The year 2021 marked a watershed in the legal relationship between college athletes, their institutions, and the NCAA.
On June 21, the United States Supreme Court unanimously struck down NCAA rules restricting the amount of “education-related benefits” schools can provide to athletes.[1] A week later, the NCAA suspended its rules preventing athletes from profiting from their name, image, and likeness.[2] In September, the top attorney at the National Labor Relations Board issued a memo opining that certain college athletes are “employees” under the National Labor Relations Act, which could potentially give them the right to unionize and speak out about their “working” conditions.[3] Meanwhile, class action lawsuits asserting that collegiate athletes should share in television broadcast revenue and be paid a minimum wage are making their way through the courts.[4]
While most of the literature has focused on the normative question whether athletes should be paid for their services, this article explains these developments and identifies the practical issues they create for university attorneys and compliance officers.
The Game Changer: NCAA v. Alston
In NCAA v. Alston, the U.S. Supreme Court unanimously struck down decades-old NCAA rules restricting the education-related benefits schools can provide to athletes.
Before the decision, NCAA rules prohibited schools from providing athletes with financial aid beyond the “cost of attendance,” which generally included only tuition and fees, room and board, books, and certain other expenses related to attendance for the athlete’s period of eligibility.[5] Several athletes brought class actions against the NCAA and its member conferences, arguing that restricting education-related benefits to “cost of attendance” violated the Sherman Act.
The Supreme Court ultimately agreed. In a unanimous opinion, it upheld a lower court injunction preventing the NCAA from enforcing these restrictions. The Court determined that: (1) the NCAA enjoys monopoly power in the athlete labor market; (2) NCAA member schools “compete fiercely for student athletes” but remain subject to the NCAA’s limits on the compensation they can offer those athletes; (3) the NCAA’s limits actually decrease athlete compensation compared to a competitive market; and (4) athletes have no meaningful ability to negotiate compensation with the NCAA. Although the NCAA made several arguments for why it should be exempt from antitrust law, the Court rejected them all.
Importantly, the Court did not review the NCAA rules limiting compensation unrelated to education, i.e., “pay for play.” Nevertheless, the Court’s refusal to recognize the NCAA’s claimed immunity from federal antitrust law removed the primary legal argument used to support those rules. Justice Brett Kavanaugh put it bluntly in his concurrence, stating: “The NCAA is not above the law,” and “there are serious questions whether the NCAA’s remaining compensation rules can pass muster” under antitrust laws. Justice Kavanaugh went on to highlight that the NCAA’s business model would be “flatly illegal in almost any other industry in America”—noting that refusing to pay athletes simply because the defining characteristic of collegiate sports is that the athletes are unpaid—is unpersuasive.
The immediate, practical impact of Alston is that schools are no longer restricted in the amount of education-related benefits that they can offer to athletes playing Division I men’s and women’s basketball and Football Bowl Subdivision football.[6] Whereas schools previously could give these athletes only an amount equal to the “cost of attendance,” they can now offer to reimburse other education-related expenses, including computers, science equipment, musical instruments, tutoring, expenses related to studying abroad, and other tangible items related to the pursuit of academic studies. Schools can also offer educational aid beyond an athlete’s period of eligibility—including post-eligibility scholarships and paid post-eligibility internships.[7]
If a school decides to give education-related aid beyond the “cost of attendance,” however, it must do so in compliance with other potentially applicable laws and rules—most notably, Title IX, which prohibits discrimination on the basis of sex in educational institutions that receive federal funding.[8] If schools choose to provide additional education-related benefits as permitted by Alston, they will have to take that aid into account when determining Title IX compliance.
Moreover, although the Supreme Court’s decision in Alston prohibits the NCAA from restricting education-related benefits, the lower court’s decision allowed conferences to limit those benefits. Although large conferences whose members compete for the top high-school football and basketball recruits likely will not take such action (the SEC and Big XII have already stated that they will not), [9] other smaller conferences may decide to impose restrictions to ensure a level playing field for financial haves and have-nots. Schools should be aware of that possibility and communicate with their conferences before deciding to give additional education-related benefits.
NCAA’s Interim Policy on Name, Image and Likeness
A week after Alston, amid mounting pressure from state legislatures, the NCAA removed another obstacle to athlete compensation by adopting an interim policy suspending rules that once prevented athletes from profiting from their name, image, and likeness (“NIL”).
