The black economy: not p(l)aying by the rules
We all know that the black economy is alive and well, despite the enforcement activities of the Australian Taxation Office and the Fair Work Ombudsman (FWO). In the last couple of months, I’ve seen arrangements which are not merely dodgy, but which are unquestionably illegal:
- A bottle shop which pays staff in cash (at a good rate, but no tax, no super), and a slab of beer instead of public holiday penalty rates – really, where do you start?
- Two senior professionals employing a secretary for regular work on condition that she sets herself up as a contractor – sham contracting anyone?
However, these arrangements at least involve pay. Even worse are arrangements for unpaid work. A common form of this is the “trial period” or “work experience” or “internship.” The FWO and the law are quite clear about this: work in the context of employment must be paid for. While a transitory trial (such as a barista demonstrating coffee making skills, or a candidate working a shift to assess aptitude) may be permissible, and vocational placements (in the context of clinical experience as part of a course of study) and genuine work experience (where the work is not of real value to the employer because of the nature of the work and degree of support and assistance given as training) are also acceptable, extended so-called “work experience,” “internship” and “trials” are not. See the Fair Work website for more information on unpaid work.
A recent report, Unpaid Work Experience in Australia, examined unpaid work experience, etc and found that although about 70% of respondents felt they gained skills and experience from work experience, placements and internships, 43% of unpaid work experience, trials etc were outside any formal arrangements and open to abuse.
The vulnerability of young unemployed people desperate for a toehold in their preferred line of work is obvious. That abuse occurs is clear from the cases which come before the courts.
For example, in FWO v Crocmedia (2014), a media company had engaged students, for no pay for three weeks, acting as producers for late night radio, before engaging them as “volunteers” or “contractors” and paying “expenses” for extended periods. While the students had sought the opportunity to gain work experience, and no doubt benefited from the experience they gained, the work done as work experience was no different to what was done after they were engaged on a paid basis so it was indeed work, and should have been paid.
The work done as “volunteers” or “contractors” was plainly employment, and using misleading titles did not alter that fact. The “expenses” paid were also below award rates. Ironically, as the payments were described as “expenses,” the employer couldn’t set them off against the wages due, and was required to pay award wages in full for the whole period of the engagement, as well as penalties of $24,000.
Private arrangements for work experience or internship are legitimate, but be aware of the shift from something which is genuinely beneficial to the trainee but not to the employer, to something which is beneficial to the employer and constitutes work, which must be paid for.
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