Start-up director of Her Fashion Box discovered the really high price of fashion when she thought she could classify her employees as ‘interns’ to avoid paying correct award rates.

The Fair Work Ombudsman fined Kathleen Purkis and her company a total of $329,133 for underpaying three young employees a total of $40,543 for work they did between 2013 and 2015.

Two of the employees were not paid minimum hourly rates, overtime, public holiday pay and annual leave and one of the employees was not paid at all, except for a one-off “Christmas bonus” of $1000.

The unpaid graphic designer, who worked two days per week for nearly six months, had unlawfully been used as an unpaid intern, and was owed $6,913.

The two other employees who worked full time, another graphic designer and a brand partnership manager were underpaid $15,511 and $18,119 respectively.

All three workers have now been paid back in full.

Sydney Federal Circuit Court Judge Nicholas Manousaridis found that the employer’s contraventions of the Fair Work Act (FW Act) were deliberate.

While Judge Manousaridis acknowledged that the penalty was “substantial”, he said that because of the “serious and sustained contraventions of important provisions of the FW Act” they were “appropriate and proportionate to the contravening conduct”.

“The penalty should be set at a level that … 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.

In its media release of the case, Fair Work Ombudsman Sandra Parker said “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”.

“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,” she said.