What sports organisations need to consider when offering internships and volunteer roles
Published 02 December 2016 By: Libby Payne
Sport offers some individuals the opportunity to earn eye-watering amounts of money at the very top end of the professional game. However, at the other end are those individuals and organisations struggling to make it, relying on often precarious funding arrangements, or handouts from family and friends, in order to keep going. A common theme is that there are many passionate individuals desperate to work in the industry, whether just to be a part of it or with a view to carving out a long-term career.
For those who can support themselves there are plentiful opportunities to get a foot in the door in exchange for little or no pay, through voluntary and entry-level roles. It is true that these roles may offer valuable experience and that pay can be a secondary concern, at least for some. However, it is important for clubs, governing bodies and other employers to ensure that roles within their organisation are correctly categorised and in particular that, where applicable, they pay the National Minimum Wage (“NMW”).
This article examines the legal position in England and Wales on internships and volunteers in sport and whether those people are eligible to receive the NMW. Specifically, this article covers:
- Background to the problem – issues of unpaid and low-wage internships at football clubs and the wider scale of the situation.
- Who is entitled to the minimum wage?
- Does training and work shadowing create an employment relationship?
- How should internships be treated for purposes of NMW?
- Who qualifies as a volunteer?
- What are the alternatives to offering internships?
- What happens if the NMW is not paid?
- What are the remedies for individuals who think that they are being underpaid or who wish to report an employer?
- Tips for employers on how to be clear on the type of work they are offering and what they can expect in return
- Final tips and points to remember about the NMW
Back in 2013, it came to light1 that several premier league clubs including Swansea City, Reading2 and Wigan Athletic were advertising for unpaid and low-wage internships. This was described at the time by the press as unfair and exploitative.3
In a study conducted by The Sutton Trust4, it was found that roughly 31% of University graduates were working on unpaid internships. They estimated that a six month unpaid internship would cost a single person in London around £926 a month. It found that unpaid internships were only a possibility for those with the financial means to work for free and still support themselves. Many industries, including those in the sports sector, prefer to hire individuals with experience. If it is only possible to get this experience via an unpaid internship there is effectively a barrier to entry to those in less financially secure positions.
However, the issue remains widespread and a simple internet search will reveal a range of internships in organisations within the sports industry which are stated to be unpaid. The Government also suggested last month that it will look at the problem of unpaid internships and consider whether to introduce a ban.5 It is therefore important to understand what is and what isn't allowed at the moment regarding unpaid work.
Who is entitled to the National Minimum Wage?
The National Minimum Wage Act 1998 (“NMW Act”) provides that an individual who works under an employment contract6 or a contract under which the individual (a “worker”) personally performs work or services for someone who is not a client or customer of the individual's own business7, is entitled to the NMW. Since 1 April 2016 the NMW also includes the higher rate for workers aged 25 and over known as the National Living Wage.8 This is not to be confused with the even higher rate Living Wage that is calculated and advocated on a non-mandatory basis by the independent Living Wage Foundation.9 Current NMW rates are £7.20 for those who are 25 and over, £6.95 for those between the age of 21 to 24, £5.55 for those between the age of 18 to 20 and £4 for those under 18.10
It is not always straight forward to determine whether someone is an employee or worker or self-employed as the test considers a number of factors. This was seen in the recent Uber case (Aslam & Farrar -v- Uber11) where it was decided by the Employment Tribunal that Uber drivers are in fact workers as Uber has multiple rules controlling how they operate:
- Uber interviews and recruits the drivers; it stipulates the make of car drivers are allowed to use, the default route that the driver is to take and the fare;
- It operates a system of disciplining drivers by logging them off the app temporarily or permanently if they contravene any rules;
- Uber also accepts the risk of loss that would fall upon the drivers themselves if they were self-employed.
- The level of control Uber exercised over the drivers meant that they could not be in business on their own account.
