Legal opinion: Internships – cheap labour or career opportunity?

This article is in association with Rosenblatt law firm

On 12 May 2011, the National Union of Journalists (NUJ) claimed its first victory in its “cashback for interns” campaign when an intern, Keri Hudson, who had worked for TPG Web Publishing’s My Village for around two months, was awarded £1,024.98 in damages for unpaid wages and holiday pay despite the advert for the internship expressing that it was an unpaid position.

National minimum wage

The National Minimum Wage Act 1998 provides that if someone is expected to undertake “work” for an organisation, they are entitled to be paid the national minimum wage, even if there is no written contract in place. The tension rests in whether an intern is classed as a worker, in which case they are entitled to the minimum wage, or a volunteer (who is under no obligation to perform the work and has no formal arrangement) who has no such entitlement.

This was the question faced by the employment tribunal in this case, which, when passing judgment, stressed that a key factor in its decision was the actual role being performed by the intern. In the tribunal’s view, the role of Miss Hudson, which included managing six other interns, training and delegating tasks, hiring new interns and scheduling articles, went beyond simply being trained and was, in fact, a proper job.

It is, of course, too simplistic to say that a business will be exposed to a similar claim if they require an intern to do “real work”. In almost all internships there will be some crossover between providing training to the intern and the intern providing assistance to the business; that is the very basis of why such relationships exist. However, employers should be mindful of the balance between work and training during the internship, and the risk that if it tilts too far towards “real work” the business may find itself on the receiving end of a minimum wage claim.

However, it is important not to exaggerate the consequences of this decision. It was not merely the work being done by the intern that affected the opinion of the tribunal. A statement released by the NUJ indicated that the tribunal was further swayed by the fact that Miss Hudson had been asked if, when the website was taken over by TPG Web Publishing Ltd, she would stay on and work for the new company. The statement provided that “she was assured her pay would be fixed. After five more weeks she was informed that she would not be receiving payment for the work carried out”. The retraction of this offer no doubt acted as the catalyst for her claim.

Entry routes to employment

Nonetheless, this decision may set alarm bells ringing in the ears of many businesses that use, but do not pay, their interns. With the unemployment rate of 16- to 24-year-olds already at 20%, the withdrawal of entry routes (such as internships) into professions such as journalism and fashion is not something that school leavers and graduates want to see happen. However, this decision will lead to questions for businesses about whether or not they should offer such opportunities at all and, if so, whether or not to pay for these internships.

The Chartered Institute of Personnel and Development (CIPD) shares these concerns. In June 2010, its publication Internships: To pay or not to pay raised concerns that the effect of forcing business to pay interns the minimum wage may be that the organisations become unable or unwilling to provide them. It recognised, however, that 37% of internships at that time were unpaid and proposed a new training wage of £2.50 per hour for anyone enrolled on either an apprenticeship or internship.

The TUC believes that interns should be entitled to the minimum wage and the introduction of a training wage would be a “watering down” of this legislation. TUC general secretary Brendan Barber stated: “We urgently need more rigorous enforcement of the minimum wage to ensure that so-called interns are not exploited and abused.”

Social mobility

On 5 April 2011, Nick Clegg announced the Government’s intentions on this matter with their social mobility strategy, “Opening doors, breaking barriers”. There is no sign that the CIPD’s recommendation will be followed and it seems that legislation introducing a training wage is not currently forthcoming. However, the Government’s intentions do include a promise to encourage employers to open up their employment methods and asks “business to offer internships openly and transparently and provide financial support to ensure fair access”.

The decision in Hudson v TPG will no doubt be welcomed by the TUC, which will see it as support for its argument that interns should, at the very least, receive the minimum wage. The NUJ is continuing with its campaign in this area, warning media companies to “pay interns or face the consequences”. Whether TPG Web Publishing Ltd appeals the decision or not, it looks as though this debate is likely to continue and will no doubt result in some much needed legal guidance in this area.

Rima Mehay, associate solicitor, and Richard Freedman, trainee solicitor, Rosenblatt Solicitors

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