I'm currently running a startup in California, and I'm looking to hire a few minors as paid software engineering interns. Since minors are unable to sign contracts, will I run into any issues with owning the intellectual property (software) that they end up developing?
First of all, it is not generally correct that "minors are unable to sign contracts". However, in many cases, minors can disaffirm contracts. (This is also called "voiding the contract, and such contracts are called 'voidable".) This means that, up until the minor becomes an adult, and for a limited time after that, the minor can cancel the contract and cease to be bound by it. There are some kinds of contracts to which this does not apply.
Under the traditional common law, the major exception was contracts for the purchase of "necessities" for the minor or the minor's family. The term "necessities" included food, clothing, and shelter. Contracts for "necessities" could not be disaffirmed. In addition, contracts to purchase goods that had later been sold to a third party for value, and the goods delivered to that third party could generally not be disaffirmed.
However, many US States and other jurisdictions have modified these rules by statute. California, for example, has specific laws governing contracts for minors engaged in art, film, and entertainment work and in professional sports. These laws spell out procedures that must be followed to make such contacts not subject to disaffirmance, including a court hearing and payment of a part (15%) of the earnings into a trust.
See the Findlaw page "Is It Legal to Sign a Contract With a Minor?" which states:
For most contracts, the general rule is that while it's not illegal to enter into a contract with a minor, the contract is voidable at the discretion of the minor. Voidable contracts are usually valid contracts and are binding unless the child cancels it.
On the other hand, if the minor turns 18 and doesn't cancel the contract within a reasonable period of time, the contract could become binding and enforceable.
The page goes on to mention some specific state provisions in Texas, New York, and California, none of which seem to be relevant to the situatiin described in the question.
The page "Can a Minor Enter Into a Contract?" from HG Legal Services states:
Many people who are under the age of 18 have some type of employment. Additionally, there are many children in the entertainment industry. Both California and New York have passed legislation that limits such a minor’s right to disaffirm the contract. Some laws allow courts to first approve the contract so that the infant cannot later attempt to void it. Additionally, contracting with the infant’s parent rather than directly with the infant can bind the child in some cases. Some states allow infants to work so long as they acquire a work permit.
(Note that in legal usage "infant" means the same as "minor", that is, a person not yet adult. It does not mean a baby.)
Note that if a minor disaffirms a contract, the entire contract is undone. The minor cannot pick and choose which sections to disaffirm (cancel). Goods or money received by either party under the contract must be returned, for example. When a transaction cannot lawfully be undone, then it may not be possible for the minor to void the contract.
The possibility of disaffirmance means that one cannot rely on a contract with a minor in the same way one can rely on a contract with an adult. If it is important to have a binding agreement, such as an NDA, with a minor working as an intern or employee, one would need to take steps to ensure that the contract is binding. In some cases having a custodial parent approve such a contract might be useful. The specific steps that would accomplish this in a particular jurisdiction, if it is possible at all, are something that a lawyer could advise on.
In addition to the issue of possible disaffarmance, in many jurisdictions child labor laws restrict and regulate any employment of a minor, and this will probably include a position as an intern. A work permit may be required, and the hours of work may be limited, particularly during the school term.
The question reads:
I'm looking to hire a few minors as paid software engineering interns. [emphasis added]
A paid intern is an employee. Minimum wage laws will apply, unless there is a specific exception
29 U.S. Code § 203 (part of the US Federal Fair Labor Standards Act (FLSA)) defines an "employee" in subsection (e) as "the term “employee” means any individual employed by an employer." with exceptions and different definitions for government workers, farm workers, volunteers, and certain other cases which do not seem tol apply here. Subsection (g) reads "“Employ” includes to suffer or permit to work."
The US Department of labor "Fact%Sheet%#13:%Am%I%an%Employee?" further defines "employee" and gives tests for whether a persron is an employee or an independent contractor. It states that "most workers are employees".
It gives various factors to consider in deciding whether a worker might be a contractor or an employee. These include:
- Work that is integral to an employers business is usually done by employees, not contractors.
