One of Labour’s proposals to raise wages for workers is through a ban on unpaid internships. But when many interns should already be legally paid, will a ban be a material change?

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Unpaid internships have been subject to media criticism for years. The previous Conservative government took some steps to target unpaid internships, but not through any change to the law. 

Back in 2017, an external review recommended the government should remove exploitative unpaid internships. Their view was that the existing laws around when interns should be paid were already clear and so they recommended more enforcement action taken by HMRC (who are responsible for enforcement of the national minimum wage).

The Conservative government confirmed that it would follow the recommendation and, HMRC then went on to write to 500 businesses reminding them that interns should be classed as “workers” and paid the minimum wage. However, a BBC enquiry in September 2020 reported unpaid internships were on the rise again as a result of the COVID-19 pandemic.

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What’s the deal with internships?

There is no legal definition of an internship or work experience. An “internship” can be used as a label for various working arrangements. 

An intern’s employment status is crucial; it determines what employment rights they will have. An “intern” is not a legal status. Depending on the details of the internship, the intern could be an employee, worker or volunteer. The most important implication is that only workers and employees are entitled to the national minimum wage. 

Some forms of work experience or internships can lawfully be unpaid. For example, an intern who is “work shadowing” but not actually performing “work” will not qualify for the national minimum wage. But if an intern is required to carry out work-like tasks or the intern is getting some form of reward for work (including a promise of future employment), they are likely to be considered a “worker” and should be paid accordingly.

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What will be the New Deal?

The Labour Party’s New Deal says that they will “ban unpaid internships, except when they are part of an education or training course”. What Labour consider to be an “internship” and how any new law will be enforced has not been confirmed.

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What could a ban look like?

It is unclear exactly how Labour will legislate for such a ban. Previous attempts to change the law give us an idea of the approach Labour could take:

• A total ban. Labour have said that they will ban unpaid internships, with only a narrow exception if the internship is part of an education or training course. How Labour define an “internship” in future legislation will be important: 
  • One previous draft bill from 2017 (which never became law) defined an internship as an employment practice where an intern “undertakes regular work or provides regular services” with the purpose of meeting learning objectives or to gain experience of working for that employer or to provide practical experience in an occupation. 
    
    An intern who undertakes work or services on a regular basis is already likely to be considered a “worker” and entitled to the national minimum wage. Whilst an express ban of such arrangements will provide clarity for employers and interns, adopting this definition would not go much further than the current law.
    
  • Two further draft bills (again, which never became law) used the wider term of “work-experience”, defined as “observing, replicating, assisting with and carrying out any task with the aim of gaining experience of a particular workplace, organisation, industry or work-related activity”. 
    
    This definition captured a broader range of working arrangements, including more informal work shadowing. This would have a much bigger impact for businesses (but is a less likely option if Labour choose a total ban). 

• A ban based on duration. An alternative approach would be to ban unpaid internships or work experience which exceeds a certain duration, e.g. four weeks.
  
  This would be a similar approach to that adopted by some of our European neighbours. For example, in Germany a voluntary internship must generally be paid if it is for longer than 3 months.

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How would a ban be enforced?

Although there have been media reports of unpaid internships for years, there are rarely tribunal claims or criminal prosecutions in practice. Enforcement will usually depend on individuals bringing a claim or reporting a breach, which interns may be more reluctant to do than permanent staff. Internships allow students or graduates to gain experience for their CV and enhance their professional experience. Interns will often have aim to secure permanent employment or a positive reference and they are therefore in a particularly vulnerable position.

It is possible we could see stronger enforcement under the new Labour government. One of Labour’s proposals is the introduction of the National Minimum Wage Enforcement which may be able to assist with this job. They will have powers to inspect workplaces, bring prosecutions and levy fines and it is possible internship arrangements could be under increasing focus.  

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What can employers do now?

Whilst we wait to see what the final legislation will look like, here are some proactive steps employers can take now:

• Review your practices: Carry out an audit of all work experience placements or internships to understand what formal and informal work experience is offered throughout your business. It is important to look into what type of work or learning is carried out by interns.
• Consider expenses: No matter how the government legislate for a ban, Labour’s intention is to improve social mobility and allow all talent to build their skills. Even if a work experience period is lawfully on an unpaid basis, employers can improve access for all interns by providing expenses such as travel, accommodation and meals.
• Broader focus on social mobility: Aside from expenses, other steps can help employers promote social mobility. Businesses could target schools in social mobility “cold spots” or consider broadening the entry routes into the business or the amount of required experience necessary before recruitment.

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More information about Labour’s employment reforms can be found on our policy dashboard. 

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If you have any specific questions you would like advice on or if you would like information about what is discussed in this article, then please contact: Abi.Frederick@lewissilkin.com of Lewis Silkin LLP or koichiro_nakada@btinternet.com.