Where someone is expressly stated to be an “employee”, there is unlikely to be any issue in establishing that they are entitled to the NMW. However, uncertainty can arise in circumstances where an individual does not have an employment contract and is described as a “freelancer”, an “independent contractor”, an “intern” or a “volunteer” etc. The central question is: is such an individual a 'worker' for NMW purposes?
The starting point for identifying “worker status” is to determine whether or not the individual is working under a contract at all. Contracts involve reciprocal obligations. The basic elements of a contract are: an offer of work, acceptance of that offer and consideration. There must also be an intention for a legal relationship to arise. Offer and acceptance are usually easy to identify in these circumstances, regardless of whether there is any written agreement. Consideration is usually pay received in exchange for work done, but can also be found in the giving of expenses or a benefit in kind. An intention to create legal relations will usually be assumed in a business context, unless, for example, the work involves the employment of family members.
If there is a contractual relationship between the parties, the next issue is to consider is what type of contract the individual is working under. First, there must be an obligation of personal service on the part of the worker. Secondly, the other party to the contract must not be a “client or customer of any profession or business undertaking carried on by the individual”.
Does training and work shadowing create an employment relationship?
First, it is worth noting that the NMW does not apply to those of compulsory school age (broadly, those who are under 16)12 and those undertaking specified forms of training, work experience or trial periods of work.13 The NMW will also not apply to those who are genuinely “work shadowing” to gain an insight into a workplace. There is no definition of “work shadowing” and this could cover a range of circumstances from a one day visit to a workplace to a longer period of several weeks, but crucially the individual must be genuinely shadowing and not undertaking any actual work. That said, the individual may be given tasks to do to give them an idea of what it would be like to work in the role, but should not be given responsibility for delivering work.
Whether a person is merely shadowing or actually working will be a question of fact in every case and the dividing line may be very fine. However, it will probably be unrealistic to argue that someone who is in an organisation for more than a few weeks is in fact still merely “shadowing” and not actually performing work for the organisation (however mundane their tasks might be). Individuals who are genuinely work shadowing will not be under any legal obligation to turn up or to stay for particular periods of time.
Offering work experience to individuals aged 16, work experience that falls within one of the specific schemes mentioned in the NMW Act, or genuine work shadowing for limited periods of time are therefore low risk options in terms of the potential application of the NMW.
How should internships be treated for purposes of NMW?
There is no agreed definition of “internship”, but typically internships are entry-level roles (albeit often specifying a fairly high level of educational attainment in order to be considered for the post) that are offered for a limited period of time. They are often a precursor to an offer of permanent employment with the organisation offering the internship (for example, “vacation schemes”), but this is not always the case. Some internships are paid, some are not, and some offer “expenses only”.
An intern who is required to attend work, is given specific tasks and responsibilities and receives some pay for work done is very likely to be able to demonstrate that there is “mutuality of obligation” between them and the organisation offering the internship, and that the NMW applies. Even if no pay or expenses are offered, it may still be possible for the intern to show that they ought to be classified as a “worker”, having regard to the legal principles outlined above, thus entitling them to be paid the NMW at the appropriate rate.
Who qualifies as a volunteer?
Sporting bodies through to local sports clubs rely on volunteers to deliver a broad range of services and activities. True volunteers are not entitled to the NMW because a truly voluntary arrangement does not involve an intention to exchange work for reward (paid or unpaid) in the context of a legally binding contractual relationship. Reward (usually in the form of experience or the satisfaction of doing something interesting or useful) may be incidental to a voluntary arrangement, but the individual offers his or her services without the expectation or entitlement of receiving anything in return. Identifying a true volunteer is not always easy to demonstrate (see footnotes for details of Murray v Newham Citizens Advice Bureau,14Migrant Advisory Service v Chaudri,15 South East Sheffield Citizens Advice Bureau v Grayson, 16 Melhuish v Redbridge Citizens Advice Bureau,17 and Autoclenz v Belcher18).
