A failed online fashion company that once featured on the TV show ‘Shark Tank’ has been penalised $329,133 for exploiting workers, including engaging one of them as an unpaid intern, when she was, in fact, a part-time employee.
The Federal Circuit Court slapped Her Fashion Box Pty Ltd with a $274,278 penalty, while its sole director Kathleen Purkis was hit with a further $54,855.
Her Fashion Box was an online store founded by Ms Purkis which sold subscription boxes of fashion accessories and beauty products.
In 2016, Ms Purkis appeared on Network 10’s Shark Tank program where she secured a $200,000 investment from judges Janine Allis and Andrew Banks in exchange for 16 per cent of her business.
In 2015, she was a finalist in the Telstra women business awards.
Underpayments and unpaid internship
An investigation in 2017 discovered that three workers all aged in their mid-20s had been underpaid a total of $40,543 by Ms Purkis and Her Fashion Box.
One of the workers was a graphic designer who worked for the company two days a week under a purported ‘unpaid internship’ for six months, without receiving any pay.
She was given a one-off “Christmas bonus” of $1,000 – which left her $6,913 out of pocket.
Her Fashion Box underpaid another graphic designer a total of $15,511 over a period of two years of full-time work.
The worker told the court that the underpayments left him struggling to pay for basic living expenses.
The third employee who was employed on a full-time basis as a brand partnerships manager, was underpaid $18,119 over a 12-month period.
Underpayments ‘significant and deliberate’
In the Federal Circuit Court, Judge Nicholas Manousaridis was scathing – describing the contraventions as “serious and sustained contraventions of important provisions of the Fair Work Act” – adding that the underpayments were “significant and deliberate”.
Judge Manousaridis found that Ms Purkis knew that Her Fashion Box was not paying workers what they were legally entitled to, and said a substantial penalty was required to deter others from similar conduct.
“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,” Judge Manousaridis said.
Internships a way to avoid paying wages
Miles Heffernan, Litigation Director at Industrial Relations Claims, said the case is a warning to those working for companies under unpaid internship arrangements.
“All too often businesses label young workers as ‘interns’ as a way to avoid paying them proper wages and entitlements,” he said.
“Unpaid internships should only last a short period of time, and should be a requirement of a legitimate university or training course.
“The minute unpaid ‘interns’ are not learning and benefiting from the engagement, and the minute they start doing work that a paid employee would normally do, then they should be being paid.”
Wage theft should be a criminal offence
Mr Heffernan once again called for wage theft to be made a criminal offence.
“I don’t know how many cases of deliberate and systematic wage theft it is going to take for state and federal governments to take some serious action to stop this scourge,” he said.
“Despite baseless arguments from employer groups, the evidence is overwhelming that current penalties for wage theft are hopelessly inadequate – so until we start locking up greedy bosses like Ms Purkis – we will continue to see workers having their wages stolen.”
If you are not being paid your correct wages and entitlements, or if you are considering legal action to recover stolen wages, we can help.
Please call our team at Industrial Relations Claims today on
1300 045 466