October 13 2015
In this Guest Blog, labour lawyer Josh Mandryk of Goldblatt Partners tackles a question that I have often raised with my own students and with activists who have been doing a great job raising awareness of the common employer practice of calling employees ‘unpaid interns’ as a way of avoiding employment standards laws. The question is this: What if the employers just offer “volunteer” positions and workers agree to be “volunteers”? It is a tricky question, because the law does not want to outlaw volunteering. Don’t we want people to volunteer to help out at the Terry Fox Run or other charitable events, for example? If so, would a law declaring all volunteers “employees” discourage socially valuable volunteering? How can the law distinguish between “good volunteering” and disguised employment that is really a form of exploitation?
Here’s Josh’s discussion of this issue:
Last year, the Ontario Ministry of Labour ceded to the demands of students, young workers and intern rights activists when it ran an inspection blitz cracking down on illegal unpaid internship scams. The media buzz that followed the blitz coupled with the threat of real consequences for employers helped bring the message home: the overwhelming majority of “interns” in Ontario are employees covered by the
Employment Standards Act, 2000 (the “ESA”) unless they are performing work under a program approved by a college of applied arts and technology or a university.
Unfortunately, unscrupulous employers are creative, and many have altered their employment practices in a further attempt to continue to avoid paying their workers. Two distinct employer responses have emerged.
The first response is that many employers have simply tweaked their internship programs to ensure they only hire interns who are working as part of a university or college placement, taking advantage of the overbroad exclusion in Section 3(5) of the ESA.
The second response – the subject of this post – is the growing trend towards employers characterizing their unpaid workers as “volunteers” or “volunteer interns”. The rise of volunteer misclassification poses new challenges for the fight against wage theft and employee misclassification. It also begs a simple question: “What is a volunteer?”
Volunteers and the Employment Standards Act, 2000
The ESA does not contain a statutory definition of “volunteer”.
The ESA Policy and Interpretation Manual (the “Manual”) indicates the ESA does not apply to volunteers, who are not considered to be “employees” under the Act. However, the Manual notes that the Employment Standards Program must still inquire into whether someone is a “true volunteer” or an employee. According to the Manual, the fact that no payment was made to the individual is not determinative, nor is the fact that some form of payment may have been made.
So How Do We Determine if Someone is a “True Volunteer”?
The Employment Standards Program’s approach to volunteer misclassification is based on Employment Standards Appeal Decisions from the 1980s. At that time, appeals were heard by a Referee. Today, they are heard by the Ontario Labour Relations Board (the “Board”).
The leading case on volunteer misclassification cited by the Manual is Re Consumer Liability Discharge Corporation. The claimant in that case, a recent college graduate named Tony Molica (“Molica”), began working for the employer after he indicated that he wanted to come to the company’s office and “learn by observation”, offering to work without “any compensation of any kind”. Molica testified that the employer told him that there would be no money “until I could produce”, which could take up to three months.
In the decision, Referee Davis noted that the minimum standards contained in the ESA cannot be rendered nugatory by agreement between an employee and employer. He stated that “it is critical in this regard to distinguish between one who truly volunteers their service without expectation of compensation and one who agrees to forego receipt of wages which are established as an employment standard,” and that “[t]his very difficult question is one which depends for determination on the total circumstances surrounding each individual case.” Referee Davis went on to outline the following factors to guide this determination:
One of the key factors in determining whether there has been a true volunteering of services… is the extent to which the person performing the services views the arrangement as being pursuant to his pursuit of a livelihood on the one hand, and the extent to which the person receiving the services is conferred a benefit on the other. Another factor will be the circumstances of how the arrangement was initiated: and again, whether an economic imbalance between the two parties was a factor in structuring the arrangement.
Turning to the matter before him, Referee Davis noted that both Molica and his father testified that they believed he had “gotten a job” as a result of the arrangement, and that he would be paid once he started to produce. Referee Davis found this fact determinative, and upheld the Employment Standards Officer’s (“ESO”) order to pay.
Two other volunteer misclassification cases are cited in the Employment Standards Handbook (the “Handbook”): Re F.A.T.E. Self-Help Publications Inc. and Re Station Street Café. Interestingly, neither of these cases cite Consumer Liability Discharge Corporation or follow the test outlined by Referee Davis therein.
In F.A.T.E. Self Help Publications, the claimant worked as a volunteer, but on the understanding that the employer planned to pay her retroactively through a government grant once the funding came in. After two months, the funding still wasn’t there and she wanted to get paid. The claimant and her boss grabbed lunch to discuss the matter, during which he offered to pay her $200 for her two months of work in order to settle the dispute. Referee Cameron found this offer as demonstrative of the fact that there was an employee/employer relationship, and upheld the ESO’s decision to award the claimant back pay.
In Station Street Café, it was alleged that the two claimants had “volunteered” to work for free for a two-week trial, after which they would be paid $300 a week. In upholding the ESO’s order to pay, Referee Adamson relied on section 23 of the ESA, when then read as follows:
23. Every employer who permits an employee to perform work or supply any services in respect of which a minimum wage is established shall be deemed to have agreed to pay the employee at least the minimum wage established under this Act.
Referee Adamson found that the employees may have offered to volunteer, but that by permitting them to work in his restaurant the employer accepted the responsibility to pay them minimum wage.
The Problem with the Consumer Liability Discharge Corporation Approach
The test outlined in Consumer Liability Discharge Corporation is vague, subjective, and has not been applied in subsequent cases.
A more fundamental problem with relying on the case is that on its facts it seems to be more of an early “unpaid intern” or “trainee” case than a “volunteer” case. Nowadays, we’d call someone who works for a company to “learn by observation” without “any compensation of any kind” an unpaid intern, not a volunteer, and there are statutory provisions to address whether or not they are entitled to payment. To this point, it’s important to highlight the fact that all of the cases discussed herein were decided long before the ESA was amended in 2000 to introduce the current regime regulating unpaid internships. All of this calls into question the ongoing viability of the Consumer Liability Discharge Corporation approach.
The Need for a New Approach
The changed statutory context and growth of unpaid internships since Consumer Liability Discharge Corporation was decided begs for a new approach. With the ongoing Changing Workplace Review, now is the time for ESA reform to provide clarity on the issue of when volunteerism crosses into employment. At the least, new ESA provisions should be introduced which prohibit the use of volunteers by for-profit employers, and provide guidance and clarity on the circumstances under which volunteers can be engaged by non-profits, charities and within the broader public sector.
Volunteering can give us purpose and allow us to make meaningful, positive impacts on our communities. The benefits of volunteerism make it all the more important that we protect against its misuse as a guise for wage theft and employee misclassification.
Josh Mandryk is a labour lawyer at Goldblatt Partners LLP
Law of Work Book Reference:
The issue of whether unpaid interns and volunteers are “employees” is addressed in Chapters 4 (The Law of What? Employment, Self-Employment, and Everything In Between) and Chapter 7 (The Requirements of an Employment Contract)