Undertaking an internship is increasingly becoming a prerequisite to full-time employment. The Fair Work Ombudsman has recently instigated a review of internships in Australia, the finding of which could have important implications for students and graduates.

Students in degrees such as healthcare and education have long established placement programs. Others, especially in media or the community sector, are entering industries with a long established culture of unpaid internships, some on the exploitative side.

Youth unemployment persists, with 18 to 25 year olds currently making up a quarter of the long-term unemployed in Australia. Many will look to unpaid internships to gain crucial workplace experience and try to differentiate themselves from other candidates.

The legislation surrounding this issue is the Fair Work Act 2009. According to guidance material provided by the University Provost, under the Act a student can undertake an unpaid internship if it is classified as a volunteer activity, for a not-for-profit, or as a formal credit requirement of a course.

Without university endorsement, unpaid work experience can only take place at a for-profit company when no ‘employment relationship’ is created. The determination of whether an ‘employment relationship’ exists is founded in case law and may require expert legal opinion. Along with penalties of up to $33,000 for breach of the Act, these ambiguities may discourage unpaid, short-term internships.

Professor Rosemary Owens is one of the two professors investigating the issue on behalf of the Fair Work Ombudsman. She describes the project as “looking at the implementation of the Act, and seeing what practices, including apprenticeships, conform to the Act and which do not”.

The findings of this report should go some way to resolving whether unpaid internships are a valid workplace arrangement, and if so, on what terms. Professor Owens notes that there exists relatively little data on internships in Australia.

In his book Intern Nation Ross Perlin notes that the idea of formal, lengthy and paid apprenticeship periods is a difficult proposition in white-collar workplaces where flexibility is crucial. Some graduate programs offer this kind of experience, but overwhelmingly employers want candidates to be work ready. This usually means a significant premium is placed on candidates with relevant work experience.

Universities are also placing more emphasis on experiential learning. In the United States three-quarters of students have undertaken an internship by the time they finish their bachelor. Also fueling the growth in demand for internships in America, both paid and unpaid, is the increasing importance of university rankings. One of the easiest ways for universities to give their students, and themselves, an advantage is to ensure students have undertaken significant work experience before graduating. They have hence strongly promoted and facilitated this practice.

Whilst many companies have entered into legitimate arrangements, hugely benefiting participating students, other employers have taken advantage of this ready supply of free labour, often in clear contravention of US labour laws.

As elsewhere, the choice for Australian students and graduates is often not between an unpaid internship and full time work, but between an unpaid internship that meets the professional aims and direction of students, and a series of temp or part-time roles that don’t.

It could be argued that by not paying interns, or by paying them as salaried workers and not by the hour, employers could offer more support to new entrants into the workforce. This would allow students to get a sense of the realities of an industry earlier, and enable them to make better career decisions. On the other hand, providing these opportunities may delay the inevitable and trap people in careers with very low prospects of full-time employment.

In terms of equity, it’s a double-edged sword. It provides a way for people to experience, build connections within and consolidate learning in their field; with more opportunities obviously spreading benefits to more people. However, when these kinds of internships become a normalised pathway into certain careers, it favours the well off and well connected who can afford to work for free for lengthy periods.

Coercive or misleading arrangements could result from more permissive regulations. Implied or explicit guarantees that never eventuate, such as the promise of remuneration or a paid position upon completion, have been of particular concern.

Peter Gahan, Professor of Human Resource Management at the University of Melbourne, states that laws should “ensure that employers cannot use these practices in an exploitative way—especially where young people or say migrant workers with limited labour market experience may be involved.” But at the same time they should “facilitate opportunities for students”.

There is potential through the current review for Australian law to better address new workplace realities; possibly making the substantial benefits of internships available to as many people as possible, whilst limiting exploitation. As Professor Owens cautions, it’s important to remember “this is not a black and white issue”.