Her Fashion Box, an online fashion start-up that secured funding on the second season of Shark Tank, has been taken to court over allegations it ran an unlawful unpaid internship program and underpaid three workers more than $40,000.
The Fair Work Ombudsman has commenced legal action in the Federal Circuit Court against the subscription box business and its director Kathleen Enyd Purkis, alleging three employees were underpaid a total of $40,543 for various periods of work between 2013 and 2015.
The court action follows a notice, issued by NSW Fair Trading in October, warning consumers to avoid doing business with the start-up, which has a due to complaints relating to the acceptance of payment without supplying goods, failure to respond to requests to cancel subscriptions and failure to respond to contact from consumers about missing goods.
It is alleged by the Ombudsman that the three employees, aged in their mid-20s, were variously underpaid their minimum hourly rates, overtime, public holiday pay and annual leave entitlements.
One employee, a graphic designer who had completed a university degree, allegedly 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 allegedly underpaid $6913. The Ombudsman alleges she was in fact engaged as an employee and performing productive work, and therefore entitled to be paid minimum Award rates and entitlements.
Another graphic designer engaged by Her Fashion Box was allegedly underpaid 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 third employee, engaged on a full-time basis as a brand partnerships manager, was allegedly underpaid a total of $18,119 over a 12-month period.
The Ombudsman also alleged that Her Fashion Box further contravened the law by failing to comply with four Notices to Produce documents or records issued by Fair Work inspectors.
The Ombudsman has advised legal action has been commenced because of the lack of co-operation with inspectors and the significant amounts involved for young employees. Her Fashion Box faces maximum penalties of up to $51,000 per contravention and Purkis faces penalties of up to $10,200 per contravention. The Ombudsman is also seeking Court Orders requiring the company and Purkis to back-pay the employees in full. They have been only partially back-paid to date.
An injunction restraining Her Fashion Box and Ms Purkis from underpaying workers in future is also being sought. If the injunction is granted, the company and Purkis could face contempt of court proceedings for any further underpayment contraventions proven in court.
A directions hearing took place in the Federal Circuit Court in Sydney on 31 May 2017.
Fair Work Ombudsman Natalie James said her agency had received a number of requests for assistance from Her Fashion Box workers since 2015 with employees claiming they had been underpaid due to allegedly unlawful ‘internship’ arrangements.
“Unpaid placements or ‘internships’ are legitimate in certain cases – for example, where they are part of a vocational placement related to a course of study,” she said.
“The law prohibits the exploitation of workers by characterising them as ‘interns’ or as doing ‘work experience’ when they are fulfilling the role of an employee. Such workers must be paid minimum employee entitlements.
“Legitimate internship and work placements can be a genuine way for people to further their learning or gain skills that assist in finding stable employment, but only if these arrangements are entered into lawfully in accordance with an approved program. Employers cannot simply choose to label an employee as an ‘intern’ in order to avoid paying their staff according to their lawful entitlements.”