Read Husch Blackwell’s 2024 NCAA Compliance Report: College Athletics in Transition.
In last year’s NCAA Compliance Report, we discussed House v. National Collegiate Athletic Association—the third case in a trilogy filed by current and former student-athletes who claim the NCAA, as well as the Power 5 conferences, violated antitrust law by prohibiting athletes from earning compensation based on their Name, Image and Likeness (NIL) from third parties, and also that football and basketball players should have the ability to share in telecast group licensing revenue.
Trial is set for January 2025, but the athletes picked up two huge wins this past fall. In late September 2023, U.S. District Judge Claudia Wilken, who presided over O’Bannon and Alston, certified an injunctive relief class that includes student-athletes who are competing, have competed or will compete from June 15, 2020, to the judgment of the case. Then, in November 2023, Judge Wilken granted class-action status in the damages portion, which could result in more than 14,000 current and former student-athletes being eligible to claim damages.
The House class is seeking backpay for lost NIL broadcast revenue, lost NIL video game revenue, and lost NIL revenue since June 15, 2016, but for the NCAA’s prior NIL rules that were lifted in 2021. Judge Wilken is also presiding over another similar class action antitrust suit, Hubbard v. NCAA, the plaintiffs in which are seeking backpay for lost Alston education-related benefits. A loss for the NCAA in House, and potentially Hubbard, could result in billions of dollars in damages. For this reason, a review of how the NCAA managed another antitrust claim in January 2008 (White v. NCAA) is relevant.
In White v. NCAA, the precursor to O’Bannon and Alston, plaintiffs challenged the NCAA’s amateurism rules and alleged the NCAA and its member schools were parties to a horizontal agreement that denied the plaintiffs of their legitimate share of the financial benefits obtained through the business of “big-time college sports.”
Thomas Baker, a sports law professor in the Sport Management Program at the University of Georgia penned an article for Forbes, writing:
The plaintiffs in White, however, posed a more serious threat than prior cases because they were not requesting the court to ignore the dicta in Board of Regents by holding that the NCAA’s concept of amateurism violated antitrust. Instead, the plaintiffs in White merely wanted to extend existing compensation restrictions to account for educational and economic realities so as to include the full cost of attending a university or college. The plaintiffs’ request in White was so compelling that it would eventually become the relief granted to the plaintiffs in O’Bannon v. NCAA. In O’Bannon, the Ninth Circuit found that expanding athlete compensation to the full cost-of-attendance was a less-restrictive approach to preserving amateurism.
The key difference between White and House is not only the money at stake, but also that in White the “NCAA still enjoyed significant judicial deference for its amateurism policy, with strong legal precedent supporting a presumption of validity for NCAA amateurism rules in the Third, Fifth, Sixth, and Seventh Circuits,” Baker wrote. Now, post-Alston, Board of Regents dicta is no longer applicable and there is little to no deference to any concept of NCAA amateurism. It is equally true that the Justices went out of their way in Alston to indicate that their decision was not intended to address “pay for play” or athlete employment, which would fundamentally alter the pre-professional collegiate sports model in the United States.
Regardless, as with White, it is unlikely that the NCAA or college sports governance at the Division I level will be able to move forward to enact meaningful legislation or structural reforms until this case is settled. If House and Hubbard are not settled and plaintiffs prevail, it could force the Supreme Court to decide whether colleges and universities should be required to share revenue. In addition, there are a number of other lawsuits, (e.g., Bewley v. NCAA, Carter v. NCAA, and Fontenot v. NCAA), seeking more general judgments to permit “pay for play” and eliminate “amateurism” altogether. While we know at least one Justice, Justice Kavanaugh, believes any limitation to compensation for college athletes likely violates antitrust law, it is unclear how the remaining eight Justices would rule. From a public policy standpoint, it is clear that the Supreme Court will likely be the authority to rule on issues that fundamentally alter collegiate sports at all levels in the United States.
Read the 2024 NCAA Compliance Report: College Athletics in Transition.
Johnson et al. vs. NCAA
Since our report last year, the Third Circuit has yet to rule in Johnson v. NCAA, where student-athletes, beyond those who compete in the Power 5 or in traditionally revenue-generating sports, have requested recognition as employees entitled to protections under the Fair Labor Standards Act (FLSA), such as minimum wages and overtime. A win for the student-athletes would create a circuit split. Prior to Alston, the Seventh and Ninth circuits held as a matter of law that FLSA did not apply to college athletes. Such a split would almost certainly necessitate a review by the Supreme Court.
