Unpaid Interns Declared Employees

Is an intern an employee? According to a recent Employment Relations Authority (ERA) case the answer is yes. This decision, along with a general trend on what is deemed to be work is once again putting the spotlight on the practice of unpaid internships which form part of many tertiary qualifications.

This case related to intern psychologists who ‘worked’ for the Ministry of Education on 40 week practicum placements which were required as part of their training. In exchange they received a scholarship of $25,000 and access to supervised practice.

The union representing the interns claimed the intern psychologists were employees. The Ministry denied they entered into employment relationships with the interns, arguing the programme was for training purposes.

The ERA took in to account the following factor to reach the decision the interns were employees:

• The memorandum of understanding between the Ministry and the universities stated that “sole responsibility and authority for the programmes of work, the relationship and for the conduct of the interns while working with the Ministry’s clients lies with the Ministry”.
• An intern gave evidence that what she did as an intern was exactly what she did as an educational psychologist.
• The interns worked business hours and any absence required permission.
• What the interns did was work. The interns were doing what was required of an employee and the work was an important responsibility.
• The work was done for reward i.e. the payment of the scholarship.
• A small number of existing Ministry staff completed the intern placement to move into educational psychology. They were salaried under the collective agreement. The purported distinction between employment and training was not being applied to them.

The ERA viewed it’s decision to be part of a trend in recent cases:

[66] Concluding that intern psychologists are employees as well as students completing their studies may disrupt assumptions that have operated about those practicum arrangements for some time. It is, however, consistent with the direction of travel apparent in many employment law cases in recent years where assumptions about what is work, what is employment and what is worth have been unpicked and overturned … 

This is not an isolated case and the decision is consistent with previous similar cases. It is imperative employers consider the implication before engaging in an unpaid intern relationship and the potential risks of that person being deemed an employee. The implications for the Ministry included the ERA determining that the interns should be paid the applicable salary in the Collective Agreement with the value of the scholarship subtracted.