Unpaid internships can carry costly risks

A look at how — and why — employers should protect themselves
By David Whitten (Guest Commentary)
|Canadian HR Reporter|Last Updated: 09/24/2013

Unpaid internships as part of co-op programs or partnerships with community colleges and universities are well-established in workplaces right across Canada.

These placement programs offer tangible value to both the employer and intern. Companies recruit more effectively and students gain skills and connections to help them find that all-important first job after graduation.

However, unpaid internships also have a dark side. Recent graduates, desperate for experience and facing the toughest job market in a generation, are increasingly being lured into unpaid internships with promises or suggestions of eventual paid employment.

Sometimes, the employer is just unscrupulous and interested only in free labour. The business owner or company purposely dangles the prospect of a job to the intern and then works the grad long and hard before showing her the door at the end of the placement period.

These unethical employers then move on to the next naive young person hoping for employment.

This quiet yet highly destructive form of workplace abuse is proliferating. Unfortunately, few victims complain for fear of being branded as whiners or troublemakers at the start of their careers.

In other cases, the employer may be reasonably well-intentioned but ignorant of the fact that, with rare exception, unpaid internships are unlawful.

How the law defines unpaid internships

In Ontario, for example, the Employment Standards Act, 2000, only allows unpaid internships after graduation for vocational training placements for the skilled trades, such as plumbing or pipefitting.

The law is explicit — unless it is through a university or college, unpaid internships for other functions such as office administration, IT, sales, communications, promotions or marketing are unlawful.

Ontario’s act also stipulates that unpaid interns cannot legally generate commercial value. In other words, it is against the law for a business to profit in any way from an intern’s unpaid labour. As well, an unpaid intern cannot displace a paid employee.

It is also unlawful to offer an intern full- or part-time paid employment after the internship ends. Even the suggestion of a paid job at the end of the intern period can land a company in hot water with the Employment Standards Branch of the Ontario Ministry of Labour.

A business or organization that violates any one of these narrowly construed provisions is in contravention of the ESA and liable for providing back pay of up to $10,000 (at the minimum wage) to the intern. Employment standards officers can also require employers to reinstate the intern as a paid employee.

More seriously for offending companies, using unpaid interns can result in hefty fines ranging from $50,000 for individuals and up to $500,000 for repeat offenders.

All that an intern need do to instigate an investigation is lodge a formal complaint with the Ministry of Labour. This will automatically trigger an investigation.

The amount awarded depends on evidence of how many hours were worked, which is why interns are well- advised to keep careful track of the hours they work and duties they perform. The case for compensation and fines is also greatly strengthened by evidence of tasks performed, value created and promises of employment.

How organizations can protect themselves

So how should lawyers and HR professionals protect organizations from allegations of intern abuse? Employers that use unpaid interns need to be mindful of the risk of such an approach and thoroughly audit their organization’s use of interns to ensure all unpaid placements meet the provisions stipulated by their province’s employment standards legislation.

If the use of unpaid interns is found to fall outside the letter of the law, employers should immediately rectify the issue by offering full payment, including interest accrued, to compensate the intern for his labour.

This action will signal that the company’s illegal use of interns was not intended to exploit the intern and will lessen the likelihood of fines.

From there, protocols for the future use of interns should be embedded in human resource policies and clearly communicated throughout the organization.

It is imperative that managers or supervisors in a position to bring an intern into the workplace know both the rules and the risks.

The safest approach is simply to ban the use of unpaid internships altogether and pay the minimum wage when such services are required.

If unpaid interns are seen as essential or highly valuable by an employer, another option is to expand the use of internships involving students attending colleges of applied arts and technologies or universities. Student placements involving educational institutions fall within the law and offer reputational and HR benefits.

Organizations grappling with the issue of unpaid interns should also consider the manner in which the media is covering workplace issues. The recent news coverage surrounding RBC’s controversial use of Canada’s Temporary Foreign Worker Program clearly demonstrates the extent to which an employer’s reputation — and business — can be damaged by hostile public opinion.

David A. Whitten is an employment law expert and the founding partner of Whitten & Lublin in Toronto. He can be reached at david@whittenlublin.com.

Add Comment

  • *
  • *
  • *
  • *