutuality of obligation” i.e. whether there is an obligation on the organisation to provide work and on the individual to do that work?

Where the answer to all these questions is yes, the individual will usually be a worker.

The way in which an employer treats an individual on work experience can therefore determine their legal status and legal entitlements.

Factors which may be relevant to the question of whether an intern is a worker include:

• whether the student is actually doing work of benefit to the organisation: if they are genuinely just shadowing someone rather than working themselves they will not be a worker
• the length of the placement: the longer it goes on the more risk of the intern being considered a worker (weeks rather than months might provide a credible argument that someone was not a worker)
• whether they are genuinely able to come and go as they please or whether they must comply with instructions and are required to perform a certain amount of work?
• The number of hours worked and when these are performed: if the arrangement is flexible and fluid they may not be a worker but if they are required to be in a certain place for a set number of hours each day they look like a worker.

A tribunal will consider the actual working arrangements that applied (rather than simply what any contract said) and if these mean that the person is a worker then, by law, they are entitled to be paid at least the minimum wage.

In November 2009 an Employment Tribunal in Reading, found that intern, Nicola Vetta, who worked for a London film production company and who had agreed to receive only expenses, was entitled to recover payment of wages after her internship ended. She was backed in her case by the Broadcast, Entertainment and Cinema trade union, BECTU and recovered almost £2000 in unpaid wages.

Exceptions

While most workers in the UK are entitled to be paid at least the NMW there are some narrowly defined exceptions, including:

• voluntary workers (employed by specific categories of organisations, such as charities)
• students undertaking work experience as part of Further Education or Higher Education courses
• those on Work Trials while unemployed and on Jobseekers Allowance

The issue is therefore not clear cut: work experience and volunteering activities can be legitimately unpaid if they fall within the exception provided by NMW regulations.

HMRC scrutiny of unpaid internships likely to increase

This year’s annual report from the Low Pay Commission recommend that the Government take steps to raise awareness of the rules applying to payment of the NMW for those undertaking internships, all other forms of work experience, and volunteering opportunities.
In addition, it urged the HMRC to make sure these rules are effectively enforced by using its investigative powers.

Employers in sectors which are particularly renowned for using interns should therefore prepare for greater interest in their arrangements from the HMRC.

Political pressure on social mobility may result in a crackdown on unpaid internships

Although the Government itself has promoted an expansion of work experience and intern opportunities for young people, concerns have been expressed about the inappropriate use of unpaid internships.  The Deputy Prime, Nick Clegg recently highlighted the need to ensure greater access to such opportunities for those from disadvantaged backgrounds in order to promote social mobility.

On 5 April the Government’s new social mobility and child poverty strategy was unveiled: Opening Doors, Breaking Barriers.  As part of that plan, it was announced that informal internships for young people in Whitehall would be banned.

Comment

The issue of unpaid internships is now firmly on the political agenda. Employers need to fully understand the legal status of their own work experience students or risk claims fuelled by the greater awareness among young people of their rights in this area.

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