The policy change means athletes now can be paid to endorse products on TV, radio, or social media, and to allow companies to use their names, photos, and likenesses—for example, in video games and advertisements. Prior to the new policy, the NCAA’s bylaws on Amateurism and Athletics Eligibility prohibited athletes from accepting compensation for the use of their name or picture or for advertising, recommending or promoting the sale or use of any commercial product or service.[10]
The NCAA’s interim policy is notable for how short it is. Essentially, the policy delegate’s responsibility for crafting NIL rules to state legislatures, conferences, and individual schools. Athletes attending schools in states that have passed NIL laws (more on that below) must follow their respective state laws. In states without NIL laws, however, the NCAA’s interim policy affords schools and conferences broad discretion to develop their own rules governing NIL activities.
Notably, the NCAA’s interim policy expressly leaves the prohibitions on pay-for-play and improper recruiting inducements untouched. That means athletes cannot be paid for their athletic participation or performance (e.g., no one can pay an athlete a salary or offer an athlete $100 per touchdown catch), and they cannot be paid to attend a specific school. That said, the interim policy also allows athletes to use a professional services provider (such as a lawyer, accountant, or agent) with respect to NIL activities. Previously, use of such a provider would mean athletes lost their NCAA eligibility.
The NCAA’s interim policy took effect July 1, 2021. It will remain in effect until the United States Congress passes NIL legislation or the NCAA adopts a final policy.
State and Federal NIL Laws
The NCAA’s adoption of its interim policy was largely driven by NIL laws enacted by several state legislatures, many of which also went into effect on July 1, 2021.[11] Those laws now shape how athletes can monetize their NIL.
As of the writing of this article, 28 states have enacted laws that allow athletes to benefit from their NIL. NIL laws have been proposed in 14 other states.[12] The National College Players Association (“NCPA”), a nonprofit that advocates for student-athletes, released an official rating of each state’s NIL law based on how conducive the law is to a prospective athlete’s ability to earn NIL pay.[13]
The Texas law—SB 1385, which received a 62% rating from the NCPA—illustrates the types of issues these laws attempt to address. SB 1385 prohibits schools from adopting or enforcing a policy that prevents an athlete from earning NIL compensation “when the student is not engaged in official team activities as that term is defined by the institution,” or prevents athletes from hiring an agent for contracts or other legal matters relating to the use of NIL. In addition, an athlete cannot be disqualified from eligibility for a scholarship, grant, or similar financial assistance awarded by a school simply because the athlete earns compensation from use of the athlete’s NIL or obtains professional representation.
Like most state NIL laws, SB 1385 restrict athletes from entering into certain NIL contracts. Athletes cannot enter into:
Finally, the Texas law requires schools to provide all athletes with a financial literacy and life skills workshop at the beginning of the athlete’s first and third academic years at the institution. The workshop must be at least 5 hours in duration and include information on financial aid, debt management, time management, budgeting, and academic resources available to the athlete.
NIL legislation is still pending at the federal level. As recently as September, Representatives Anthony Gonzalez (R-Ohio, a former Ohio State wide receiver) and Emanuel Cleaver (D-Missouri) introduced a bipartisan NIL bill, which is now in committee.[14] The Student Athlete Level Playing Field Act is poised to enable athletes to secure endorsements and agency contracts (with some exceptions)[15] free from NCAA and university restrictions. The bill also establishes the Covered Athletic Organization Commission – an independent body tasked with resolving disputes between players and the schools/NCAA. Marco Rubio (R-Florida) introduced a similar bill in the Senate. Whether either bill has enough momentum to eventually pass remains to be seen.
The main impact for schools is that all schools in Divisions I, II, and III will have to formulate an NIL policy to ensure that athletes do not unwittingly violate the “pay for play” and improper recruiting inducement rules, which remain in effect. (By this point, most schools have likely already formulated such a policy.) For schools in states that have enacted NIL legislation, that policy can simply be the state law. Schools in other states, however, will have to develop their own policies, and will have to consider:
Beyond creating an NIL policy that complies with the NCAA bylaws still in effect, schools will have decide how far they are willing go to help their athletes capitalize on NIL. If schools want to attract the top recruits, having group licensing opportunities (where brands pay schools to use multiple players’ NIL rights, and a share of the revenue is paid to athletes who opt in) may become the new standard.
