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Venture Capital Firm Cited for Misusing Free Intern Labor

When many people think of unpaid internships they might think of fetching coffee or sorting mail. They rarely think of unpaid interns as performing some of the primary jobs of the industry.

Internships have long been a way for new professionals to gain experience and get a foot in the door in a particular industry. Many people are willing to take unpaid internships in the hope it will mean greater opportunity for them later in their career.

The federal Fair Labor Standards Act (FLSA) does allow companies to use unpaid interns, but only if the internship is considered a valuable learning opportunity for the intern. That means it must be comparable to taking a class on a related subject, and the company cannot significant benefit from the work the unpaid interns performed.

According to a recent investigation conducted by the U.S. Department of Labor (DOL), Fenox Venture Capital, a venture capital firm based in San Jose, California, was allegedly illegally using unpaid interns to perform important jobs for the company. Some of the tasks the unpaid interns allegdly performed included recruiting for the firm, screening startups for investment potential, and translating Anis Uzzaman’s book, “Startup Bible” into Japanese. Uzzaman is a founding partner of Fenox Venture Capital and the premise of his book was to teach Japan how to follow the success of Silicon Valley.

Living in the Bay Area without a salary is no easy feat, but the venture capital industry is a very competitive one and one that is very attractive to many young professionals in college or just graduating from college. The unpaid interns who provided all the free work for Fenox Venture Capital were no doubt happy to have the opportunity, but that doesn’t mean the company had the right to have them work for free.

The investigation found that 56 workers of Fenox Venture Capital allegedly were mislabeled as unpaid interns from September 2011 to September 2014. As a result, the U.S. Department of Labor has ordered the venture capital firm to pay $331,269 in back wages and damages.

This is far from the first time a company in a hot industry has allegedly tried to avoid paying wages and ended up paying the price in court. Last year, Apple, Google, Intel, and Adobe Systems settled a wage and hour lawsuit for $415 million that alleged the companies had maintained an illegal agreement not to poach employees off each other in order to keep salaries artificially low.

Another Silicon Valley-based company was hiring Indian workers in Silicon Valley, but paying them in rupees, which meant they were only earning $1.21 per hour, which is far below the Bay Area’s minimum wage.

Companies can avoid a large judgment by settling outside of court, but just having a wage and hour lawsuit filed against them, or a Department of Labor investigation, is enough to draw negative media attention to the companies. Venture capitals do not want their industry to be associated with a failure to pay wages or illegally using free labor, since that paints the whole industry in a negative light.

Our Chicago and Naperville wage and hour attorneys and unpaid overtime lawyers and attorneys are intimately familiar with the issues that arise during wage claim litigation, and we know the laws that govern overtime cases well. Many employers misclassify employees as being exempt from overtime laws and pay workers salaries instead of hourly wages in order to avoid paying them overtime. Some employers mistakenly classify employees as exempt and others intentionally do so in order to circumvent the law. In either case, workers do not receive the wages they should, and a lawsuit may be the only way to recover their earned wages. We represent call center workers who are forced to work overtime but are not paid time and half wages.

Nationwide Consumer Rights is based in Chicago and Oakbrook Terrace. We represent clients throughout the country who have not been paid for the overtime hours that they worked. If you believe that you are owed overtime wages, contact one of our Palatine and Northbrook class action attorneys by phone at (877) 990-4990 or through our online form.