The conclusion of a US Labor Department investigation is that Fenox Venture Capital’s labeling of 56 employees as interns was in violation of labor law. The conclusion of the investigation means that the firm is required to provide the mislabeled employees for three years of “free” or unpaid work totaling $331,269 in back wages and damages.
Definitions You Should Know:
What is an Intern? A trainee (often a student or recent graduate) that works, usually without compensation, at a certain trade, occupation or company in order to gain valuable work experience.
The investigation began in late 2014. Investigators discovered that the San Jose, California based firm illegally labeled 56 workers as interns between September 2011 and September 2014. By doing so, the company obtained free labor that both US and Japan born workers should have received compensation for. The “free labor” was spread over a wide variety of tasks, but included recruiting for the firm and screening startups for potential investment. This is notable because these are two of the venture capital firm’s key functions.
According to the Fair Labor Standards Act (FLSA), employers are required to pay interns if certain criteria apply to the situation. One such criterion is if the interns in question are performing work that the company would hire someone to do otherwise. It is fairly unusual for a venture capital firm to be found in violation of labor law. Yet this is only the latest in a series of events damaging the health of Silicon Valley. Silicon Valley has also recently become known for a culture that is hostile to women, its willingness to conspire to keep salaries lower with inter-company agreements not to compete for workers (2015), and use of immigrant labor (2014). A number of lawsuits and labor code violations have kept Silicon Valley popping up in the news regularly and left many questioning where the investigations will lead next.
If you are interested in additional discussion of misclassification of employees or mislabeling of employees as interns, please contact one of the experienced employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.