Minor Details: Child Labor Law and Related Legal Considerations in Esports

“And a little child shall lead them” — a biblical phrase that might loosely apply to esports and the larger video gaming industry, where youth dominates the gamer and influencer landscape and the streaming platforms where they play and work.  As the business of esports and video gaming grows, so too have the business opportunities for young gamers, including those who have not yet reached the age of 18.  Professional esports organizations are diversifying their business activities and, in doing so, they are increasingly contracting with minors for various purposes, including, for example, to develop them for professional teams in leagues like Overwatch and Call of Duty, where the minimum player age is 18, or to deploy them as brand ambassadors and influencers playing Fortnite on streaming platforms like Twitch, where the minimum user age is 13.  Indeed, a Los Angeles-based esports organization, Team 33, recently announced that it had contracted with an 8-year-old Fortnite player.  Next thing you know, teams will be scouting the toddler and preschool ranks for prospective gaming stars.

All kidding aside, Team 33’s move has brought renewed attention to a longstanding and perpetual question in the video gaming industry:  How can esports organizations legally hire or contract with gamers who are minors (i.e., less than 18 years old)?   There is no easy, short answer (see below), but the question does seem to be top of mind for many in the industry.  In the recent 2020 Esports Survey Report (published by Foley & Lardner LLP and The Esports Observer), 68% of industry respondents believed that management of gamers “under the age of 18 and corresponding child labor law complications” were important legal issues facing the industry.  In fact, these issues surprisingly drew more concern than a variety of other labor and employment law matters, including unlawful discrimination and harassment, which (as reported here) have historically plagued the industry and its predominantly online environment.

The concerns are rightly placed.  Businesses can be subject to significant civil and criminal penalties for violating federal or state child labor laws, which serve to protect children from economic exploitation and ensure their education (see, e.g., the federal Fair Labor Standards Act, the New York Labor Law, and the California Labor Code).   Recognizing and navigating the relevant laws and regulations is critical for esports organizations endeavoring to contract with a gamer who is a minor.  Key threshold considerations involve the legal capacity of a minor to enter into a contract and whether the minor’s contracted activity is employment or something else entirely.

Capacity to Contract

 As a general rule, minors do not have the legal capacity to contract, which in turn allows them to disaffirm signed contracts at any time while still a minor or upon reaching majority age.  Having a parent or guardian co-sign, guarantee, or approve the agreement has no legal effect, as the minor can still disaffirm.  Apparently, the entertainment industry chafed at having such little contractual control over child performers. Consequently, various states, including California and New York, enacted statutes (directed mainly at the arts, entertainment, and sports) to allow for judicial approval or confirmation of contracts with a minor, which effectively makes them binding on and enforceable against the minor (i.e., as if entered into by an adult).

It is not entirely clear that gamers in every contractual circumstance would qualify as performers, entertainers, or players in sports, as prescribed by these statutes.  In addition, there may be other barriers to judicial approval, including judicial receptiveness to such applications and the attendant costs of the required court proceeding.  In any case, esports organizations should be mindful of a minor’s right to disaffirm a written contract, and the potential option to remove that right via a judicial proceeding under one of these statutes. 

Employee or Contractor?

Standard concerns over worker classification (i.e., employee or independent contractor) do not abate when an esports organization contracts for services with a minor.  As we have seen in certain high-profile cases (Tfue v. FaZe Clan), the industry generally is not immune to misclassification concerns. Indeed, improperly classifying a minor as an independent contractor can have dire consequences for an organization that believes it can ignore applicable child labor laws that restrict how and when a minor can be employed and work.  Given these restrictions, there may be perverse incentives for organizations to push the envelope in order to classify minors as independent contractors.  However, all the standard misclassification rules apply, and organizations must carefully consider what precisely they are paying for when contracting with a minor.  Is it for services like playing games online, entering competitions, or streaming to followers, and, if so, how much control does the organization retain regarding when and how such services are performed?  It matters little how the parties define the relationship on paper; instead, the focus should be on how the relationship functions in practice and whether the gamer has the required independence under the applicable laws and tests.  This is especially critical in a jurisdiction like California, which is home to many esports organizations and has a notoriously restrictive  misclassification law that could make it much harder to prove a gamer’s independent contractor status.  

Even against this backdrop, it is easy to imagine a relationship where the minor is not required to provide any services or to do anything, but instead serves only as an endorser, with the esports organization paying the minor simply for the association.  This appears to be the position of Team 33 in explaining its contractual relationship with the 8-year-old gamer.  Of course, even in a relationship as loosely structured as this, the devil will be in the details.  Required appearances or activities, or exclusive relationship terms, could nevertheless tip the scales away from independent contractor status.

Child Labor Laws

Finally, when it comes to compliance with child labor laws, the distinction between independent contractor and employee may have little meaning.  In states like California and New York, child labor laws have been specifically tailored to address child performers, and these specific statutes are written in terms that would apply to either employment or the provision of personal services by an independent contractor.  Thus, even if an esports organization could reasonably establish an independent contractor relationship with a minor, it may still need to adhere to the various statutory restrictions and requirements, including the procurement of permits and how and when the minor can be engaged (see above links to information concerning New York and California child labor laws).

Schlussfolgerung

In recent years, the growth and maturity of esports and the larger video gaming industry have been marked by spasms of employment-related legal concerns, including around unlawful sex (and other forms of) discrimination, as well as the sophistication (or lack thereof) of the contracts by which gaming talent is engaged.  Esports organizations are increasingly looking to build their brands and future teams through contractual relationships with minors. And while the proverbial little child may lead them in this regard, it nevertheless begs the question, to what end?  The establishment of business arrangements with minors is fraught with legal peril and, if these relationships are not proactively created and managed with the potentially applicable laws in mind, an organization and the industry in general could be sitting on a powder keg.