The Cost of Free Labor

In most industries, game development and legal included, internships are an important part of the educational process and offer a unique opportunity to spend some time in a field prior to making a full-time commitment. Many companies receive countless emails from students looking for a foot in the door. More than half of all college students participate in an internship prior to graduation; and for good reason – internships provide the type of experiences and connections simply not available in a purely academic setting. A third of all students are willing to forego a paycheck for these benefits; but, in many cases the costs outweigh the benefits for all parties involved.

As a developer, the siren song of free labor is tempting. Many college students possess impressive skills, boundless energy, and a willingness bordering on desperation. However, taking advantage of this resource could crash your company into litigation. Recent lawsuits against Fox Searchlight Pictures, Warner Music Group, and the New Yorker indicate the flaws in assuming interns are little more than free labor. Even though the interns at Searchlight were only doing typical entry level chores, as opposed to highly skilled labor, they were not receiving any obvious educational benefit from their internship. Similarly, Warner’s intern claimed that in addition to gaining no educational benefit from his unpaid internship, he regularly worked more than forty hours a week. The New Yorker interns received a small stipend (about $12 per day), but clearly less than minimum wage. They also performed chores with no educational or vocational value. The common factor in all these cases is a lack of any benefit, financial, educational, or otherwise, to the intern.

Unpaid internships are subject to strict regulation by the US Department of Labor. For example, the work performed by the intern must be “similar to training that would be given in an educational environment” and “for the benefit of the intern.” The regulations prohibit the employer from any immediate benefit from employing the intern, forbid an intern from taking the place of a paid position, and limit the amount of work an intern can do for an employer. Unless these regulations are met, the intern must be paid at least minimum wage for his or her contributions. It’s noteworthy that the Department of Labor does not accept receipt of college credit as an explanation for why the internship is unpaid.

Since unpaid interns aren’t technically employees according to the US Department of Labor, it’s likely they aren’t employees for the purposes of work for hire. A work made for hire is “work prepared by an employee within the scope of his or her employment.” An employee’s conduct is within the scope of employment only if “(a) it is of the kind he is employed to perform; (b) it occurs substantially within the authorized time and space limits; [and] (c) it is actuated, at least in part, by a purpose to serve the [employer].” When work for hire disputes reach the courts, they take into account employment status and compensation. An unpaid intern is not receiving compensation and is of questionable employment status, so any work product is likely not work for hire. In game development, many work for hire products, such as code, art assets, or music, are incorporated into the final game. If these are created by interns, the company may not actually own the rights necessary to integrate them into the product.

The typical and appropriate response to work for hire concerns is employment contracts, which usually include a confidentiality or non-disclosure provision. However, the enforceability of these contracts is questionable where an intern is receiving nothing of value, referred to as consideration in contract law. Put simply, for a contract to be enforceable the people signing the contract must be receiving some benefit. A non-disclosure agreement gives the company the benefit of having its secrets kept and an employee the benefit of employment. It’s unclear what benefit unpaid interns receive, so it’s unlikely, or at the very least questionable, whether or not a judge would uphold the agreement.

As a student, particularly in a competitive job market, doing anything to get exposure or a leg up in the market is a tempting proposition. However, the evidence consistently indicates that an unpaid internship doesn’t improve your chances of securing a job. Employment rates post graduations for students who engaged in unpaid internships were no more likely to find a job than those who had no internship at all. Even more unsettling, after entering the workforce, unpaid interns make substantially less than students with paid internship experience. These students make less than even those students who abstained from internships all together. This may be due to an expectation that these students are willing to work for less, but regardless of the reasoning, unpaid internships offer little economic advantage.

Although unpaid internships, when viewed as educational opportunities are not necessarily harmful, the studies and the news both seem to indicate there may be better ways to spend your time. Even a small but reasonable hourly wage gives a student a financial stake in your business and a sense of ownership over their work. As a student, holding out for a paid position both shows pride in your work and increases your chances for employment post-graduation as well as higher wages.

About Suzanne Jackiw

Suzanne Jackiw is an official contributor to Law of the Game. She’s a student at Chicago-Kent College of Law, focused on Business and Intellectual Property issues related to video game law; and, she works as a business intern with several small indie game companies and as a law clerk for The Game Attorney. She has attended many video game development conferences, including Steam Dev Days and the Game::Business::Law Summit. The opinions expressed in her columns are her own. Reach her at Suzanne[dawt]Jackiw[aat]Gmail[dawt]com.

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