A FASHION industry start-up that scored a $200,000 investment on Channel 10’s Shark Tank last year has faced court for allegedly underpaying three workers more than $40,000 and running an unlawful unpaid internship program.

The Fair Work Ombudsman has commenced legal action against Her Fashion Box, a subscription service which sells “fashion boxes” containing fashion accessories and beauty products, and its founder and sole director Kath Purkis, in the Federal Circuit Court.

Ms Purkis appeared on the 2016 season of Shark Tank, where judges Janine Allis and Andrew Banks agreed to a chip in $200,000 in exchange for 16 per cent of her business.

The watchdog alleges the Sydney-based company underpaid three employees, aged in their mid-20s, a total of $40,543 between 2013 and 2015 in the form of unpaid minimum hourly rates, overtime, public holiday pay and annual leave entitlements.

According to the FWO, one employee, a graphic designer with a university degree, worked two days per week for nearly six months under an “unpaid internship”, before receiving a one-off payment of $1000.

The watchdog alleges she was underpaid $6913, as she was in fact engaged as an employee and therefore entitled to be paid minimum award rates and entitlements.

Another graphic designer was allegedly underpaid a total of $15,511 over a period of two years fulltime work, while a third fulltime employee, engaged as a brand partnerships manager, was allegedly underpaid $18,119 over 12 months.

The watchdog also alleges the company further contravened the law by failing to comply with four notices to produce documents and records.

Her Fashion Box faces maximum penalties of up to $51,000 per contravention and Ms Purkis faces penalties of up to $10,200 per contravention. The employees have been only partially back-paid to date.

Fair Work Ombudsman Natalie James said legal action had been commenced because of the lack of co-operation with inspectors and the significant amounts involved for young employees. She said the FWO had received a number of requests for assistance from workers since 2015.

Ms 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 in a statement.

“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.”

Ms Purkis did not respond to requests for comment.

frank.chung@news.com.au