- If a worker exercises managerial skills, and if so, if these affect the worker's chance of profit or loss, the worker is more likely a contractor
- The relative investment by the worker in facilities and equipment. If there is little, the worker is more ;likely an employee.
- Workers who must use independent business judgement are more likely to be contractors.
- Detailed control of hours of work and methods indicates that the relationship is more likely one of employment.
Employment Under Copyright Law
17 USC 102 states that:
A “work made for hire” is—
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned ...
It part (1) of this definition that is relevant here
The US Copyright office Circular 09 "Works Made for Hire" states:
To help determine who is an employee, the Supreme Court in Community for Creative Non-Violence v. Reed identified factors that make up an “employer-employee” relationship as defined by agency law. The factors fall into three broad categories.
- Control by the employer over the work. For example, the employer determines how the work is done, has the work done at the employer’s location, and provides equipment or other means to create the work.
- Control by employer over the employee. For example, the employer controls the employee’s schedule in creating the work, has the right to have the employee perform other assignments, determines the method of payment, or has the right to hire the employee’s assistants.
- 3 Status and conduct of employer. For example, the employer is in business to produce such works, provides the employee with benefits, or withholds tax from the employee’s payment.
These factors are not exhaustive. The Court left unclear which of these factors must be present to establish the employment relationship under the work-for-hire definition. Moreover, it held that supervision or control over creation of the work alone is not controlling.
However, all or most of these factors characterize a regular, salaried employment relationship, and it is clear that a work created within the scope of such employment is a work made for hire (unless the parties involved agree otherwise). Examples of works made for hire created in an employment relationship include:
- A software program created by a staff programmer within the scope of his or her duties at a software firm [Emphasis added]
The closer an employment relationship comes to regular, salaried employment, the more likely it is that a work created within the scope of that employment will be a work made for hire. But because no precise standard exists for determining whether a work is made for hire under part 1 of the definition in section 101 of the copyright law, consultation with a lawyer may be advisable.
If a work is made for hire, the employer or other person for whom the work was prepared is the author and should be named as the author on the application for copyright registration. Respond “yes” to the question on the application about whether the work is made for hire
Given all this, it seems likely that "paid interns" in the situation described in the question will be employees for purposes of copyright law, and their works in the course of employment will be works madwe for hire, with the employer being legally the author. This conclusion does not depend on an employment contract, adn an action by the intern to later void such a contract will not change the copyright status of the work.
The copyright of works (including software) produced by such interns is likely to be a work made for hire, with the employer being the author and initial copyright holder. This is true regardless of any contract, because a contract is not the key factor which makes a person an employee under US law, rather the nature of the relationship is.
It would be wise to consult a lawyer with experience in employment law and the laws governing minors in the relevant jurisdiction before entering into such an arrangement.
As David Siegel explains in another answer, the contract may be voidable, not invalid, and whether or not it is voidable will depend on a complicated constellation of state labor laws. These are very important considerations which you must seriously evaluate, probably in consultation with a lawyer.
But you asked about copyright. In general, under US law, works created by an employee as part of their official duties are considered "works made for hire" under 17 USC 201(b), and the employer is considered the legal author for the purposes of copyright. This means that copyright vests in the employer and not in the employee; it is not the case that the copyright initially vests in the employee and is somehow transferred to the employer by contract. If the employment contract is later voided, there are (at least) two possible legal interpretations:
- The minor was an employee at the time they prepared the work, so notwithstanding their later voiding of the contract, the software was legally authored by the employer, and the employer owns the copyright.
- The minor's was (retroactively) never an employee, and the software becomes a work of sole authorship under 17 USC 201(a). The copyright reverts to the minor. If more than one person worked on the software, then 17 USC 201(c) comes into play, and things get substantially messier.
I'm not aware of any case law suggesting that one of these interpretations is more likely to be correct than the other, but I have limited experience with labor and contract law, and I may be missing something obvious. If indeed this is an unsettled question of law, you probably do not want to become the test case, as it is likely to be expensive to litigate.
The bottom line: You already need the contract to be non-voidable anyway, for many important reasons unrelated to copyright. If you solve that problem, then the software will be a work for hire, and the copyright side of things will mostly take care of itself.