Unpaid Internships – Going the way of the dodo?

Recently, a lot of attention has been focused on unpaid internships offered to students and other young job-seekers in Ontario.  With internships topping the list of Ministry of Labour “blitz” targets, the shuttering of intern programs at the Walrus and Toronto Life in response to Ministry enforcement activity, and the decision by Rogers to eliminate their unpaid internship programs at Flare and Chatelaine, there appears to have been a sea-change in attitudes toward these programs.   Beyond enforcement action by the Ministry, employers may have also heard about a significant increase in litigation south of the border, as unpaid interns have brought class actions against large companies for alleged failure to abide by the Fair Labor Standards Act.  All of this has led many employers to question the feasibility of their own training programs.

So, should organizations continue to offer valuable work experience to youth entering the job market by providing unpaid positions?  The answer to that question is partly legal and partly practical.

The Employment Standards Act, 2000 (the “ESA”) provides that there are limited circumstances in which an employer can offer unpaid ‘training’ positions to young workers.  First, there is the typical “co-op” program (section 3(5)¶ 2).  To qualify, the work must be performed “under a program approved by a college of applied arts and technology or a university”.  Aside from structured co-op programs, however, there is a second, less concrete form of training arrangement that is likewise exempt from the ESA.  In order to meet the exception, all of the following conditions must be met:

1. The training is similar to that which is given in a vocational school.
2. The training is for the benefit of the intern, such as imparting new knowledge or skills.
3. The employer derives little, if any, benefit from the activity of the intern while he or she is being trained.
4. The training doesn't effectively take someone else's job.
5. The employer isn't promising a job at the end of the training.
6. The intern has been told that he or she will not be paid for their time.

The focus of these conditions is on the educational or experiential value of the opportunity to the intern.  For many employers, meeting all of the conditions will be challenging, particularly balancing the provision of valuable learning to the student while deriving little benefit from the work. The Ministry has been clear that these are “very restrictive conditions”, suggesting that very few such arrangements are likely to be found to comply with the ESA.

If an intern is found to not meet these conditions, then the Ministry will find that they are “employees” of the employer and subject to all of the terms of the ESA, including hours of work, eating and rest periods, overtime and minimum wage requirements.  Where unpaid interns are found to be employees, an Order to Pay wages and vacation pay is almost a certainty.

However, beyond the strict legal preconditions, there are practical considerations, too.  Many interns have expressed concerns with the quality of the internships that they have been offered.  And dissatisfied, unpaid interns are much more likely to generate complaints or legal claims.  Therefore, it’s imperative that organizations ask themselves some questions (which also happen to dovetail with the legal requirements above):

·         Is there work that can be provided to a young worker that will enhance their formal education and training?  If the work in question is repetitive and mechanical, it’s unlikely the intern will receive much value or satisfaction from the experience.  A training program should be designed that takes into account the educational background of the intern to ensure that valuable practical skills are being imparted.

·         Assuming there are functions that will have practical value to the worker, would the organization generally have those functions performed by an employee?  If so, it may appear that the employer is benefiting and increase the intern’s sense that they are essentially an unpaid source of labour.

·         Are interns part of the employer’s overall labour strategy, or in addition to the workforce that would normally be retained?  Again, if it appears that the employer is “counting on” interns in order to meet its production requirements, it’s likely the employer will appear to be benefiting from unpaid labour.

·         How long are internship terms?  Are the same workers being offered multiple renewals of their internship arrangement?  The longer interns are retained and/or the more frequently they are renewed, the more likely that resentment will build that their services are being supplied for free without any prospect of paid employment.

·         Will the employer be in a position to ultimately offer paid positions to some individuals who perform internships?  While an employer should not promise employment flowing from the unpaid training (see the 5^th condition above), if it is clear that future employment with the organization is improbable, interns may become frustrated.

Providing a good work environment and ensuring that the organization’s internship program generates real benefit for trainees is perhaps the best means of ensuring both compliance with the ESA and that interns will not become dissatisfied.

If in doubt whether existing internship arrangements are consistent with legal requirements, however, employers would be well-advised to consider converting internship positions to paid, fixed-term trainee roles.  Ensuring that trainees receive at least minimum wage and other entitlements under the ESA is perhaps the best means of avoiding compliance issues in the current environment.

If you have questions or concerns about an internship program, feel free to contact Lance Ceaser to discuss.