Unpaid internships are often considered a rite of passage for those entering the workforce. But any business looking to engage an intern must ensure that it does so in accordance with the law. This three-part article series explains the relevant law (Part 1), outlines how to set up a proper intern arrangement (Part 2) and highlights the importance of getting the arrangement right (Part 3).
In this article, Part 3 in our series on internships, we outline what can happen if you fail to engage an intern correctly. Doing so can have both personal and corporate ramifications, including the imposition of serious penalties.
If you’ve properly assessed a worker to be an unpaid intern based on the criteria set out in Part 1 of this series and engaged the intern utilising a properly prepared internship agreement as recommend in Part 2 of this series, you’re well on your way to having a problem-free internship experience.
But if you’ve jumped head first into launching your “internship” program without knowing the relevant law or taking the time to enter into an internship agreement, you may be in for some trouble ahead.
If the internship arrangement is not a vocational placement and an employment relationship is found to exist, the business will be required to comply with the Fair Work Act 2009 (Cth) (FW Act) and any applicable industrial instrument. In addition to paying wages to the employee, this will also require the business to:
As you can see from this list, incorrectly categorising an employee as an intern can snowball into a series of breaches of the FW Act.
The use of unpaid internships to exploit young workers has been of particular concern to the Fair Work Ombudsman (FWO) in recent years. For this reason, it pursues investigations and prosecutions of employers that fail to comply with their minimum obligations in respect of these vulnerable workers.
If a prosecution is successful, the court can order an employer to pay a penalty, pay an employee their outstanding entitlements or compensation, reinstate an employee or require the employer to stop the contravening conduct.
In September 2017, the maximum penalty for a breach of the FW Act by a body corporate increased to $630,000. However, it is important to recognise that the penalty imposed is per breach and so multiple breaches may result in multiple fines, as can be seen in the case examples outlined below.
Where a company has breached the FW Act, directors or managers can also be held personally liable for the same contraventions. This will be the case if the individual has been “involved in” the contravention.
Under section 550 of the FW Act, a person is “involved in” a contravention if the person has aided, abetted, counselled or procured the contravention, induced the contravention, been knowingly concerned in the contravention or conspired with others to effect the contravention. In other words, the individual must have been a “knowing participant” in the breach.
Where an individual is found to have contravened the FW Act, they may also be liable for a monetary penalty. The penalty that can be imposed is one-fifth of the maximum penalty that can be imposed against a body corporate for the same contravention. This is up to $120,600 depending on the breach.
We outline below a sample of decisions involving contraventions of the FW Act in respect of wrongfully engaging interns. As you will see, the penalties can be significant.
On 28 February 2019, Her Fashion Box (HFB) and its sole director and majority shareholder Kathleen Purkis were ordered to pay penalties of $329,133 for underpaying employees, one of which had been engaged under the guise of being an “intern”.
One of the employees, a graphic designer, was engaged on the basis of an “unpaid internship” despite the fact that she had completed her university studies and worked 2 days per week for almost 6 months. This was not a legitimate internship and, as such, the young worker was actually an employee who should have been paid for the work she performed.
Another two employees were also underpaid $15,511 and $18,119. Judge Manousaridis of the Federal Circuit Court found that Ms Purkis knew HFB was not paying the workers their entitlements and imposed penalties to deter others from similar conduct.
Kjoo operated a fast food sushi take-away store that employed three young Korean nationals pursuant to an “internship arrangement” it had with a Korean education provider. The workers were paid between $12 and $13.50 per hour to perform duties typical of employees working in a sushi store, including food preparation, cooking, receiving orders and serving meals. As outlined in Part 1 of our article series, this would not constitute a “vocational placement” for the purposes of the FW Act as the employees were paid remuneration and did not undertake the internship as a requirement of an education or training course. The employees were underpaid a gross amount of $51,025.84.
The Federal Circuit Court handed down penalties of $161,760 against Kjoo, $32,352 against Kjoo’s manager and part owner, and $4,608 against Kjoo’s external accountant (who was involved in preparing false records).
AIMG advertised for the position of “Event planner internship”. Despite calling the position an internship, the successful candidate, Ms Shen, performed more than 180 hours of productive work for AIMG, such as organising events, editing its magazine, reception duties, telephone and email correspondence regarding event partnership and general office cleaning. These were the same duties that Ms Shen performed when later engaged as a permanent part-time employee, indicating that there had been an employment relationship from the outset. In addition, the internship did not have any affiliation or connection with the tertiary studies being undertaken by Ms Shen and so it did not meet the requirements for a vocational placement under the FW Act.
Ms Shen was not paid for the work she performed during the “internship” resulting in an underpayment of $2,272.01. AIMG also failed to comply with a range of employer obligations under the FW Act.
The maximum penalty that the Court could impose on AIMG was $867,000. This was based on 18 contraventions associated with Ms Shen’s “internship”, as well as the later employment of Ms Shen and another employee. Ultimately, the Court imposed a penalty of $272,850.
Nexus Coaching Group Pty Ltd advertised two unpaid internship positions – a “Graphic Design Intern” and a “Multi Media Intern”. Three “interns” were ultimately engaged by Nexus. They were later offered employment or required by Nexus to become independent contractors because the business was “moving to a freelance model”.
Nexus went into liquidation and, following the company’s collapse, the FWO pursued its director and chief executive officer, Ms Aldred who had been responsible for the day-to-day management, direction and control of the company’s business.
Ms Aldred was investigated for multiple breaches of the FW Act including:
Although Ms Aldred rectified all underpayments and took responsibility for the actions that occurred, the Court found that her practices were “at best misleading and deceptive… and at worst formed part of a calculated and carefully executed fraud upon these three young women”. A penalty of $17,500 was imposed on Ms Aldred personally.
Crocmedia was approached by two young people (a current student and a recent graduate) who asked if they could complete a period of work experience. They were engaged by Crocmedia as “interns” for 3 weeks of unpaid work experience.
At the completion of this initial period, Crocmedia retained the two for 6 and 12 months as “volunteers”. This arrangement involved reimbursement for expenses of $75 for weekday shifts and between $80 and $120 for weekend shifts.
The “interns” were considered to be employees given their work as producers on Crocmedia’s radio programs, with duties including:
Given their employment status, Crocmedia contravened the FW Act by failing to:
Despite co-operating with the FWO’s investigation, penalties totalling $24,000 were imposed on Crocmedia.
The articles in this series outline the limited circumstances in which you can properly engage an individual as an unpaid intern. They also highlight the importance of using an intern agreement. As set out in this article in particular, the consequences of getting it wrong can cause significant financial and reputational damage.
McCabes’s Employment Team can assist you to avoid making the same mistakes as these employers did by:
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.