A failed fashion industry start-up that once scored a A$200,000 ($208,106) deal on Shark Tank has been dealt a final blow after copping a massive fine for exploiting young workers.
Her Fashion Box and its sole director Kath Purkis have been fined a total of A$329,133 by the Federal Circuit Court in Sydney for underpaying three workers more than A$40,000 between 2013 and 2015.
The court found one was unlawfully classified as an "unpaid intern" when she was in fact a part-time employee. The graphic designer worked two days per week for nearly six months before receiving a one-off "Christmas bonus" of A$1000.
The three workers, who were underpaid a total of A$40,543 for their entitlements including minimum hourly rates, overtime, public holiday pay and annual leave between 2013 and 2015, have now been back paid in full.
Her Fashion Box Pty Ltd has been fined A$274,278 and Purkis a further A$54,855.
The company ceased trading in 2017 and has unsecured debts of A$200,000. Purkis told the court she had no income or property and is currently financially supported by her partner.
"There is no doubt that the penalties are substantial," Judge Nicholas Manousaridis said on Thursday. "Unfortunately, the conduct constitutes serious and sustained contraventions of important provisions of the Fair Work Act."
Judge Manousaridis said the underpayments were significant and deliberate and that Ms Purkis was aware she was not paying her workers the amounts they were entitled to. He said a substantial penalty was required as a deterrent for others.
"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 found the "unpaid intern" was underpaid A$6913. She gave evidence that by late 2014 she was running out of money and, expecting to begin full-time work with Her Fashion Box, resigned from her part-time waitressing job.
Another graphic designer was underpaid A$15,511 over a period of two years of full-time work. That employee gave evidence that he struggled to afford basic living expenses and there were days he could not afford lunch and had to borrow money from his mother.
A third employee, a full-time brand partnerships manager, was underpaid a total of A$18,119 over a 12-month period.
The court also found Her Fashion Box breached the law by failing to comply with four Notices to Produce documents or records issued by Fair Work inspectors, who investigated the company after receiving complaints from the young workers.
According to court documents, when contacted by Fair Work inspectors who asked her if she had ever heard of the Ombudsman before, Purkis said she had done "a lot of reading … in particular in relation to internships".
She later said she had "read about how (the FWO) speak to company owners and they get them to improve processes and different things like that" and that she had "read cases where people have said they were an intern and they weren't an intern".
The Fair Work Ombudsman commenced legal action in 2017.
"Business operators cannot avoid paying lawful entitlements to their employees simply by labelling them as interns," Fair Work Ombudsman Sandra Parker said in a statement.
"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."
Parker said unpaid placements were 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," she said.
"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."
Her Fashion Box sold online subscription boxes containing fashion accessories and beauty products.
In 2016, Purkis appeared on Channel 10's Shark Tank where she secured a A$200,000 investment from judges Janine Allis and Andrew Banks in exchange for 16 per cent of her business.
Purkis did not respond to multiple requests for comment.