Sofar Sounds has made a name and a business for itself by staging “secret gigs and intimate concerts” featuring emerging artists for an invited, engaged audience — but as detailed in an article in the Talkhouse and a subsequent report in Variety, its model is problematic because it has generated millions in funding yet relies largely on unpaid volunteers, dubbed “ambassadors,” to work its events, and pays artists just $100.

The company is being investigated by the Department of Labor regarding these practices, and it confirmed today that it has embarked upon a long-term program to hire part-time crews to work with its ambassadors on shows, CEO Jim Lucchese tells Variety.

“We are rolling out Sofar Crew: paid, part-time event staff in all owned, operated and ticketed markets. Sofar Crew will work with and be directed by Sofar full-time employees in those markets.”

He added that the plan to hire the paid part-timers was launched nearly a year ago. “Planning for Sofar Crew was underway when I got here in February,” he says. “The team anticipated the need for Sofar Crew as an extension of full-time teams based on Sofar’s growth.

“It’s one thing when you have a two-person team in a town supporting a handful of shows,” he continues. “But over time, show volume has increased substantially. Wanting to ensure the quality of the experience for everyone, the team was mapping out Crew as a way to support continued growth while also improving the shows.”

The hiring moved closer to reality after the company closed its most recent financing round, which brought in some $25 million round from investors including Richard Branson and Union Square Ventures, in May.

“With the financing in place, Sofar then ramped up people operations, evaluated and brought on HR systems needed to administer Sofar Crew and spent a lot of time discussing and refining the approach with the local teams,” he says.

While sources at the Dept. of Labor say that Sofar’s model is “completely unlawful,” the situation is not black-and-white, either legally or, for lack of a more accurate term, morally — several artists said that they do better financially and especially in terms of fan engagement and merchandise sales at Sofar shows than they do at many regular gigs.

Lucchese declined to discuss the investigation, but the company’s move seems to confirm what a source close to the company told Variety earlier this month: that Sofar is working with the Department of Labor in an effort to “resolve the situation.”

Attorney James Sammataro of Pryor Cashman LLP, who works extensively in the live-entertainment space, told Variety earlier this month he suspected that Sofar may be quietly attempting to reach a behind-the-scenes arrangement with the Department of Labor, whereby volunteers can work a certain number of hours without the company being deemed to have run afoul of labor provisions in New York and other states.

“There’s sufficient precedent in distinguishing between the type of activities that are permissible for ‘non-profits,’ but impermissible as to ‘for profit’ corporations,” Sammataro said.

Lucchese deferred to Sofar’s official comment on the investigation: “The New York State Department of Labor has requested information about the Sofar Ambassador program and we’re fully complying with their request. The New York State Department of Labor hasn’t made any findings or assertions of non-compliance against Sofar. We look forward to answering any questions they have and resolving this matter.”

Asked what’s next for the company, he said, “Our two biggest focus areas are supporting our community’s continued growth and delivering more value to artists.  We’re totally committed to those areas. We’ll have more to share later on this year.” Variety will share that information as well, as it develops.