Fashion start-up penalised over unpaid internship

The Fair Work Ombudsman has secured a total of $329,133 in penalties in Court against a fashion industry start-up for underpaying three workers more than $40,000, including by purportedly engaging one of the workers as an unpaid intern when she was, in fact, a part-time employee.

Sydney-based Her Fashion Box Pty Ltd has been penalised $274,278 and its sole director and majority shareholder, Kathleen Enyd Purkis, has been penalised a further $54,855, in the Federal Circuit Court.

The Court found three employees aged in their mid-20s were underpaid a total of $40,543 for their entitlements including minimum hourly rates, overtime, public holiday pay and annual leave between 2013 and 2015.

One of the employees, a graphic designer who had completed a university degree, worked two-days per week for almost six months without pay under a purported “unpaid internship” before receiving a one-off payment of just $1000. She was underpaid $6913.

Fair Work Ombudsman Sandra Parker said inspectors investigated after receiving underpayment complaints from the young workers.

“Business operators cannot avoid paying lawful entitlements to their employees simply by labelling them as interns. 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,” Ms Parker said.

“Unpaid placements are lawful where they are part of a vocational placement related to a course of study. However, the law prohibits the exploitation of workers when they are fulfilling the role of an actual employee. Business operators who try to exploit young workers as a source of free labour risk facing enforcement action from the Fair Work Ombudsman. Any workers with concerns should contact us.”

In addition to the employee unlawfully underpaid for the purported internship, Her Fashion Box underpaid another graphic designer a total of $15,511 over a period of two years of full-time work as a result of underpayment of his minimum Award entitlements.

The worker gave evidence that the underpayments left him struggling to afford basic living expenses and there were days he could not afford his lunch and had to borrow money from his mother.

A third employee, engaged on a full-time basis as a brand partnerships manager, was underpaid a total of $18,119 over a 12-month period. The three workers have now been back-paid in full.

Judge Nicholas Manousaridis described the contraventions as “serious and sustained contraventions of important provisions of the Fair Work Act” and said the underpayments were significant and deliberate.

Judge Manousaridis found that Ms Purkis knew that Her Fashion Box was not paying workers amounts they were entitled to for work performed 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.

The Court also found Her Fashion Box also breached the law by failing to comply with four Notices to Produce documents or records issued by Fair Work inspectors.

Her Fashion Box sold online subscribers boxes containing fashion accessories and beauty products.

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