Beware the Unpaid Intern in Canada

One of the unfortunate outcomes of the current economic climate is that there are fewer jobs to go around for students. Summer and graduating students who have relied on summer jobs for experience and training are finding few opportunities out there.

To solve this problem, many students and graduates are reaching out to companies to offer their services on a gratuitous basis as unpaid “interns.” The mutual benefit seems obvious — especially if an unpaid internship blossoms into a full-time paying job.

But employers beware — the relationship may not be that beneficial. In fact, these relationships raise all sorts of legal issues: Could a company be ordered to pay an unpaid intern wages? What are a company’s obligations to the unpaid intern for workers’ compensation insurance? What if an unpaid intern commits an illegal act while “working” for a company?

Legislative landscape
Unlike the United States, Canada does not have federal legislation like the Fair Labor Standards Act that has the power to deem unpaid interns (or trainees) as employees.

Instead, Canadian employers must consult the applicable provincial employment standards legislation to determine if an unpaid intern is an “employee.” The fact that someone is not paid is not the only indicator that someone is not an employee. If it looks like a duck, walks like a duck, and quacks like a duck, chances are it’s a duck. The same is true for employees. If someone “looks” like an employee, there is a good chance the individual is an employee.

In Ontario, for example, an intern is an “employee” if he or she is being trained in a skill used by the company’s other employees, unless the intern:

• is receiving training similar to training given in a vocational school;
• benefits from the training and the employer doesn’t;
• doesn’t replace other “employees”; and
• doesn’t automatically become an “employee” when the training has finished.

Risks
If an unpaid intern is really an employee, the employer will be responsible to the intern as if he or she was an employee. The employer would be responsible for paying all outstanding wages owing to the employee, including vacation pay, overtime, etc. The employer also could be responsible for notice of termination (or pay in lieu of notice) and severance pay.

The other area of concern is employee safety. If there was an accident in the workplace, chances are that the employer would be responsible for the unpaid intern’s injury under workers’ compensation and other laws. As well, employers may be held responsible for wrongful actions of unpaid interns if they’re responsible for harassing or discriminatory behavior.

Recommendations
Before welcoming unpaid interns onboard, you may want to consider the following:

• Communication and expectations should be as clear as possible. Consider drafting a simple letter to the unpaid intern that sets out that he or she is not an employee, but an unpaid intern. The letter should also set out the unpaid intern’s role and term with the company and your expectation that he or she will abide by all company policies and procedures, especially those dealing with harassment and discrimination.
• Consider expanding orientation programs to interns.
• Make sure unpaid interns are trained properly, especially on safety procedures and on your harassment and discrimination policy and procedures.
• Ensure the unpaid intern is aware that any policy breaches could result in a termination of the relationship before the term ends.
• Be as upfront with the intern as possible about future job opportunities. Don’t oversell the likelihood that the role will become a paid role if there is really no chance of that happening.

Remember, there’s no such thing as a free lunch. So if someone comes along and is prepared to do what your employees do, but for free, be careful. Make sure everyone’s expectations are established up front. And keep in mind that just because you call someone an unpaid intern, doesn’t mean he or she is not an employee.

Contact the Author — Sara Parchello

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  Sara Parchello, Partner, Bennett Jones
  Sara Parchello is a partner at Bennett Jones. She has an employment and labour focused legal practice, with considerable understanding of the retail, hospitality, and mining industries. She is a specialized resource for HR professionals and in-house counsel generalists to consult on employment-related issues, including drafting and enforcing restrictive covenants, human resources policy development, accommodation and disabilities, and advice on workplace harassment complaints and investigations. She also provides employment litigation services and labour arbitration in the provincial and federal sector. Sara is regularly engaged by clients to provide respect in the workplace training with a focus on employer obligations under the Occupational Health & Safety Act and the Human Rights Code