What does the law say about unpaid internships?

1.    Background

Internships are typically periods of short term work undertaken, generally, by young people after they finish study and before they begin permanent, full time employment. There is no set definition of an internship. Some last for a fortnight or less. Some last for months.

Unlike apprenticeships, internships are not directly regulated by any body or statutory scheme, aside from general employment protections.

While there have been several unreported cases of interns bringing claims to the Employment Tribunal, there is little case law on the subject. However various bodies, including the Department for Business, Innovation and Skills (BIS) have produced guidance on how interns should be treated at work.

The Sutton Trust estimates that at any one time there are around 30,000 internship in th UK, of which half are unpaid. The law on internships is not widely understood. 

2.    The National Minimum Wage Act 1998

What is the National Minimum Wage?

Section 1 of the National Minimum Wage Act 1998 provides that

“A person who qualifies for the national minimum wage shall be remunerated by his employer in respect of his work in any pay reference period at a rate which is not less than the national minimum wage”[1].

This applies regardless of whether the person who qualifies for the national minimum Wage agrees to work for a sum at a rate which is less than the national minimum wage. A person who qualifies, shall not be paid less than the rate which has been set. 

How is the national minimum wage determined?

Section 2 of the Act provides that the Secretary of State shall make regulations proscribing the rate of the national minimum wage. In practice, this has been done on an annual basis with reference to the recommendation of the Low Pay Commission, who suggest an hourly rate at which the national minimum wage should be set.

Who qualifies for the National Minimum Wage?

A person qualifies for the national minimum wage if she is a “worker”[2], working in the United Kingdom, who is not of compulsory school age. The question therefore becomes, who is a worker?

According to s54 of the National Minimum Wage Act, a person is a worker if they work under:

a)    “a contract of employment; or

b)    any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;”[3].

A worker is therefore someone who can show that they are an employee, or someone who can show that they have a contract and have agreed to personally undertake any work or services for an employer.

3.    When is an intern entitled to be paid?

General

An intern will be entitled to be paid if they are a worker and no exclusions to the national minimum wage apply. It will be irrelevant whether the intern has agreed to work for free.

When will an intern be an employee?

An intern will qualify for the national minimum wage if they can show that they are an employee. An employee is someone who works under a contract of employment[4]. A contract of employment will exist where

When will an intern who is not an employee be entitled to be paid?

An intern who is not an employee will be entitled to be paid if they can show the following:

a)    They are personally providing a service

b)    They are providing a service to a person who is not their client or customer

c)    They are working under a contract, whether implied or express.

It is usually relatively simple to determine whether an intern is personally providing a service. An intern who is on work experience and is shadowing a member of staff would find it difficult to show that they were providing a service to their employer. It should similarly be straightforward to determine whether an intern is providing a service to a person as a client or customer.

It can be more difficult to determine whether an intern is working under a contract. A contract will only exist if there is consideration flowing both ways. This means to create a contract, both the intern and employer must offer each-other something of value. From the intern’s side, this is simple; the intern will offer their labour to perform services. From the employer’s side, this is simple if there is a commitment to pay the intern a wage- the consideration provided will be the wage in return for services performed. More difficulty exists where the employer does not intend to pay the intern. In this situation, consideration may exist if the employer offers the intern something of value in the form of a promise of future paid work. However, it is unlikely that a contract will exist if the intern is promised nothing at all by the employer.

Where an employer pays an intern something or makes a promise to the intern about future chances, it is likely that the intern will be working under a contract and thus be entitled to be paid the national minimum wage in accordance with s1 of the National Minimum Wage Act 1998. If the employer makes no promise or commitment at all, it is likely that the intern will not have any right to be paid. 

 



[1] National Minimum Wage Act 1998

[2] Section 1(2)

[3] Section 54 National Minimum Wage Act 1998

[4] Section 54(3)(b) National Minimum Wage Act 1998