Articles > Employment

When does an employment relationship commence?

June 23, 2021   Dean WolmanPhilip Evangelou

The Fair Work Act 2009 regulates employment law in Australia. There are many types of employment relationships. These relations include paid work as well as unpaid work such as vocational placements, internships, work experience and trials. The circumstances of the unpaid work and the nature of the working arrangement determines whether the employment relationship is lawful. 

The Fair Work Act 2009 permits unpaid work where there is no employment contract or when the nature of employment is a vocational placement. 

Does an employment contract exist? 

An employment contract can be written or verbal and exists when:

  • There is an intention to create a legally binding agreement
  • There is a commitment to perform work for the benefit of the business
  • The person receives remuneration for their work
  • The person is not doing the work for their own business 

Should the work be of a productive nature rather than for training or skill development purposes, it is likely that an employment relationship exists. However, whilst the person may be doing productive work, an employment relationship won’t necessarily exist on this sole basis. If the productive work is secondary to the individual’s training and development experience or if a person is undertaking productive work but in an observational role, an employment relationship may not exist. 

Nature of the employment relationship 

An employment relationship gives the person employed by the organisation the title of an ‘employee’. As an employee, the person is entitled to various conditions outlined in the Fair Work Act. Employees are entitled to receive the minimum wage and are covered by the National Employment Standards as well as the terms included in the relevant industrial award. 

An employment relationship is likely to exist if:

  • You have signed an employment contract
  • You are completing work that is significant to the business and work that the business requires to be done
  • You are doing work that is also done by paid employees 

If an employment relationship exists and you are considered as an ‘employee’, then unpaid work would be deemed unlawful. It is important to consider whether the organisation or person working at the organisation is benefitting. The nature of work being completed will determine whether the organisation is receiving a significant benefit from a person’s work or whether the person completing the work is learning and developing new skills, therefore benefitting more than the organisation. 

This is relevant to various employment arrangements, specifically internships, trials and volunteering. Whilst these roles may be advertised as unpaid, it may not be lawful to do so. In an internship or work experience arrangement, the person completing the work should benefit most from it. Therefore, if the business is getting the main benefit, it’s more likely that the person is an employee. Depending on the type of arrangement, each working arrangement has its benefits. Roles develop and whilst the working arrangement may begin as an unpaid internship or vocational placement, it may progress to an employment relationship. 

Additionally, the length of the work arrangement may indicate whether an employment relationship exists. The longer the period of a work arrangement, the more likely it is that an employment relationship exists. 

What to take away from this article?

It is important to consider the nature of the working arrangement to determine whether an employment relationship exists. Generally the circumstances indicating the existence of an employment relationship include a written or verbal contract, a person performing productive work for the benefit of the organisation and an arrangement that is designed to occur for a long period of time. These are important considerations as often unpaid roles may be unlawful. 

If you are unsure as to whether an employment relationship exists, whether the unpaid nature of the role is lawful or you need general assistance with drafting an employment contract, get in touch with our employment lawyers via the contact form or by calling 1300 337 997. 

About Dean Wolman

Dean WolmanDean is a paralegal with OpenLegal. Dean works on a range of commercial law matters including contract reviews, startup fundraising, and legal issues concerned with early stage startups.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.