The Federal Circuit Court has ordered fashion start-up Her Fashion Box to pay $329,113 in penalties for underpaying three staff more than $40,000.
Her Fashion Box was an online business that sold boxes of fashion accessories and beauty products that came to national attention when it was featured on season two of Shark Tank.
The Court found that Her Fashion Box sole director Kathleen Enyd Purkis failed to pay three staff in their mid-20s their minimum hourly rates, overtime, public holiday pay, and annual leave between the years of 2013 and 2015, coming to $40,543 in total.
One staff member in particular – a graphic designer who had completed her degree, worked two days a week for nearly six months without pay and received only a one-off payment of $1,000 – was unlawfully passed off as an intern working under an ‘unpaid internship’. She was underpaid $6,913.
Another full-time graphic designer was paid only $15,511 over a period of two years.
The designer provided evidence that the underpayments saw him struggling to meet basic living costs, with days where he couldn’t afford lunch and had to borrow money from his mother.
The third employee, who worked full-time as a brand partnerships manager, was underpaid $18,119 over the course of a year.
All three employees have been back-paid in full, according to the Fair Work Ombudsman.
Her Fashion Box Pty Ltd has been whacked with a $274,278 fine, while Purkis herself has been personally penalised a further $54,855.
Why is the sum so high?
Judge Nicholas Manousaridis said the underpayments were significant and deliberate and found that Purkis knew she was not paying workers the amounts they were entitled to.
A hefty penalty is required in order to deter others from attempting the same thing, Manousaridis said.
“The penalty should be set at a level that, having regard to the other circumstances of the case, should signal to employers who might be tempted not to inquire into their legal obligations as employers or not to comply with their legal obligations, particularly in relation to inexperienced workers, that there is a significant risk of being exposed to the imposition of a pecuniary penalty if they are to succumb to such temptation,” he said.
Not only this, but Her Fashion Box was uncooperative with the Fair Work Commission and had failed to comply with four Notices to Produce documents.
In October 2016, NSW Fair Trading issued a public warning to Australians not avoid doing business with Her Fashion Box after it received several complaints.
“The complaints received mostly relate to accepting payment without supplying goods, not responding to requests to cancel subscriptions and not responding to contact from consumers about missing goods,” said the then-NSW Fair Trading Commissioner Rod Stowe.
“In some cases, two monthly subscription payments were collected before any goods were delivered.”
Businesses on notice
“Business operators cannot avoid paying lawful entitlements to their employees simply by labelling them as interns,” said Fair Work Ombudsman Sandra Parker.
“Australia’s workplace laws are clear – if people are performing productive work for a company, they are legally entitled to be paid minimum award rates.”
Where unpaid internships are part of a vocational placement related to a student’s study, unpaid placements are lawful.
“However, the law prohibits the exploitation of workers when they are fulfilling the role of an actual employee.”
Business owners attempting to flout the law and exploit young workers risk facing off with the Fair Work Ombudsman, Parker warned.
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