The Growing Controversy of Unpaid Internships

There has been a growing firestorm about unpaid internships in the news and employment blogosphere.  The Star just ran a story about legal challenges to internships on both sides of the border, and I've seen a few other stories make the press in the last few weeks, as well as frequent criticisms of them by commentators such as Andrew Langille and David Doorey.  (On Professor Doorey's blog, The Law of Work, he has even been finding and reproducing postings for internships which flagrantly violate the Employment Standards Act...but more on that in a minute.)

Some call for legislative reform.  Personally, I'd be happier to see enforcement of existing laws.

Are Unpaid Internships Legal in Ontario?

The answer is yes.  But it's a very qualified yes.

Let's start with the position that employees have certain entitlements governed by the Employment Standards Act, 2000, including minimum wage.  For most employees in Ontario, that's $10.25 right now.

There are a number of exceptions to employment standards exemptions, but in this case, what we need to look closely at is the definition of "employee", which includes persons receiving training, as qualified by s.1(2) of the ESA:

For the purposes of clause (c) of the definition of “employee” in subsection (1), an individual receiving training from a person who is an employer is an employee of that person if the skill in which the individual is being trained is a skill used by the person’s employees, unless all of the following conditions are met:

1. The training is similar to that which is given in a vocational school.2. The training is for the benefit of the individual.3. The person providing the training derives little, if any, benefit from the activity of the individual while he or she is being trained.4. The individual does not displace employees of the person providing the training.5. The individual is not accorded a right to become an employee of the person providing the training.6. The individual is advised that he or she will receive no remuneration for the time that he or she spends in training.

So that's one of the provisions that speaks directly to unpaid internships:  A person receiving training from an employer,  in the skills used by the employer's employees, is an employee, entitled to minimum wage (among other things) unless all six criteria are satisfied.  Therefore, if even one of those criteria is not satisfied, an unpaid internship is illegal.

(As well, s.3(5) creates additional exceptions for, among others, work programs operated by secondary schools, colleges of applied arts and technology, and universities.)

There is surprisingly little case law on the point, and most of the cases are pretty clear-cut, involving small employers who try to characterize the training phase of a job as an 'internship', or similar nonsense.

The Ontario Labour Relations Board released a decision earlier this month in Sandhu v. Brar, involving a claim for wages by a 'co-op student' who worked for two weeks in a role as a computer technician - he installed software, answered the phone, and was taught how to build computers.  It was understood that the employee (Brar) would not be paid (criterion 6), but...

Based on the employer’s evidence, Brar, a trained software engineer, answered the telephone and installed computer software.  The directors acknowledged that they received the benefit of Brar’s skills and charged their customers for his expertise.  In exchange Brar received some training as a computer technician, however there is no evidence before me that the training provided to Brar was comparable to vocational school training to become a computer technician.  The employer provided no evidence as to what particular skills were taught to Brar or the number of hours of instruction.

There could be interesting times ahead.

You see, a lot of the 'unpaid internships' pay zero heed to the factors.  You would think that telling people they won't be paid would be an easy one, but Professor Doorey, in a post linked above, highlighted an unpaid internship which promised a $500 honorarium for the whole full-time internship.  (There were other problems, too, but that alone would be enough to undermine any justification for it being an unpaid internship.)

But there will be more difficult cases, too.

If the Ministry Cracks Down, What Will They Look For?

Criterion 6 is pretty objective.  An employer should make it clear at the outset, in writing, that it's an unpaid internship.  Number 5 is also fairly objective:  If subsequent employment is promised, it can't be an unpaid internship.  (There may be an argument to be made that even the prospect of subsequent employment, or the fact that subsequent employment is offered at the end of the placement, may be a problem.  I would tend to interpret the language otherwise, and the limited case law on the point leans toward an interpretation that making an offer at the end of the placement isn't a problem.)

The other factors are more difficult, though.

Training Similar to Vocational Schools

It isn't entirely clear what it means to be similar to the training in a vocational school, but presumably that would set a standard regarding the professional nature of placements.  So Burger King wouldn't be able to hire 'interns' to learn how to cook Whoppers, though one might reasonably imagine a chef training interns in the kitchen of fine restaurant.

For the Benefit of the Person Being Trained

This one should actually be relatively easy, given that, if you're not getting paid, I'm not sure I see much reason to do the work unless it provides you with some benefit.  But this may well create substantive requirements for the quality of the internship - an actual obligation to provide meaningfully beneficial training.

Little, if Any, Benefit

This is going to be an exceptionally difficult factor.  In a lot of the case law to date, the Board has looked at the fact that products or services provided by the intern have been sold by the employer to customers.  On the cases the Board has looked at, it has been pretty clear-cut.  But that can't be the whole test, because the whole point of the internship is to get the intern experience doing tasks which are marketable to clients, often involving direct interaction with clients and building their feedback into the product.  While artificial training exercises are all well and good, that's what school is all about - if I'm doing an internship, I ought to be working on something real.

At the same time, there's a cost to an internship, done properly.  Training isn't cheap, and supervising an intern, in a proper internship, will invariably require a significant time investment of the employer.  But it becomes something of an apples-and-oranges comparison:  I may create some value with my work, and while it may be less than the value that the folks supervising me could have created with their time otherwise, that's a really tough comparison to make.

