An Internship relates to the education which an intern shall receive while rendering services for the principle, together with insight and experience into the business of the principle. An Internship Agreement regulates the relationship between an intern and a principle. It is important to understand the contents of an Internship Agreement and the clauses therein.
In this blog, we evaluate some of the key concepts and clauses that should be included in all Internship Agreements and provide some background on why these are important!
Contents of this Blog
- Nature of Appointment
- Commencement and Duration
- Premature termination
- Sick Leave
- Family Responsibility Leave
- Maternity Leave
- Working Days and Hours
- Intellectual Property
- Liability and Indemnity
- Dispute Resolution
- Boilerplate clauses
Nature of Appointment
The Nature of Appointment clause is very important because it describes the type of relationship between an intern and their principle. The legal relationship between the two is important because it then provides for the legal protection that will be available to both the intern and the principle. Generally, interns enjoy different legal protection from employees and the Nature of Appointment clause will in most cases state that the intern will be seen as an independent contractor. The nature of the relationship being that of a principle and contractor has an effect on the interns benefits. For example, an intern is not protected against dismissal nor entitled to minimum wage. It is important that the principle makes it clear, that the intern will not be entitled to the benefits that are afforded to employees such as fringe benefits and employment security. The clause also states whether the relationship between the intern and the principle will be continuous or result in formal employment.
In the case of Smit v Workmen’s Compensation Commissioner, the court summarised a list of factors that outline the difference between an employee and an independent contractor. An intern meets the requirements of an independent contractor and Section 1 of the Basic Conditions of Employment Act also excludes independent contractors from the definition of an employee meaning that independent contractors are not privileged to them same benefits as of an employee. The effect of this includes but is not limited to the following:
- The principle will not be bound to make payments to the Intern in instances where the Intern goes on sick/annual leave;
- The principle does not need to observe the employment laws when terminating the agreement with the Intern;
- Tax responsibilities of the Intern’s income rest with the Intern.
It is usually to the advantage of the principle that the Intern is defined as an independent contractor rather than an employee because it lessens the principles obligations towards the Intern.
Commencement and Duration
The duration and time of engagement must be agreed upon by both the intern and the principle. The dates in which the Intern will start rendering their services, the term/duration period for which the Internship will last and the date in which the agreement will be terminated should be included within the agreement . Notice periods in respect to early termination should also be provided. The Internship Agreement will also state that termination of the agreement prematurely, will not constitute a dismissal.
It is possible that a contract may be terminated in a number of ways which do not constitute a dismissal as defined in s 186(1) of the Labour Relations Act. In the instance of fixed –term employment contracts such as Internship Agreements entered into for a specific period or expire upon the happening of an event, the termination of such a contract would ordinarily not be considered a dismissal. It has been the position in common law that the expiry of the fixed term- contract of employment such as an Internship Agreement does not constitute termination of the contract by any of the parties. It is rather seen as an automatic termination ex lege (by operation of law) rather than a dismissal. The practical effect of this is that, the intern does not have the right to institute a claim of unfair dismissal should the principle terminate the agreement for unfair or unjustified reasons.
In the event that there is a disagreement between the intern and the principle and the principle wishes to prematurely terminate the agreement, it is important that a Premature Termination clause provides for such instances within the contract. The intern will often not be entitled to receive any termination payment (compensation in lieu of notice) because the nature of the relationship between the intern and principle is that of two independent contractors and allows the principle to terminate the agreement freely for any reason which the principle deems reasonable or in some instances no reason at all.
It is important that the services that the intern will be rendering are clearly defined within the Agreement to avoid uncertainty and ambiguity. It is common that interns work remotely for the principle and the Services clause will often include a statement stating whether the intern will be rendering their services remotely or through office attendance.
Interns may or may not receive compensation for the work they do. If the agreement between principle and the intern provides that the intern be paid, the payment amount, date of payment and method of payment must be clearly stated within the agreement. Any deductions that will be made to the interns compensation must be clearly stated.
Interns are liable to pay tax as they are considered to be earning an income. However, this only applies if they earn a monthly salary/ stipend of R6 500 and above and so if the Intern is earning below the South African Revenue Services threshold at that time, they will not be liable to pay tax.
The intern will not be liable to pay to the Unemployment Insurance Fund. The Unemployment Insurance Act and Unemployment Insurance Contributions Act apply to all employers and workers, but not to –
- workers working less than 24 hours a month for an employer;
- public servants;
- foreigners working on contract;
- Employees in receipt of an old age pension are, since 07/2/2007, no longer excluded from contributing towards UIF; or
- workers who only earn commission.
An intern is considered to be a learner and accordingly will not be liable to pay towards the Unemployment Insurance Fund. It is uncommon for there to be other deductions such us medical aid to the remuneration of an Intern.
Sick leave is the leave that is granted when an individual is ill and cannot work. Legislation such as the Basic Conditions of Employment Act provides for the number of sick leave days that an employee is afforded. Such legislation does not apply to independent contractors such as interns, however the sick leave concept is often incorporated into an Internship Agreement. It is important that the number of sick leave days that will be afforded to the intern are agreed upon and stated within the agreement. In an Internship Agreement, the intern is often entitled to a pro rata amount of sick leave. The agreement will also state what procedures should be followed when the intern has taken sick leave, for example the requirement of a doctor’s note alluding to the intern’s illness which resulted in them being absent from work.
