Businesses using unpaid interns could face regulator scrutiny and customer backlash, the Productivity Commission warns.
Unpaid internship remained a controversial issue. Business groups feared over-regulation, as unions pushed for a national mechanisms for young people to complain about exploitative internship arrangements.
The commission's report, released on Tuesday, said there was a fear some employers may exploit the lack of legal clarity to use unpaid interns to do the work of a paid employee.
But it fell short of making a recommendation on the issue, citing a "lack of information" and "a lack of engagement".
The recommendation came as small businesses faced increasing regulator scrutiny, court fines and customer and external party backlash for hiring unpaid interns – outside of training course conditions.
In June, Adelaide law firm Adlawgroup faced social media backlash and Fair Work Ombudsman investigation after it advertised for junior lawyer positions which asked applicants for a $22,000 "participation fee".
Meanwhile, in January Melbourne media company Crocmedia faced a year-long investigation and was fined $24,000 by the Federal Circuit Court for not paying two young interns any wages for six to 12 months' work.
The Australian Chamber of Commerce and Industry chief executive Kate Carnell said it was unacceptable some employers used unpaid internships to exploit workers, but internships should not be subject to over-regulation.
"Quite seriously, what we don't want to see is exploitation," Ms Carnell said.
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