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What charites & non-profits can learn from the Ministry of Labour blitz on unpaid internships

By: Scott Chambers

Volunteers and unpaid interns are not covered by the Employment Standards Act, 2000 (“ESA”) and therefore are not subject to minimum wage and other requirements of the legislation. However, on September 30, 2014, the Ministry of Labour released the results of its recent blitz where it was determined that a number of unpaid interns in various sectors of the economy were actually employees covered by the ESA, and accordingly, entitled to minimum wages, vacation pay and other protections afforded to employees under the ESA. While the Ministry of Labour did not specifically target charities and non-profits in this blitz, there are many lessons to be learned due to the large number of volunteers and unpaid interns working in these sectors.

The Ministry of Labour focused on advertising, public relations, computer systems design, consulting and information services. According to the Ministry, an “internship” is a term commonly used to describe a temporary work arrangement that involves a person working at a business in a beginner or junior position, who may or may not receive pay for that work.

Although there are some very limited exceptions, generally, if a person who is not in business for themselves performs work for another person, company or organization, they are deemed to be an employee and are entitled to rights under the ESA; including, but not limited to, minimum wage. According to the Ministry of Labour, an intern or volunteer will be considered to be an employee for purposes of the ESA, unless all of the conditions below are met:

  1. The Intern’s training is similar to that which is given in a vocational school;
  2. The training is for the benefit of the intern. The intern must receive some benefit from the training, such as new knowledge or skills;
  3. The employer derives little, if any, benefit from the activity of the intern while he or she is being trained;
  4. The Intern’s training doesn’t take someone else’s job;
  5. The employer isn’t promising a job at the end of the training; and,
  6. The Intern has been told that he or she will not be paid for their time as an Intern.

Another exception pertains to college and university programs. The ESA does not apply to an individual who performs work under a program approved by a college of applied arts and technology or a university. This exception exists to encourage employers to provide students enrolled in a college or university program with practical training to complement their classroom learning.

The outcome of the inspection was that 13 of the 56 employers had internship programs that contravened the ESA, resulting in 37 compliance Orders and Orders to Pay Employee Wages. As a result of the Orders to Pay Wages, $43,543.00 was required to be paid and owed to employees who were incorrectly classified as unpaid interns. The amounts reflected minimum wages, vacation pay and public holiday pay that was not paid to the employees but should have been in accordance with the ESA.

For any employer operating an unpaid internship program, including charities and non-profits, the misclassification of the role can lead to Ministry of Labour fines, compliance Orders and significant Orders to Pay Wages to the employees. Charities and non-profits who run unpaid internship programs should be cognizant of the conditions that need to be satisfied for a person to be considered a true intern rather than an employee, as should the individuals working in that capacity.

Volunteers, like unpaid interns, are not covered by the ESA, and while the Occupational Health and Safety Act defines a worker as a “person who performs work or supplies services for monetary compensation,” charities and non-profits relying largely on a volunteer workforce still have responsibility for the health and safety of people visiting or helping out in their workplaces. Additionally, charities and non-profits should be aware that there is a fine line of distinction between a volunteer and an employee governed by the ESA. According to the US Non-Profit Risk Organization, some questions to consider in determining whether an individual is a volunteer or an employee include:

  1. Is the worker motivated by a personal civic, humanitarian, charitable, religious or public-service motive?
  2. Are the services performed typically associated with volunteer work?
  3. Are the services provided different from those typically performed by paid employees and are the hours of service less than full time?
  4. How much control does the non-profit exert over the volunteer while he or she is performing the services? and,
  5. Does the volunteer typically arrange his or her own schedule to provide services when it is convenient for the volunteer?

Although the above list is not exhaustive or entirely determinative, if an individual is providing services to a non-profit or charity that would normally be provided by a paid employee with remuneration rather than a traditionally volunteer position, then it is likely that the individual is an employee rather than a volunteer. If the position is determined to be an employment position, then the charity and non-profit may be liable for payment of minimum wages, vacation and holiday pay to the individual.

Additionally, some charities and non-profits offer perks or rewards for its volunteers, such as free parking or free memberships to fitness facilities, and on a strict interpretation, this could be considered compensation and potentially alter the relationship to one of employment, governed by the ESA. In this case, the volunteer may be deemed an employee and the ESA would may apply, requiring minimum wages etc.

Employees of charities and non-profits often seek to provide some volunteer services to their employer. This is permissible but the volunteer work should not be the same or similar, or related to their normal job duties, or during normal work hours, as it could simply be viewed as a continuation of the employee’s duties without proper remuneration or overtime pay, in contravention of the ESA. If a charity and non-profit employee seeks to volunteer time to their employer, the charity and non-profit should ensure that the volunteer role is unique and very different from the role that the employee normally holds in the organization.

The nuances of the ESA and its effect on unpaid internships and volunteers is vitally important for charities and non-profits. Non-compliance could result in the Ministry of Labour ordering the charity and non-profit to pay wages that should have been paid to the “volunteer” and “interns”.

Scott Chambers is a partner at Blumberg Segal LLP, practicing in commercial litigation, including employment law, professional negligence litigation, and product liability litigation.

Blumberg Segal LLP acts for employers, including non-profits and charities, who are interested in understanding their legal obligations on hiring an employee and ensuring that the employment agreement is legal and binding, as well as in minimizing risks and damages when dealing with an employee on termination. Whether it is properly drafting an Employment Agreement, or properly complying with the legal requirements in terminating an employee, please contact Scott Chambers at scott@blumbergs.ca or call 416-361-1982 ex. 240. Often a short consultation with an employment lawyer can result in saving thousands of dollars for unintended violations of the Employment Standards Act or the common law.

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