Mark Walker is a Senior Associate in the employment team at international law firm CMS. He advises and delivers training to many HE clients.
Careers Services take pride in ensuring job adverts passed on to students comply with the law and good HR practice. However, among questions Careers Services are being asked by students are “can this internship really be unpaid” and “are charities exempt from paying me the National Minimum Wage (NMW)”?
Unpaid internships have been criticised in the press in recent years but, in terms of pay, things are now considerably better for students than they were. From a legal perspective, whether an intern is entitled to be paid depends on whether they fall within the definition of a “worker” under the Employment Rights Act 1996. If they do, they will be entitled to receive the NMW.
Under the 1996 Act, a “worker” is defined as someone who works under a contract requiring them to carry out work or services for an employer. If an intern is expected to come into work every day for an agreed period of time and provide services, it is likely they will be a worker for the purposes of the Act and entitled to the NMW.
To add to the confusion, there is no legal definition of “volunteer”. The Compact Code of Good Practice on Volunteering issued by the Institute for Volunteering Research says volunteering is “an activity that involves spending time, unpaid, doing something that aims to benefit the environment, individuals or groups other than (or in addition to) close relatives.” Volunteers are integral to the success of many of organisations but they work in the absence of any contractual obligations and, more often than not, volunteers and the organisation agree a convenient time for voluntary tasks to be carried out.
So what is there in terms of the law in relation to volunteers? Section 44 of The National Minimum Wage Act 1998 specifically exempts “voluntary workers” from the NMW. Basically, a voluntary worker is a worker who works for a charity or voluntary organisation who receives no monetary payments, except expenses.
The last major consultation on NMW was done in 2007 by DBERR (now DBIS). It concluded: “Section 44 was included in the 1998 Act to enable qualifying organisations and unpaid volunteers to continue to operate as they have always done, but without leading to confusion about eligibility for the NMW”.
Despite being designed for use in relation to unpaid volunteers, there have been some situations where organisations have recruited interns on the basis they do not need to be paid the NMW because of the “voluntary worker” exemption. This is based on that person being a worker, working for a qualifying organisation, and receiving no payments except permitted expenses, meaning they fall into the section 44 category. At first glance, this seems unfair and allows qualifying organisations to offer unpaid internships with impunity. However, this is how Section 44 works and any qualifying organisation doing this is acting in accordance with the law.
There is a degree of circularity in the way Section 44 works. It is by not paying the NMW that a qualifying organisation ensures that the NMW is in fact not payable. In other words, an unpaid internship for a non-qualifying organisation would breach the NMW legislation, whereas the same internship for a qualifying organisation would not. This may leave some observers feeling a little uneasy, in that it allows qualifying organisations not to pay the NMW to someone who would otherwise be a worker (eg an intern).