Last week saw the introduction of a motion into the House of Commons by Tory MP Alec Sherbrooke to restrict the use of unpaid internships. Although the motion had cross party support, given its timing, there was no prospect whatsoever of this getting on to the Parliamentary agenda with a view to becoming law, as proved to be the case when just a couple of days after, it was thrown out. This is a shame because internships create even more uncertainties than zero hour contracts, which have been the focus of late for politicians. Many young people view internships as their only hope of a job – “if I do a good job they may keep me on” or “I have no experience of the industry so my only hope is an internship”.
The cynics among us may see all of this as no more than the rhetoric we often see in the run up to elections, particularly given the disillusionment of many young voters after the last election when the promises made by politicians regarding student fees were not met. It would be a shame if this is the case because, in the case of internships, many young people are exploited and lured into working for little or nothing in the hope of a job as a reward for their efforts, when the reality is they are simply there because of a drive to keep headcount costs down.
While there is no doubt some employers view internships as a means of obtaining cheap or free labour, this is not the case for all. Many employers offer internships because they present an opportunity to showcase their workplace, allowing them to attract the best people and become an employer of choice. Internships also allow employers to test capabilities in a way that is not possible in the recruitment and selection process. Whatever the reason for interns, they are not completely unregulated and it is surprising how few organisations do not appreciate that because an intern is likely to come within the definition of a “worker” under the National Minimum Wage Regulations, they should by be paid at least the National Minimum Wage (NMW) as well as having other statutory entitlements such as paid holiday. In the light of case of Secretary of State for Business, Innovation and Skills v Knight reported last week there could also be a chink in the armour which prevents interns being classified as employees.
In the Knight case the Employment Tribunal had to consider whether a majority shareholder who had not received pay for two years could be an employee. Mrs Knight’s claim related to her entitlement to a payment from the National Insurance Fund because her company which was also her ‘employer’ had become insolvent. There has been considerable case law over the years as to the existence of an employment relationship since 1968 when the High Court in the case of Ready-Mixed Concrete (South East) Ltd v the Minister of Pensions and National Insurance laid down three keys tests for the determining the existence of an employment contract namely that:
1. an agreement exists to provide the servant’s own work or skill in the performance of service for the master (personal service) in return for a wage or remuneration;
2. there is control of the servant by the master; and
3. the other provisions are consistent with a contract of service.
Since the Ready Mixed decision there have been numerous cases where the factors for determining whether an employment relationship has come into existence and the principle of the “irreducible minimum” has evolved. This means that if any one of the 3 rules listed above may not be established then generally there is no contract of employment. However, it appears from the Knight judgment it is not an incontrovertible rule that the lack of any payment of salary is fatal to the existence of an employment relationship. In that case the EAT dismissed the appeal against an Employment Tribunal’s ruling that Mrs Knight was in fact an employee despite the fact she had received no pay for the last two years of her employment. The EAT explored all the key factors and decided there was in fact an employment contract in existence being of the view that notional, rather than received pay was sufficient to satisfy the test outlined above in 1.
In the case of internships many organisations do pay interns at least the NMW. Given the decision of the Employment Tribunal in the Knight case, one wonders whether it will only be a matter of time before a court will conclude that an employment relationship exists between an organisation and an intern despite the wording of any agreement between them. In such an event the intern may well have employment protection and other statutory rights given to employees including an equal pay claim if other employees are paid more than the NMW for the same or similar work.
