Australia: Fashion start-up fined $274,000 for employee and “intern” underpayments, failing to comply with regulatory investigation
The Federal Circuit Court of Australia has ordered an employer and its managing director to pay pecuniary penalties for the underpayment of its employees and non-compliance with a Fair Work Ombudsman (“FWO”) investigation.
In Fair Work Ombudsman v Her Fashion Box Pty Ltd & Anor  FCCA 425, the Federal Circuit Court of Australia assessed pecuniary penalties for a series of admitted contraventions of Fair Work Act 2009 (Cth) (“FW Act”) for the underpayment of a Graphic Design “Intern”, a Team Manager, and Brands Partnership Manager.
The Federal Circuit Court observed that the Graphic Design Intern and Team Manager’s employment were covered under the Graphic Arts, Printing and Publishing Award 2010 (“Graphic Arts Award”) and that the Brands Partnership Manager was covered under the General Industry Retail Award 2010 (“Retail Award”).
Despite the Company’s attempts to describe the Graphic Designer as an “Intern”, the Court heard that the Graphic Designer had been responsible for creating and updating the Company’s website; editing, videos for the Company’s YouTube channel, and creating electronic direct mail and newsletters. Accordingly, the Court held that the Graphic Designer should have been classified as a “Level 5 employee” under the Graphic Arts Award.
In relation to the Company’s other two employees, the Court held that the Team Manager was a “Level 7 employee” under the Graphic Arts Award and that the Brands Partnership Manager was a “Retail Employee Level 1 – Clerical Assistant” under the Retail Award.
Following an FWO investigation that spanned over two years, the Court found that the Company had failed to properly pay the prescribed rates under the Graphic Arts Award and the Retail Award in relation to the employees’:
- minimum rates of pay;
- overtime pay;
- accrued but untaken annual leave pay; and
- public holiday pay.
The Court also heard that the Company had not complied with the FWO’s investigation into its conduct, when it failed to produce documents in response to several requests from the FWO and failed to provide a reasonable excuse for doing so.
In assessing the size of the penalties to be imposed, the Court considered, among other things:
- the need to deter businesses from engaging unpaid “interns” in the fashion industry;
- the employees’ vulnerability due to their inexperience within the fashion industry; and
- the financial and social impact of the underpayments on the employees.
In respect of the Company’s noncompliance with the Ombudsman’s requests for documents, the Court also considered the delay caused to the FWO’s investigation into the Company and the general need to deter businesses from failing to comply with FWO investigations.
The Court balanced these factors against the Company’s admissions, at trial, that it had underpaid its employees and that it had failed to comply with the FWO’s requests for documents. Accordingly, the Court allowed for minor discounts for both sets of contraventions.
Weighing up these and other factors, the Court imposed the following penalties:
- in respect of the Company – a total of $149,328 for failing to pay the employees their proper Award rates and a total of $124,950 for failing to comply with the FWO’s requests for documents; and
- in respect of the Director – a total of $29,865 for failing to pay the employees their proper Award rates and a total of $24,990 for failing to comply with the FWO’s requests for documents.