Not Displacing Other Employees

I imagine that it would be pretty difficult to prove, in most cases, that an intern's work has displaced another employee.  But this goes hand-in-hand with the 'little, if any, benefit' provision:  If interns are part of your business model on an ongoing basis, generating meaningful production for you, then they are probably taking real jobs.

Ultimately, one can definitely imagine internships which meet the statutory criteria...but the reality is that, whereas most people offering internships are doing so because they want the free labour, that very goal probably undermines the legality of the internship itself.

Why Are Unpaid Internships So Prolific?

It's a tough economy out there, and it's well-known that younger folks just starting out are having a hard time finding jobs:  The economy is far more heavily loaded with small and mid-size employers than ever before, with a workforce that is more mobile than ever before, so employers are unwilling and unable to invest in training new entrants to the workforce.  As a result, most employers are looking for experience.  You can't get experience if you don't have a job, and you can't get a job if you don't have experience:  It's the catch-22 for the younger generation.

So young people, once they finally come to the inevitable conclusion that more education is not what they need to become employable, are trying to find alternative ways of getting experience:  If nobody will pay me for the experience I need, I guess I have to work for free.

For a long time, it has been well-known that academic co-op programs are excellent for improving employment prospects after graduation.  So take a school like the University of Waterloo - it has a massive co-op program across all fields, but particularly so in its computer-related fields of study.  Because it has a good reputation in those fields, top employers hire co-op students from UW, and those co-op students go on to be in high demand immediately after graduation.

(Incidentally, to the extent of my awareness, though it may not be universally true, UW co-op jobs are paid.)

For most university and college grads, things aren't so rosy.  They're graduating with hundreds of others, and competing for very finite entry-level positions, and lack meaningful professional experience.

So the 'unpaid internship' is the supposed answer to the problem, a way of getting young people much-needed experience without generating a significant cost to employers.  Win-win, right?

Do They Work?

Let's get one thing clear:  Many young people are so desperate to find a job in their field that they'll do just about anything that they think will improve their odds.  These are all things I've seen tried:

• Go back to school for a graduate degree.  (In most fields where a graduate degree isn't completely necessary in the first place, this isn't helpful.)
• Learn a language.  (Can be helpful, but you need more than that.)
• Go to professional conferences for networking.  (And find that 90% of the other attendants are also unemployed new graduates looking to do the same thing.)
• Randomly add established professionals on LinkedIn.  (And get banned from LinkedIn.)
• Send out cold resumes to every related employer you can find on Google.  (I know where the applications I've received have gone.)

The list goes on.  I'm pretty sure that if career counsellors started suggesting that you could show how much you want the job by cutting off your left hand in the interview, there'd be a lot of jobs opening up for folks who make prosthetics.

So the fact that market entrants are trying this approach, en masse, doesn't suggest to me that it's necessarily effective.  In fact, the numbers don't seem to be panning out, and there are a couple of good reasons why:

(1)  Companies that can't pay their interns lack the credibility to bolster a CV.  Let's say you intern at a small tech company to get your foot in the door.  First of all, small tech companies don't necessarily know how to manage internships.  They don't necessarily offer appropriate training, nor provide real learning opportunities, and you're half-likely to spend most of your time answering phones and fetching coffee.  Even if you don't, that's the perception.  If you weren't performing work worth getting paid for, then there's no reason to think that there's any value in the experience.  Larger, more reputable companies, by contrast, usually pay their interns, trying to attract the best candidates.

(2)  Numbers.  Unpaid internships are widespread, meaning firstly that there are a lot of people who have completed unpaid internships, and secondly that there is a lot of junior work being completed by unpaid interns.  You see the problem, I hope:  I, as an employer, have so many young people willing to work for me for free.  I can hire one of those, and pay nothing, or I can hire someone who has, say, completed an unpaid internship (and therefore has a bit of experience, but still not much), and pay them at least minimum wage.  (A minimum wage employee, over the course of a year, costs an employer well over $20,000 on wages alone.)  It's a no-brainer.  This not only reduces the market value of new entrants to the marketplace, but also devalues the very experience obtained through an unpaid internship.

Closing Remarks

I don't think that all unpaid internships are exploitative.  In law school, I worked for a summer at a legal aid clinic, and one of the staff lawyers there had, years earlier, shown up at the clinic's door desperate for an articling job, and when they said they didn't have the funding, she said she'd work for free.  As I understand it, the clinic made arrangements to fund part of her articles, and the other part was completed elsewhere...but the reality is that she couldn't get licensed without her articles, the clinic served a good cause, and that experience became the start of a great career for her.

But there are good reasons for the legislative restrictions on unpaid internships, and I do not believe that society or the economy is well-served by relaxing those restrictions.  Yet the people who want such internships aren't generally going to complain to the Ministry, and because half the point of the internship is to develop positive references, they aren't going to complain afterwards either.  With a legislative regime like the ESA which is so significantly complaint-driven, that creates an atmosphere of non-enforcement.

I've expressed concerns before about the Ministry's "Let the employees come to us" approach for employment standards enforcement.  Especially when they added the policy of making employees ask the employer for relief first, I became particularly concerned about that, as it becomes an invitation to the employer to flout employment standards until an employee asks them not to.  And since many employees don't have the stomach to challenge their employers on that sort of thing, many employers will get away with it indefinitely, with little risk of serious consequence because there's probably going to be an opportunity to simply correct the deficiency with no further penalty.

Likewise in this case.  Employment standards exist for the protection of employees, and to require employees to proactively learn the law and stand up to their employers...kind of defeats the point.

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This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.