There is a specific exemption (to the entitlement to receive the NMW) in the legislation as regards “voluntary workers”, but this only applies to those working for a “charity, a voluntary organisation, an associated fund-raising body or a statutory body”, and only where specific criteria regarding their working arrangements are satisfied.19
Organisations should take care not to blur the distinction between a true volunteer and a worker by, for example, placing obligations on volunteers to do work at particular times or imposing sanctions if they do not do certain things. Realistically an organiser will need to direct volunteers for say an event such as the Olympics or London Marathon to stand in a certain place or carry out certain activities. However, typically more volunteers will be recruited than are strictly needed so that if someone doesn't turn up another individual can fill the gap. This, and the provision of uniforms, does not undermine the volunteer status of the individuals at these types of events. On the other hand, a football club would not want to rely on volunteers to act as stewards at stadiums as they will be required to have a certain minimum number turn up and be responsible for key issues such as health and safety.
Further, paying a volunteer a flat day rate for their work, for example, could indicate that they are in fact a worker and not a true volunteer. This type of “honorarium”, “per diem” or “fixed expenses” was popular in amateur sports as a way of incentivising and rewarding competition officials and organisers. The reimbursement of out of pocket expenses does not carry this level of risk.
It may be tempting for organisations to argue that their interns are in fact volunteers and this may sometimes be the case. However, if an advert for an intern starts with “your responsibilities include…”, this is likely to be a difficult argument to maintain.
For more information about the liability risks in sport and what the Social Action, Responsibility & Heroism Act 2015 mean for sports volunteers please see here20
What are the alternatives to offering internships?
For some roles, the organisation may not be able to justify paying the NMW or may not even be able to afford it. It may however be possible for such organisations to employ students in circumstances in which the NMW does not apply or employ apprentices, to whom a lower rate applies.
UK students who are required to undertake a period of work experience of up to one year as part of their course are exempt from the NMW. In order to qualify for this exemption, the course has to be one of higher or further education, the placement must be compulsory as part of the course and the work must be undertaken before the course ends.21 Students who are on the EU programmes Leonardo da Vinci, Youth in Action, Erasmus or Comenius are also exempt from being paid the NMW.
Apprentices are employees but as they are employed principally for the purposes of training, they are exempt from the full NMW. The lower rate of £3.40 applies to those aged 16-18 or those in in their first year of training.22 Once the apprentice is into their second year of training and has reached the age of 19, they are entitled to the NMW for their age group. The apprenticeship must lead to a formal qualification and combine on the job training with study (usually one day a week). An apprenticeship can take between 1 and 4 years to complete depending on the level undertaken. For more information for employers and individuals on apprenticeships there is a dedicated government website.23
What happens if the NMW is not paid?
Employers who do not pay the NMW open themselves up both to enforcement action by HMRC and to claims from individuals.
Enforcement action is unlikely to be limited to one individual; rather, HMRC is likely to undertake a thorough audit once it has identified any instances of NMW non-compliance. HMRC can then order the employer to pay to the affected employees any underpayment of the NMW. It worth noting here that the NMW needs to be paid in each pay reference period, so if an individual works for 200 hours one month they must be paid the NMW for those 200 hours. HMRC can also issue a penalty to the employer of 200 per cent of the underpayment up to a maximum of £20,000 per individual. A notice of underpayment can relate to any underpayment in the period of six years prior to the date of the notice.
Criminal sanctions can also be applied, including directors being struck off in certain cases. Generally, criminal prosecution will occur where an employer repeatedly fails to pay the NMW.24 In order to deter employers from failing to comply with NMW, the government can also publicly name those employers who fail to comply. The “naming and shaming” scheme was first introduced in October 2013, and since then, over 600 employers have been publicly identified, owing a total of £3.5 million in arrears.25
What are the remedies for individuals?