Family Responsibility Leave
Family responsibility leave is the leave granted to someone to allow them to attend to family responsibilities like the sickness of a child or the death of a parent. Although a principle is not obligated to grant family responsibility leave, it is a concept that is often included within an Internship Agreement. It is important that the number of days of family responsibility leave be clear in the agreement. The instances in which such leave can be taken should also be stated within the agreement.
Legislation provides that female employees are entitled to 4 months unpaid maternity leave when they are pregnant. While such legislation does not apply to independent interns, the maternity leave concept is often included within agreements with independent contractors such as the Internship Agreement. A principle may decide that the female worker be compensated even while on maternity leave. The Internship Agreement should clearly state whether or not the intern’s maternity leave will be paid or unpaid. Some Internship Agreements may also provide that the Internship Agreement will not be extended should the intern become pregnant.
An Internship Agreement involves educating and training the intern. Naturally this would mean that the intern will be under the supervision of the principle or any person designated by the principle. It is important for the intern to be aware of who will be supervising them during the course of their engagement with the principle and the reporting structures therein.
Working days and Hours
The working days and weeks for the intern need to be agreed and stated within the agreement. For example, the intern may only work 3 days and week for 7 hours on each day.
The intern will obtain knowledge of the principles trade secrets or private and confidential information about the principle and the principle will usually prefer that the information remains private. It is important that proprietary and confidential information is protected and the agreement states that the Intern may not share the principle’s private and confidential information to any third parties and doing so will be considered breach of contract.
An employer will generally include a confidentiality clause in a contract, especially if the intern will be working with proprietary information and or top executives. In most cases, confidentiality clauses are signed when an individual is first hired and are valid through the termination of their Internship or, in some cases, a period of time after Internship ends. On termination of engagement, a formal release document may also include an undertaking whereby the Intern is to refrain from disclosing certain confidential information.
Intellectual property is any product of the human intellect that the law protects from unauthorized use by others. An Internship Agreement should provide for the ownership of intellectual property rights. The agreement should state who the intellectual property rights belong to. As with most employment agreements, an Internship Agreement will often state that intern will cede all the intellectual property rights obtained during the duration of the engagement to the principle. The agreement may also include that, although goodwill may be accrued, there will be no payment to the intern for goodwill.
Unless there is a statement to the contrary, a work created by an employee under a contract of service such as an Internship Agreement, in the course and scope of their agreement will be automatically assigned to the employer. This was confirmed in the judgment of King v South African Weather Service 2009 (3) SA 13 (SCA);  All SA 31 (SCA).
It is still important to include this clause in the intern’s agreement as this will mitigate against a possible issue arising at a later stage as to the ownership of the particular intellectual property. The Internship Agreement may then also be relied on as being a written assignment in the event of the former Intern being recalcitrant.
The addresses that the parties have chosen to be their designated addresses in respect to communication and notices is referred to as domicillium. The domicillium must be included within the contract for clarity and to ensure that notices are sent to the correct address. Procedures that should be followed should one of the parties change their addresses should also be included, to ensure that the parties can communicate effectively and to avoid communication being missed. For example, the agreement may include that a notice of change of address must be sent in writing within 10 days of the change of address.
Liability and Indemnity
It is of importance that both parties are aware of who assumes the risks that may be involved when entering into an agreement. Often in an Internship Agreement, the intern agrees to take on all risks associated with entering into an Internship Agreement with the principle. The intern usually agrees to indemnify and holds the principle harmless for any injuries suffered or losses incurred during the engagement between the parties.
Due to the high cost of risk, the principle in an Internship Agreement usually wants to assume minimal risk and so naturally the principle will ensure that the contract states that the intern will be liable for all risks involved with entering the agreement. To avoid problems that may arise at a later stage, where the intern institutes a claim against the principle for any injuries or losses suffered, it is important that the agreement clearly states who will bear the risk and be liable for losses or injuries.
It is important that a contract provides for instances when either the principle or the intern are found to be in breach of contract and the procedures that should be followed thereafter, including clearly stated notice periods. The remedies that are available when one is in breach should be clearly stated, as well a clear indication of who be bear the costs incurred when seeking remedial action or costs incurred as a result of the breach.
It is common that a party may be found in breach of contract and the Breach clause provides for such instances in detail. It is important know when one can institute legal action against another party for breach of contract as well as the remedies that are available to an aggrieved party. Should the case of breach of contract reach the courts, the courts will consider whether the provisions within the agreement were complied with and take into consideration which remedies the parties agreed to rely on in the event that a party is found in breach. This clause makes it easier for a court to rule on a matter of breach of contract because the parties would have already agreed to what action should be taken, should a party be found in breach.
In the event of that a dispute arises between the parties, it is important the agreement states which dispute resolution methods are preferred and the procedures that should be followed. The agreement should also clearly state which court will have jurisdiction over any dispute that may arise from the agreement.
It is important that parties agree to which procedure they will follow should a dispute arise before a dispute arises. The South African Law Commission Issue Paper 8 Project 94 Alternative Dispute Resolution highlights the alternative dispute resolutions that are favourable in employment agreements such an Internship Agreement which include mediation and arbitration. Disputes arising from an employment contract may also be resolved under the conditions and pursuant to the procedure provided for in Individual Labour Disputes Resolution Act.
Apart from the above, all Internship Agreements should contain standard boiler plate clauses (or general clauses) which are included to ensure certainty and prevent ambiguity.
These clauses would include, for example:
- Whole Agreement