A Turning Tide in Federal Protections
The legal landscape continued to shift in September, as the general counsel of the NLRB, Jennifer Abruzzo, issued a memo reinstating the NLRB’s 2017 position that certain athletes at private universities are “employees” protected by the NLRA.[16]
According to Abruzzo, who is responsible for charting the NLRB’s enforcement priorities and prosecuting unfair labor practices claims, the NLRA defines “employee” broadly, and none of the enumerated exceptions include university employees, football players, or students. Moreover, she wrote, under common law, an employee includes a person “who perform[s] services for another and [is] subject to the other’s control or right of control,” and athletes perform services for and are subject to the control of the NCAA, their conferences, and their schools.
Abruzzo’s memo is unlikely to have any immediate impact on schools. A determination by the NLRB that athletes are “employees” under the NLRA means that athletes would have the statutory right to unionize and “act collectively to improve their terms and conditions of employment” without fear of retaliation. However, Abruzzo does not have the unilateral power to determine that athletes are employees protected by the NLRA. The NLRB itself (a five-member panel, of which Abruzzo is not a member) would have to make that decision in a contested case for it to become law. Although Abruzzo’s memo indicates that she would be willing to prosecute such a case, there is no guarantee that the Board would agree with her position.
Moreover, for a contested case to come before the Board, someone would first have to file an unfair labor practices claim seeking protection for athletes under the NLRA. Collegiate athletes have not attempted collective action since the Northwestern University football team’s failed attempt to unionize in 2015. Unless and until that happens again, Abruzzo’s memo will remain nothing more than an unfulfilled position statement—especially since the NLRB general counsel is appointed to a four-year term by the President. If a Republican president is elected in 2024, he or she may appoint a replacement for Abruzzo who does not agree with her view.
The one, immediate issue that Abruzzo’s memo creates for schools is her condemnation of the term “student-athlete.” Her memo states that she views any reference to college players as “student-athletes” to be a purposeful violation of Section 8(a) which subjects the violator to strict liability, reasoning that the term “student-athlete” itself is used to “deny athletes legal protection and preserve the myth that today’s student-athletes are amateurs pursuing sports as a mere hobby or avocation.” Thus, an enterprising athlete could raise a test case of Abruzzo’s position simply by taking issue with a school’s use of the term student-athlete in any school policies or promotion materials. Private universities should weigh that risk in deciding how to describe its athletes.
More Change Coming (Potentially): Johnson v. NCAA and House v. NCAA:
The assault on NCAA amateurism promises to continue in the months to come, as two other cases that seek compensation and employment protections for athletes are currently moving through the federal courts.
In Johnson, six athletes sued the NCAA and several member schools under the federal Fair Labor Standards Act (“FLSA”) and state minimum wage laws. They complain that athletes are “employees” of their schools under the FLSA who deserve to be paid minimum wage for time spent participating in athletics.
This is not the first time that athletes have sought protection under the FLSA. However, courts rejected prior challenges based on the premise that a “revered tradition of amateurism,” not employment, defined the relationship between athletes and their schools.[18]
In September, the court denied the defendants’ motions to dismiss the case, which means that Johnson has proceeded further than all other collegiate athlete FLSA cases before it. The court’s decision relied heavily on Alston. Whereas prior courts had rejected the contention that athletes are employees based on the NCAA’s history of amateurism, Alston obviously called that premise into question, and, the Johnson court determined that the athlete plaintiffs had plausibly alleged that they were employees under the FLSA. The defendants are seeking an immediate appeal of that ruling.
Johnson could have extreme practical implications for schools. The FLSA requires employers to pay certain employees a minimum wage (which is currently $7.25 per hour). It also requires employers to pay certain employees no less than one and half times their normal rate of pay for any hours over 40 worked in a single week. If the plaintiffs ultimately prevail, schools and/or the NCAA could find themselves having to pay each of their athletes a minimum wage for any time spent practicing, playing games, doing weight training or other conditioning, obtaining treatment, traveling to competition, etc. And, it is not difficult to imagine athletes at many institutions spending at least 40 hours per week on these activities, if not more, meaning that overtime compensation would also be due.
One interesting question is how, or if, the NCAA would have to split these wage burdens with its member schools. The NCAA and schools are both defendants in the litigation, and the plaintiffs are pursuing the case based on the premise that the NCAA and its schools are joint employers.
