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Unpaid internship gets Shark Tank start-up fined $330k

Unpaid internship gets Shark Tank start-up fined $330k

Kathleen Purkis, Her Fashion Box

A start-up once featured on Shark Tank has been fined just under $330,000 in court for wage underpayments, including over an unpaid internship whom the regulator deemed to be a part-time employee.

The $329,133 in penalties was slapped on Sydney-based Her Fashion Box Pty Ltd and its sole director, Kathleen Enyd Purkis (pictured), by the Federal Circuit Court, following action launched by the Fair Work Ombudsman (FWO).

It followed allegations by the FWO that the business underpaid three employees aged in their mid-20s between 2013 and 2015, a range of entitlements, including penalty rates, minimum hourly rates and annual leave.

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One of the employees, a graduate graphic designer, worked two days per week for close to six months as part of an unpaid internship, before being offered a one-time payment of $1,000.

According to FWO, the intern was actually an employee, which meant she had been underpaid by $6,913.

The other two employees had been engaged on a full-time basis: one as a graphic designer and the other as a brand partnerships manager.

The total underpayment for all three workers added up to $40,543, according to the regulator.

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Judge Nicholas Manousaridis was quoted by the FWO as stating that the underpayments were a significant and deliberate breach of workplace laws.

“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.

Further breaches were found by way of a failure to comply with four Notices to Produce documents.

The business was fined $274,278 while Ms Purkis was personally penalised $54,855.

“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,” Ombudsman Sandra 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.”

It is not the first time that Her Fashion Box has found itself on the wrong side of a regulator.

In October 2016, it was the subject of a public warning by NSW Fair Trading, urging consumers not to deal with the business.

“Fair Trading has received several complaints about the online fashion store and has had difficulty making contact with the owner,” it said in a statement on its website.

“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.

“In some cases, two monthly subscription payments were collected before any goods were delivered.”

Fair Trading said at the time that Her Fashion Box was featured in season two of the hit TV show Shark Tank, during which it secured funding to expand.

A Notice of Proposed Deregistration of Her Fashion Box Pty Ltd was published by ASIC on 12 February 2019.

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Unpaid internship gets Shark Tank start-up fined $330k
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