DISCLAIMER: I am not a lawyer. This is not legal advice. I would love for an actual lawyer to comment on this issue to correct any inaccuracies.
Free interns? We'll take 'em!
As a bootstrapping indie studio, we are happy to have all the help we can get. We've had several enthusiastic volunteers eager to lend their time and skills to us in exchange for the experience and credit in our games. I figured we could just bring them on as interns and let them contribute to whatever extent they could and wanted to. That idea, I've come to find out, is 100% illegal. Wanting to make sure Dark Tonic would be legal owners of any work potential interns did on the studio's behalf, before bringing them on, I looked for an intern agreement that covered this. My all-in-one suite of legal docs did not contain such an agreement, so I went looking online. That's when I came across this article from the New York Times: http://www.nytimes.com/2010/04/03/business/03intern.html?pagewanted=all
From that doc, the 6 main criteria that define a legal internship are:
- The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
- The training is for the benefit of the trainees;
- The trainees do not displace regular employees, but work under their close observation;
- The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
- The trainees are not necessarily entitled to a job at the conclusion of the training period; and
- The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
If these 6 criteria are not fulfilled, the "intern" will be legally acting as an employee, and entitled to minimum wage, and all other employee laws.
There is also not a legal concept of a "volunteer" for a for-profit company. That falls under the same rules. 
What can you do?
The only 2 legit ways I've found to receive free work as a for-profit company are either:
- An internship that meets all 6 criteria above. In this case, the company is spending close to the amount of time training the intern as the intern's work benefits the company (so it is not actually free work).
- Have them work as independent contractors, and agree to limited/no compensation as specifically described in a contract. The catch here is that as an independent contractor, they must determine the best way to achieve the results the company requests in the contract, but the company cannot tell the contractor specifically how something should be done, what tools to use, etc. If the company does that, the contractor's status may automatically revert to that of an employee.
That line between contractor and employee is also fairly fine. Here are the laws concerning them: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3FFrom that page, these are the questions that define an employee vs. a contractor:
Common Law Rules
Facts that provide evidence of the degree of control and independence fall into three categories:
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Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
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Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
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Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Basically, a contractor is independent and makes full choices about how to achieve work results. If you're an unpaid intern, and your host company isn't fulfilling those 6 criteria above, congratulations! You volunteered yourself into a paying job! If your company has or is considering bringing on an intern, educate yourself.  Get social with Dark Tonic: http://www.facebook.com/darktonicgames https://twitter.com/darktonicgames |
Looking into this myself in the past I have found that if someone works for free on your project, and it does well, they can sue you for a portion of the profits.
Thus you should draw up a contract for each contributer and pay them an agreed amount for their input to protect yourself and your property, even if they want to contribute for free.
The six points you cited above seem to function to protect the interests of interns, but I'd humbly offer that they're for your benefit as well.
I'm no MBA or anything, but establishing a professional relationship with those prospective volunteers so eager to contribute to your company is EXTREMELY important.
1. If they're capable of producing results that will directly benefit your business, you should be eager to bring them on as direct employees; the quality of their work will be backed by the standard you set (and by the way, work done for free is always half-assed). As you mentioned, you'll obviously have more collaborative control over their work, and most importantly, their work-flow.
2. If they're NOT capable of directly filling an immediate need in your staff, but are obviously motivated and determined individuals with an indisputable commitment to pursuing a career in that role, you've got yourself a potential intern. If you have the resources to support an internship, and you find someone who's dripping with potential, you're better off training and shaping them to the standards practiced by your team. If the intern proves to be a great fit for the team, excels in their learning and obviously proves their potential by producing actual results, negotiate their full time position. If the internship goes sour, you're not obligated to hire them.
What are your thoughts?
I disagree with the thought that work done for free is always half-assed. I got my start in games as one of the first 4 members of a mod team that eventually grew to over 30. We were all extremely dedicated, and I've not seen a more passionate, hard working group of developers. I busted my ass for 3 years with no pay to help build that mod team, and our hard work and dedication eventually paid off. We went on to become SimBin Studios (http://www.simbin.com) which continues to put out high quality racing games. Myself and the core of the mod team broke off after a time and formed a new company that eventually became Slightly Mad Studios (http://www.slightlymadstudios.com/), the team behind Need for Speed: SHIFT and SHIFT 2: Unleashed (my last 2 shipped titles).
The mod community is full of guys who work their asses off putting everything they have into what they do, and given a shot at getting their work into a real game, would sacrifice much for the opportunity.
Here's Dark Tonic's situation (also as a response to Christopher Casey and Jacob Germany below) we are bootstrapping and have no budget to pay anyone. The business owners have been paying in to cover operating costs and obviously working with no pay. Obviously that's the way it should be, we are taking the risk, and will reap the rewards of our effort.
We've been approached by artists fresh out of school eager to break into the industry (which is hard enough when the economy is good). The truth of the situation is, if we were hiring for pay, we couldn't hire these guys as they don't have the skill level we'd need for them to have to jump in and hit the ground running.
We have no budget to pay, but we can offer them hands on experience on a great project, full credit in a shipped game for the stuff they work on, and they get to learn from seasoned pros. These are their benefits, and they obviously come at a price - we lose valuable development time while training them to bring their skills up to par.
So, we have this choice. Do we bring these guys on, give them a shot, spend time training them up, or do we turn them away and let them knock on some other doors? And of course, they could be applying for paying jobs at other studios the whole time, the arrangement is at will.
I pride myself on running a studio dedicated to doing good, meaning ethically and morally. Which is the more moral choice?
And just to add, once we are profitable and can afford to bring someone on paid, the chances are these guys will be ready, and will have the skills we want to pay for (we'll have seen to it!) and we'll make them an offer. That's the ideal outcome for everyone.
If you're functioning with the goal of moral goodness, you're going to attract and inspire the same kind of passion you had when you formed your mod team in the first place. I commend you for that.
If a company actually used those tests in their final products, I wonder if that's actually legal (regardless of any contract the applicant signed).
People have been hurt in many ways for these laws and rights, that we take for granted.
Being some sort of serial-intern myself, this article has piked my interest. I do find that your statement “interns will kill your game company” is harsh and that the 6 rules you've mentioned are not that hard to stand by. I personally haven't been an intern for an American company, but the rules in France (were I've done most of my past internships) are quite similar. They can be summed up this way:
“The financial benefits the company draws from its intern should balance the financial loss due to the time they've spent training the intern.”
If this scenario is enforced then it's technically a win-win situation (granted the win for the intern is more important).
In practice though how can you prove, as an intern, that you've displaced an actual employee or that the company has gained a significant advantage thanks to your work?
I know in most cases companies do aim to gain something from their interns. Hell most of the time they do. But unless you've hired (sorry taken under your wing) a selfish, amoral and career-suicidal kid, odds are they'll be grateful and won't drag you to court. Then again I see things from a European perspective, where people don't sue each other nearly as much, or as easily, as they do in the US.
The “contractor” work around you suggest seems more complicated and likely to go south than taking the time to make sure you're hiring the right intern. Yes there are lazy-incompetent-greedy people out there, but that’s just as true as when you hire a “real” employee. It's human, not intern's, nature :p
Still I believe that internships, in the games industry and elsewhere, are important and should be made easier to manage from a company perspective.