Individuals can also take action and can report an employer anonymously using the ACAS helpline26, who can pass on the details to HMRC. Alternatively, they can commence proceedings in the Employment Tribunal for recovery of the underpayment, as a claim for unlawful deductions from wages. Such claims must be filed either during employment or shortly after termination. Strict time limits apply, usually three months less one day since the relevant underpayment, although where there is a series of underpayments they can be joined together (with the applicable time limit running from the last such underpayment) and up to two years' back pay can be claimed.
In addition to this statutory cause of action, a claim for failure to pay the NMW can be brought as a breach of contract claim. However, there are limits on the jurisdiction of the Employment Tribunal when dealing with contractual claims – for example, in addition to having to apply a short and strict time limit, it cannot determine a claim for breach of contract brought during employment, and the maximum compensation it can award for breach of contract is £25,000. Contractual claims for failure to pay the NMW can in the alternative be brought in the County Court or High Court. A longer limitation period (six years) applies and claims can be made during employment. There is no statutory cap on the amount of damages the court can award but damages can only be claimed in respect of the six years before the claim is made, so delaying bringing the claim can potentially reduce the amount that can be recovered.
If an individual brings a claim or asserts that they are entitled to the NMW, they are protected from being dismissed or subjected to detrimental treatment as a result.27 If they are dismissed for asserting a right to the National Minimum Wage the dismissal is treated as automatically unfair and it is not necessary for the individual to have the normal two year qualifying period of employment.28
In practice, many individuals will not raise these issues with their employer as they will be hoping for a long-term role or simply do not want to get a reputation for being “difficult” or litigious. This is of course a dilemma faced by any employee considering taking action to enforce their rights. Compensation for unfair dismissal may offer little comfort if the opportunity to work in a sought after role has been lost.
Tips for employers
In order to ensure compliance, employers need to be clear about the type of work they are offering. If offering an unpaid internship or volunteer work, there should be no obligations on the individual to undertake tasks or work set days and times. There can be an agreement in place to set out the parties' expectations, but this should not be expressed to be legally binding. If necessary a separate and binding confidentiality deed can be entered into. If an individual is taken on to shadow someone in the workplace, they should not undertake any work that could be done by a paid employee, otherwise they could be classed as a worker. It may however be okay to give the individual a task to do and feedback on it, provided this is just to give them a flavour of undertaking work and not that the output will be used by the organisation.
Where employers have used unpaid interns in the past, they will be alive to the risk that a sudden change of practice may alert recent unpaid (or underpaid) interns or workers to the possibility that they may have a claim for unpaid NMW. However, particularly as this area is firmly on the Government's agenda, all employers who consider that they may be at risk should carefully review their practices. Replacing interns where appropriate with apprentices or students on eligible courses, or restructuring their internship programmes, may be ways to differentiate the new schemes from the old and to comply with their statutory obligations.
Other points to note
The working hours of those on the NMW must be carefully recorded to ensure the individual is paid the NMW for all hours worked.
It is not possible to count the value of benefits given to individuals as part of the NMW save for a very limited amount if accommodation is provided (only about £30 a week may be offset in this case).
Employers must remember to increase the rate of the NMW when a worker moves up an age bracket.
There is widespread misunderstanding of the law around the NMW, with many employers and individuals not fully understanding their obligations and rights. Unpaid internships may be offered in good faith, in ignorance of the legal position. However, as increasing enforcement action is taken and as the Government focuses its efforts on rooting out non-compliance, it is important to ensure that workers are paid correctly and that access to unpaid roles is not in effect limited to those who have alternative income sources.
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- Tags: Contract | Criminal | Employment | Employment Rights Act 1996 | Employment Tribunal | HM Revenue & Customs (HMRC) | Internship | National Minimum Wage Act 1998 | Olympic Delivery Authority | United Kingdom (UK) | Volunteer
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A former competitive fencer, Libby is now an equally enthusiastic employment and sports lawyer. She acts for both employers and senior executives and also for sports clubs' agents and athletes. Having a real passion for the law, Libby enjoys coming up with creative and practical solutions to even the most novel issues.