By Cat Zakrzewski
A Silicon Valley venture capital firm has agreed to pay $331,269 in back wages after the U.S. Department of Labor found the company misclassified 56 workers as unpaid interns.
Investigators found Fenox Venture Capital had used the unpaid workers to screen startups for potential investments, send reports to Japanese investors and recruit potential employees. These interns displaced regular employees at the San Jose, Calif., firm.
“Silicon Valley has one of the highest concentrations of wealth in the United States,” said Michael Eastwood, an assistant district director at the U.S. Department of Labor. “For a business to not be paying their workers, it is deplorable.”
Mr. Eastwood said it is very common in the United States for businesses to classify workers as interns in order to pay them well below minimum wage or nothing at all. He said he had never before seen a case where a venture capital firm engaged in this practice.
Interns in Silicon Valley are known for having some of the highest salaries and perks, as tech companies increasingly compete to hire the best young talent. A Glassdoor report from 2014 found that nationwide, 19 of the top 25 highest paid internships were at tech companies.
Mr. Eastwood said the Department of Labor has a six-part test to determine whether or not a worker can be classified as an unpaid intern. The worker cannot displace any regular employees and the employer cannot gain any immediate advantage from the workers.
“These interns were doing the productive work of the firm,” Mr. Eastwood said. “If those interns hadn’t been there, the firm would have had to hire full time employees.”
The unpaid workers at Fenox Venture Capital ranged in age, though Mr. Eastwood said they were largely in their late teens and early twenties. Mr. Eastwood said there were a mix of local domestic workers as well as workers from Japan.
Vivek Ladsariya, head of investments at Fenox, said the firm used the internship program to find new talent. He said some current employees were hired from the program and that some interns had opportunities to be involved with processes most don’t even see at the principal level, like fundraising.
“The goal was to work with people, give them the opportunity to get into venture capital,” Mr. Ladsariya said.
Mr. Ladsariya said the firm now offers a paid internship program.
The firm manages several multi million-dollar funds and makes early-stage and final round investments. Its portfolio includes Jibo Inc., a personal robot company, and Genius Media Group Inc., formerly known as Rap Genius.
Original article can be found on Wall Street Journal