College Athletics: Three Things for Campus Counsel to Keep an Eye On

November 14, 2022
Firm Publication

Athletics on campus are currently in full swing. Football continues toward its various bowls and championships, while men’s and women’s basketball competitions have just begun, not to mention the many other fall and winter sports underway. We also continue a period of profound change in college athletics and it is now more important than ever for campus lawyers to be in close connection with athletics leadership.

Three things in particular should be on the radar of campus counsel to avoid unpleasant surprises as we head into 2023 in the ever-changing arena of college athletics.

New NIL Guidance from the NCAA

On October 26, the NCAA Division I Board of Directors issued updated guidance on its interim policy on name, image and likeness (NIL) activities.  This guidance attempts to further describe how the NCAA rules prohibiting pay-for-play and extra benefits, among others, apply when institutions may be involved in assisting their student-athletes or collectives in identifying or navigating NIL transactions. The guidance is in the form of non-exhaustive lists of permissible and impermissible activities in two categories:

  • Institutional support for student-athlete NIL activity.
  • Negotiating, revenue sharing and compensating.

College counsel should be aware of this guidance and review it with appropriate athletics leadership to assess compliance. In addition to NCAA enforcement in this area, NIL activities could also raise concerns under state law and Title IX.

Student-Athletes as Employees?

On December 15, the United States Court of Appeals for the Third Circuit will hear oral argument in Johnson v. NCAA. In this case, a group of student-athletes sued the NCAA and their institutions alleging that they should be classified as employees under the Fair Labor Standards Act (FLSA) and thereby entitled to payment of a minimum wage and overtime. Other courts considering such claims have rejected them at the motion to dismiss stage, most recently the U.S. Court of Appeals for the Seventh Circuit in Berger v. NCAA in 2016.

The Third Circuit in Johnson is considering whether the district court erred in refusing the defendants’ motion to dismiss on the basis that student-athletes are not employees as a matter of law. The Third Circuit will decide whether the plaintiffs – who compete in swimming, track and field, baseball, tennis, soccer and football – will be allowed to try and prove that they are employees under the FLSA or whether that is foreclosed to them as a matter of law. A victory by the defendants at the Third Circuit will maintain the current status quo, that is, that student-athletes are not employees under the FLSA. If the Third Circuit affirms the district court, however, the case will return to the district court for discovery and potentially a trial before there is a finding that these student-athletes should be considered employees. This will take at least a year, and likely longer, to litigate.

Even though it is a long time before the Johnson case could result in a holding that student-athletes are employees under the FLSA, campus counsel should be aware of this case both to be able to explain it to stakeholders in the wake of media attention and to begin long-range scenario planning. The student-athletes at issue in Johnson are not from revenue-producing sports, nor are they from colleges with high-profile athletic programs. Regardless of the contours of any class that may be certified in Johnson, if these student-athletes are held to be employees, it will impact all institutions participating in Division I athletics.

Upcoming State Legislative Sessions

The current era of third-party NIL payments for student-athletes was started by state legislatures in 2019-2020, with California taking the lead passing its Fair Pay to Play Act in the fall of 2019. Last legislative session, the College Athlete Race and Gender Equity Act was introduced in the California legislature, but failed to make it out of committee. This proposal would have required higher education institutions in California to share revenue earned in sports programs with the student-athletes who participate in those sports. Similar concepts are included in bills pending in the current Congress.

While one can reasonably question whether Congress will find college athletics to be a priority for action in the coming year, state legislatures have proven themselves to be nimble actors on the topic of college athletics especially if they are convinced that, without action, institutions in their state may face a competitive disadvantage in recruiting. Accordingly, if even one state takes action designed to allow or require greater benefits be provided to student-athletes, other states may follow suit.

As we look toward a January start for the legislative season for most state legislatures, campus counsel should be aware that state legislative action may happen quickly and what happens in one state may “spread” to your state in short order. If state legislatures propose legislation requiring additional benefits be provided to student-athletes, consider advocating that language be included stating that payment of such benefits will not create or constitute an employment relationship between the student-athlete and an institution.

If you should have questions about any of these topics or legal questions about athletics issues at higher education institutions more generally, please do not hesitate to contact the author.