United States: Hacking At Employment Risks In Hackathons: Practice Insights

Introduction

Employers of technology innovators should beware the employment traps and risks associated with think tank operations and retreats, such as hackathons. Hackathons are company-sponsored competitions, where either teams or individual software developers (and now increasingly other types of professionals) (here) are given a timed task to complete, usually over the course of a weekend, on the employer's premises.  Over the last five years, these events have exploded in popularity, generating products such as GroupMe or the beloved Facebook timeline.

Types of Hackathons

Two types of hackathons, in particular, may trigger employment law risks: 1) internal hackathons, focused on innovation by employees already employed by the company; and 2) external hackathons, where the purpose is to recruit elite programmers or other professionals from a highly competitive talent pool. In hosting these hackathons, questions may arise as to whether the event is compensable under wage and hour law, who owns the intellectual property developed during the event, and whether hackathons themselves may be deemed to be a pre-employment test.

Best Practices for Employers

To stay ahead of the potential hackathon risks, employers hosting hackathons are well advised to:

  • For internal hackathons, to the extent practicable, limit participation to employees exempt from overtime under the FLSA and applicable state laws.
  • If non-exempt employees are invited to participate in an internal hackathon, consider compensating such employees for their time spent participating, including overtime where applicable. Build in break time as required by law.
  • Companies that anticipate routinely conducting hackathons should consider including language in their employee handbook to make clear that participation in hackathons is entirely "voluntary" and that employees should not be under the impression that "promotion or advancement is dependent upon participation in the contest."
  • Companies hosting external recruitment hackathons should avoid having potential applicants work on actual company problems or software, or be prepared to pay the recruits as employees for such work. Rather, to stay focused on the purpose of a recruitment event, companies should pose hypothetical or theoretical problems in the field for the recruits to tackle.
  • Companies hosting external recruitment hackathons must consider whether the hackathon is for the recruit's benefit or the company's benefit; if the latter, the company may be obligated to compensate recruits for their participation.
  • Consider having participants in external recruitment hackathons sign terms and conditions, for instance, acknowledging the purpose of the hackathon and that participation in the hackathon does not guarantee them a position with the company and that they will not be paid since the exercise is to assess their technical skills and is not work being performed for the employer's benefit. Such terms and conditions could also designate ownership of the product developed through the hackathon.
  • Because hackathons are a relatively new tool for development and innovation, how they will ultimately be viewed and analyzed by the Department of Labor and the courts is an open question. Companies should proceed with the utmost caution in this arena and consult with their employment counsel when planning or running a hackathon to address these and any other issues that may be anticipated.
  • For more information on Hackathons, please see our article "The Human Resource Guide to Hackathons" appearing in the January/February 2016 edition of HR Advisor: Legal & Practical Guidance, Thomson Reuters. You may also contact the authors or your Seyfarth attorney.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Samuel Sverdlov
 
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