Is Unpaid Work Lawful?

Some unpaid work arrangements are considered lawful while others are not. It depends on the nature of the agreement whether an employee should be entitled to the minimum pay rate for the work they are doing as well as other minimum employment entitlements.

For an unpaid work arrangement to be lawful under the Fair Work Act 2009 it depends on if an employment relationship exists or the arrangement involves vocational placement.

If an unpaid work arrangement is not a vocational placement, the arrangement will only be legal if there is no employment relationship in place... If there is an existing employment relationship, the person is in fact actually an employee and entitled to a minimum wage, National Employment Standards and the terms of any applicable award or enterprise agreement.

When determining if a person is an employee each case must be judged on its own facts. There is no set definition of employment under the Fair Work Act. It is just a matter of figuring out if the arrangement to work involves an employment contract. This does not need to be a written contract, it may be a verbal agreement.

For an employment contract to exist it must be well defined that:

• Both parties intend to create a legally binding contract
• There is a commitment to perform work for the benefit of the business or organisation.
• The person performing work will gain something in return - this may just be experience or training.
• The person is not performing the work as a part of their own business.

When determining if an employment relationship does indeed exist it can be useful to consider the nature of the arrangement and not how the parties have chosen to describe it. These factors should be taken into consideration.

• Was the purpose of the arrangement to provide a learning experience or was it to get the person to assist with the everyday operation of the business? If the arrangement involves productive work instead of just training and skill development, it is more than likely an employment relationship exists.
• How long is the arrangement for? The longer the period of arrangement, the higher the chances of there being an employment relationship present. However short engagements can also be considered as having an employment relationship existing.
• How important is the arrangement to the business? The more essential the work is to the running of the business, the more likely it is that it’s an existing employment relationship.
• Who is benefitting from the relationship? The person who benefits the most in a genuine unpaid work arrangement should be the person undertaking the role.

A vocational placement is a formal work experience arrangement that is part of an education or training course. Vocational placement that meet the definition under the Fair Work Act are lawfully unpaid.