A Silicon Valley venture capital firm, Fenox Venture Capital, is the latest for-profit employer to face a challenge related to the use of unpaid interns.  Investigators from the federal Department of Labor's Wage and Hour Division were called in to evaluate whether fifty-six workers performing high level jobs were improperly classified as unpaid interns.  The workers' responsibilities included performing tasks such as screening start-up companies for potential investment, sending reports to foreign investors, and networking and recruiting potential staff members.  In so doing, these workers displaced regular employees by staffing the majority of the company's investment team and performing duties that directly benefitted Fenox Venture Capital, according to the DOL.  The organization's decision to classify the workers as unpaid interns therefore violated the Fair Labor Standards Act.  "Federal labor law establishes clear standards for differentiating unpaid interns from employees, and if, in fact, you are an employee, you must be paid properly," said Wage and Hour Division District Director Susan Blanco. "Employers cannot simply label an employee an ?intern' and not pay them anything."

 

To remedy this situation, the San Jose, California firm agreed to pay $331, 269 in back wages and damages.  The high cost of this mistake serves as an important reminder that employers should carefully evaluate their internship programs to ensure that they do not run afoul of the Fair Labor Standard Act.