In the other case currently pending—In re College Athlete NIL Litigation—three athletes sued the NCAA and the Power 5 conferences seeking to permanently enjoin the NCAA rules prohibiting college athletes from being paid for NIL. Although the NCAA has now agreed not to enforce those rules, at least on an interim basis, the lawsuit also seeks (1) damages for athletes who could not take advantage of social media and group licensing NIL opportunities in the past, and (2) and injunction against the continued enforcement of the portions of the restrictions on pay-for-play and recruiting inducements. The plaintiffs’ allege that even these restrictions violate antitrust laws because neither “enhance[s] consumer demand for college sports.”
On June 24, 2021, the trial court denied the NCAA’s motion to dismiss on the pleadings, which means the case will move forward to discovery to see if the plaintiffs can develop evidence to support their claims.
[1] NCAA v. Alston, 141 S. Ct. 2141 (2021).
[2] NCAA.com, NCAA adopts interim name, image and likeness policy, https://www.ncaa.org/about/resources/media-center/news/ncaa-adopts-interim-name-image-and-likeness-policy (June 30, 2021).
[3] Jennifer A. Abruzzo, Office of the General Counsel, Statutory Rights of Players at Academic Institutions (Student-Athletes) Under the National Labor Relations Act, https://apps.nlrb.gov/link/document.aspx/09031d458356ec26 (Sept 29, 2021).
[4] Johnson v. NCAA, No. 2:19-cv-05230 (E.D. Pa. filed Nov. 6, 2019); In re: College Athlete NIL Litig., 4:20-cv-03919 (N.D. Cal. filed June 15, 2020).
[5] NCAA Division I Manual §§ 15.01.6, 15.02.2, 15.1, 15.2, 15.3.3.1.
[6] Although the Supreme Court’s reasoning appears to extend to all athletes, the lower court’s injunction applied only to Division I basketball and FBS football players.
[7] The lower court’s decision also allowed schools to pay athletes up to $5,980 in cash or cash equivalents as “academic awards.”
[8] 34 C.F.R. § 106.41(a), (c).
[9] No conference has acted to restrict the educational-related benefits its members can provide, and the SEC and Big XII have already announced that they do not intend to do so. See https://www.cbssports.com/college-football/news/perpetually-filled-with-angst-georgia-clashes-with-rival-florida-as-it-again-wonders-is-this-the-year/; https://apnews.com/article/college-football-us-supreme-court-sports-athlete-compensation-mens-college-basketball-918e93337e867b3f2efb2ad40ee973a7.
[10] NCAA, Division 1 Manual § 12.5.2.1.
[11] The states whose NIL laws took effect on July 1, 2021 are: Alabama, Colorado, Florida, Georgia, Illinois, Kentucky (where the governor issued an executive order), Louisiana, Mississippi, New Mexico, Ohio (where the governor issued an executive order), Oregon, Pennsylvania, and South Carolina. The laws in Arizona, Arkansas, California, Connecticut, Maryland, Michigan, Missouri, Montana, Nebraska, Nevada, New Jersey, North Carolina, Oklahoma, Tennessee, and Texas, take effect sometime between July 23, 2021 and July 1, 2026.
[12] Hawaii, Iowa, Kansas, Massachusetts, Minnesota, Missouri, New York, New Hampshire, North Carolina, Rhode Island, Vermont, Virginia, Washington, and West Virginia.
[13] National College Players Association, NCPA’s Official NIL Ratings on a Scale of 0–100%, https://symposium.us/wp-content/uploads/2021/10/NCPAs-Official-NIL-Ratings.pdf (Oct. 21, 2021).
[14] H.R. 8382, 116th Congress (2019–2020), https://www.congress.gov/bill/116thcongress/house-bill/8382.
[15] For example, boosters cannot directly or indirectly provide any funds or anything else of value to induce an athlete to enroll at a particular institution, and athletes cannot wear a competing sponsor’s apparel in a game or contest.
[16] Jennifer A. Abruzzo, Office of the General Counsel, Statutory Rights of Players at Academic Institutions (Student-Athletes) Under the National Labor Relations Act, https://apps.nlrb.gov/link/document.aspx/09031d458356ec26, (Sept 29, 2021).
[17] No. 19-cv-5230 (E.D. Pa.).
[18] See, e.g., Berger v. NCAA, 843 F.3d 285 (7th Cir. 2016).
[19] No. 4:20-cv-3919 (N.D. Cal.).
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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