I don't think this answered the OP's question. I get that you're arguing that the student is the primary beneficiary of the free labor they are giving to the c

I don't think this answered the OP's question. I get that you're arguing that the student is the primary beneficiary of the free labor they are giving to the company - but I'd be suspicious that a court would allow this interpretation. At worst this allows for negative cost labor where an employee pays/borrows money in order to provide value to an employer. To the direct question - do you provide appropriate indemnity clauses protecting employers should the legality of the arrangement be called into question?