Economist Milton Friedman famously said, “there is no such thing as a free lunch”.
For decades there has been a steady growth in non-standard employment agreements and arrangements in New Zealand, including unpaid internships. A key purpose of an internship is to gain experience, skills or contacts that may assist a prospective employee to gain employment or work opportunities in the future, but is it exploitation?
In 2015 a young New Zealand activist and filmmaker created international headlines by sleeping in a tent on the shores of Lake Geneva because he couldn’t afford to pay for rent during his unpaid internship with the United Nations. That same activist released a documentary cataloguing unpaid internships, raising the shortcomings with the practice to New Zealand. Similarly, the International Labour Office released a working paper titled “The regulation of internships: A comparative study” which advocates that internationally internships or work experience arrangements should attract the same entitlements and protections as an ordinary employment relationship. While this article does not comment on the value of unpaid internships (and whether interns should be compensated for the value of their labour) the conclusion reached by the International Labour Office is neither difficult nor controversial and it reflects comments made by the then Chief Judge of the Employment Court in The Salad Bowl Ltd v Howe-Thornley
concerning short work trials:
 ... Unpaid or inadequately remunerated ‘internships’, the acquisition of ‘work experience’, and other like categorisations of long-term unpaid or underpaid work, especially in times of high unemployment and/or in fields where there is an over-supply of applicants for work, have attracted the attention of academics and practitioners recently in Australia and elsewhere.
 Where the reasonableness line is likely to be crossed most commonly and “work” may be engaged in, for which there may be a requirement for payment as well as where other incidents of an employment relationship arise, is where the employer gains an economic benefit from the employee’s activity … Although the economic or other business or operational benefit to the employer may not have been optimal at that point due to the need for the defendant to be shown what to do and to develop the necessary skills, the defendant was nevertheless performing work for the plaintiff and contributing to its business.”
Chief Judge Colgan’s comments speak to one of the key objectives of employment legislation in New Zealand: addressing the inherent inequality of power in employment relationships. This calls to mind the definition of employee under the Employment Relations Act 2000. Section 6(1) provides a broad definition of employee, meaning “any person of any age employed by an employer to do any work for hire or reward under a contract of service” but, importantly, section 6(2) sets out that:
(2) In deciding for the purposes of subsection (1)(a) whether a person is employed by another person under a contract of service, the court or the Authority (as the case may be) must determine the real nature of the relationship between them.
The difficultly with internships arises where the above definition, relying on the true nature of the relationship between employee/intern and employer, is set against the definition of a volunteer, described as someone who does not expect to be rewarded for work to be performed as a volunteer and receives no reward for work performed as a volunteer. If an intern is engaged in work that provides some form of economic benefit to the employer or organisation and the intern is provided some reward for their work, it is likely they will cross the line from volunteer into employee attracting the basic minimum entitlements and protections under the Employment Relations Act.
The delineation between employee and volunteer was considered by Member Loftus in the Employment Relations Authority determination Labour Inspector v Ways Electronics Ltd
. That investigation involved a complaint to the Labour Inspectorate by four individuals alleging breaches of minimum employment standards. The Member considered whether the individuals in question received reward for the work they performed. He found in evidence that two of the individuals received an offer for paid employment, and one was offered a reference which would be beneficial to future employment endeavours, all of which constituted reward, meaning the individuals were properly employees of the organisation. The Member cited with approval the applicant’s closing submissions:
“Fundamentally, the unpaid trainees entered into their dealings with the respondents for reward – that is, they came to the work through a job advertisement for paid work, and then went on to work for the hire or reward promised by the respondents. They were not working for a ‘cause’ or for a charity or community group. They were working for a person, who was operating a for-profit business and directly benefited from the work of the unpaid trainees, and their reward was in the form of an individual and personal benefit – the change of continued employment which in turn could lead to a work visa in New Zealand, a reference and upskilling.”
Unpaid interns or volunteers are often an intrinsic part of an organisation’s business model (providing economic benefit to the organisation) and become a major competitive factor in the market. Also, many New Zealand Universities include internships as a course requirement as part of the learning experience. One side of the argument suggests that the sacrifice can lead to success and the other side is exploitation. It is well recognised that internships are an important part of the transition from education to employment.
There are many internships or work experience arrangements that (however they are labelled) should attract the same entitlements and protections as any employment relationship would. However, there is a need in New Zealand to protect all vulnerable workers and prevent unpaid internships from undermining labour laws and the possibility of exploitation of young people.
While internships can open doors and be an important pathway to success, interns must pay for rent and food too. If you are an intern and are concerned that you have been misclassified and are in fact an employee, who is entitled to a wage, then you should seek legal advice.