You're hiring a content writer in Austin. You ask candidates to write a 2,000-word article about your product. One candidate spends 8 hours creating something amazing. You don't hire them, but you publish their article on your blog. Three weeks later, you get a demand letter from their attorney.

Most founders think: "It was just an interview assessment, we don't owe them anything." What they don't realize: if their work provided economic benefit to your company, you violated federal wage law and owe them minimum wage plus potential damages.

The expensive truth: Founders who ask candidates to create work the company can actually use without paying them face FLSA violations, back wages, liquidated damages, and potential lawsuits. Founders who use candidate work samples in their business without permission face IP theft claims. Founders who design biased assessments filter out qualified candidates and build homogenous teams.

Here's when you must pay candidates, who owns the IP they create, and how to design fair assessments.

Yes. But the line between legal assessment and illegal unpaid labor is narrower than most founders think.

The Fair Labor Standards Act (FLSA) requires interviews to be paid when they are "working interviews." An interview becomes a working interview when the candidate is asked to perform work that not only simulates actual work, but is being or can be used by the organization for economic benefit

The test isn't duration. It's economic benefit.

The issue arises when the performance of that test delivers an economic benefit to the employer. What it boils down to is you can't use someone to do work for the company and not pay them

Examples: Legal vs Illegal Assessments

Legal (unpaid) assessments:

✅ Generic coding challenge - "Write a function that sorts an array"

✅ Case study analysis - "How would you approach this marketing problem?" (high-level strategy, no specific implementation)

✅ Portfolio review - Candidate shows existing work samples from previous jobs

✅ Simulation - "Walk us through how you'd handle this customer complaint" (talking through approach, not creating deliverable)

Illegal (must pay) assessments:

❌ Actual work product - "Write content for our blog that we'll publish"

❌ Real customer project - "Design a logo we can use for our rebrand"

❌ Usable code - "Build a feature for our actual product"

❌ Business consulting - "Create a detailed go-to-market plan for our Q2 launch with budget, timeline, and channel strategy"

Example - 10-person startup, San Francisco, California:

Legal approach: "Here's a sample product similar to ours. Write a 300-word description demonstrating your writing style. This is purely for assessment, not publication."

Illegal approach: "Write a 1,500-word guide to our actual product that we can publish on our blog. We'll credit you if we use it."

The second violates FLSA even if you "credit" them. A Nashville-based dental practice paid $50,000 in back wages and liquidated damages after requiring candidates to undergo a "working interview" without pay

When candidates perform duties that generate value for the practice, compensation becomes legally required. If regular employees would be paid for performing the same tasks, interview candidates must receive compensation too

Critical factors:

You are only required to pay minimum wage for the state or federal government, whichever is higher

State minimum wages (2026):

Example - 15-person fintech startup, New York:

You ask a candidate to create a financial model for your business. They spend 6 hours on it. You must pay them:

You cannot say "they volunteered" or "they agreed to do it for free." Even explicit consent to work without pay doesn't legally absolve employers from wage obligations when productive work occurs

There's no magic duration threshold. The economic benefit test applies regardless of time.

A 30-minute assessment creating usable work requires payment. A 10-hour assessment demonstrating skills (that you can't use) does not.

Best practices:

Example - 8-person SaaS startup, Denver, Colorado:

Low risk (unpaid): "Complete this 45-minute coding challenge solving algorithmic problems. We'll never use this code in our product."

High risk (must pay): "Spend 4 hours building a dashboard feature we need. If it's good, we'll implement it."

Duration + usability = payment required

Then you must pay them. Period.

If a prospective chef prepares a customer's meal, he or she is providing a free service to the company. California considers all time compensable when a company gains a benefit from a candidate's "volunteering"

The "might use it" scenarios:

❌ "Write sample social media posts for our actual campaign"

❌ "Design concepts for our upcoming product launch"

❌ "Create a financial analysis of our competitor landscape"

❌ "Draft email sequences we could implement"

All of these provide economic benefit because you could implement them. Payment required.

Example - 12-person e-commerce startup, Miami, Florida:

Marketing candidate creates email campaign during interview. You implement it after hiring someone else. Candidate finds out, files wage claim.

You owe:

The candidate owns it. Always. Unless they become your employee and sign an IP assignment agreement.

When you're working at a company, anything you created within the term of your employment belongs to them. However, when you're in the interview process, and thus not yet part of their team, anything you create for them is still yours

Candidates automatically own copyright to:

Example - 20-person AI startup, San Francisco, California:

Candidate writes code during take-home assessment. You don't hire them. Six months later, you use their approach in your product. They discover it and sue for copyright infringement.

You're liable for:

Not unless they agree in writing and you pay them.

Best practice: If you need to own interview work, have candidates sign agreement stating:

Most candidates will refuse this. That's the point; it forces you to design assessments that don't require owning their work.

Best for: Engineering, design, data analysis, writing

Structure:

Example: "Here's a dataset of fake customer information. In 2 hours, analyze it and present findings. We won't use this analysis for our business."

Best for: Strategy, product management, operations, sales

Structure:

Example: "Here's a fictional SaaS company facing churn issues. How would you diagnose the problem and build a retention strategy?"

Best for: Senior roles requiring both strategic and tactical skills

Structure:

Fair assessments are essential for building diverse teams and avoiding discrimination claims.

Time-based bias: Demanding extensive take-home projects disadvantages:

Solution: Keep assessments under 2 hours, offer flexibility on timing, or conduct during interview time

Cultural bias: A fair and unbiased assessment uses contexts that are equally familiar to all. A test question on quantitative skills that asks students to analyze football statistics might not be fair to women, and using scenarios involving farming may be biased against students from urban areas

Solution: Use generic scenarios accessible to all backgrounds

Access bias: Requiring specific software, high-speed internet, or equipment disadvantages candidates without resources

Solution: Provide all necessary tools or conduct assessments during in-person/video interviews

✅ Standardize across candidates - Same assessment, same time limit, same evaluation rubric

✅ Job-relevant only - Test skills actually needed for role

✅ Multiple evaluation methods - Don't rely solely on one type of assessment

✅ Blind review when possible - Remove identifying information before evaluating

✅ Clear success criteria - Define what "good" looks like before reviewing submissions

Example - 25-person healthtech startup, Austin, Texas:

Biased approach: "Complete this 10-hour project over the weekend building a patient portal feature using React. Submit by Monday morning."

Problems:

Fair approach: "During your 2-hour in-person interview, we'll provide a laptop and ask you to pair-program a small feature. We're evaluating problem-solving approach, not specific framework knowledge."

No. That's IP theft.

The company asked job applicants to write a sample of code to re-design a certain process or handle an application. Your work samples may be given to the victorious candidate who then steals your viable creative ideas

What you cannot do:

❌ Implement their solution in your product

❌ Share their work with the hired candidate as a starting point

❌ Incorporate their ideas without attribution and compensation

❌ Publish their content on your blog/website

❌ Use their designs in your marketing materials

What you can do:

✅ Reference their general approach (not specific implementation)

✅ Learn from their problem-solving methodology

✅ Use insights to improve your own thinking

If you want to use their work: Hire them as a contractor, pay them, and have them assign IP to you.

Work samples are powerful hiring tools when done legally and ethically.

Key rules:

On payment:

On IP ownership:

On assessment design:

Three actions this week:

The goal isn't to eliminate work samples. It's to design assessments that evaluate skills without exploiting candidates or violating wage law.

Fair assessments help you hire better while staying legal.

This content is provided for informational purposes only and does not constitute legal advice; for guidance on your specific situation, please consult with an employment attorney licensed in your state.