The initial public narrative surrounding student-athlete employment was born out of the opinion that “student-athletes should be entitled to compensation for making their schools money.” However, it is critical to note that the Johnson lower court’s ruling focused on the “control” of the alleged employer and the relationship between athletics and the students’ educational program. Notably, while control is certainly a relevant factor for traditional employment matters, the fundamental nature of varsity sport at all levels, including high school, requires some level of control by the coach, school, and governing athletics association. However, the manner in which this could affect youth and preprofessional sports at all levels was not a consideration for the lower court, nor was the lack of precedent from any federal court or government agency regulating employment. A final decision on this question will not be limited to revenue-generating sports, nor will it be limited to private colleges and universities, unlike the NLRB cases described below.
National Labor Relations Board
Dartmouth College Men’s Basketball
Outside of federal court, the NCAA is also facing two substantial complaints before the National Labor Relations Board (NLRB). On February 5, 2024, NLRB Regional Director Laura Sacks determined that Dartmouth College men’s basketball student-athletes are employees under the National Labor Relations Act (NLRA) and directed an election be held for the men’s basketball student-athletes to decide whether to unionize. The Regional Director’s decision was based on the rationale that (1) student-athletes perform “work” that benefits Dartmouth; (2) Dartmouth has the right to control the “work” performed by the men’s basketball student-athletes; and (3) the men’s basketball student-athletes perform “work” in exchange for compensation. Prior to the decision, many practitioners believed that because the Ivy League does not offer athletic scholarships, there would be no compensation argument. However, the Regional Director determined compensation included items such as academic support, counseling, and nutrition services. It was also noted that athletes receive preferential admission and athletics apparel, including shoes, that the Regional Director valued as worth thousands of dollars.
On March 5, 2024, the Dartmouth men’s basketball student-athletes voted 13-2 to unionize. However, Dartmouth has appealed the decision to the full Board. If Dartmouth is unsuccessful, the men’s basketball student-athletes, as members of Service Employees International Union Local 560, will attempt to negotiate a collective bargaining agreement with the University that would cover “working conditions.”
USC, Pac-12, and NCAA
Similarly, albeit 3,000 miles away in California, the National College Players Association (NCPA), issued a complaint alleging that University of Southern California (USC) football and men’s and women’s basketball student-athletes are joint employees of USC, the Pac-12, and the NCAA and have been subjected to unfair labor practices. The USC case is the first to consider whether an athletics conference and NCAA are joint employers. Whereas the NLRA only applies to private schools, if the Pac-12 and NCAA are found to be joint employers, it opens the possibility of union representation of athletes from both private and public NCAA member schools. This concept of joint employer was first explored in a 2021 Memo published by NLRB General Counsel Jennifer Abruzzo who suggested that certain student-athletes in the sports of men’s and women’s basketball and football were employees under the Fair Labor Standards Act. At the heart of the complainants’ arguments are the following factors, similar to what was argued in a 2015 NLRB case involving Northwestern football:
- Athletes play football and basketball (perform a service) for their university, conference, and the NCAA, thereby generating tens of millions of dollars in profit and positive impact on the university’s reputation;
- Athletes receive significant compensation, including scholarships and stipends to cover additional expenses;
- The NCAA controls the terms and conditions of the athletes’ employment including practice and competition hours, scholarship eligibility, academic eligibility and limits some forms of compensation; and
- The university controls the manner and means of the athletes’ work on the field and other facets of their lives.
General Counsel Abruzzo has even taken exception to the use of the term “student-athlete,” now part of the lexicon in sports sponsored by colleges and universities. Following the USC complaint, General Counsel Abruzzo stated that misclassifying college athletes as “student-athletes” instead of employees “deprives these players of their statutory right to organize and to join together to improve their working/playing conditions if they wish to do so. Our aim is to ensure that these players can fully and freely exercise their rights.”
Setting aside what seems to be some level of absurdity utilizing a 1930’s era labor law, which was designed to address conditions of laborers in the mining industry and specifically excluded some industries like the railways and airlines, to reform the collegiate sports model, this “employment debate” is based on a belief that there is an economic fairness issue because of the money derived from media deals in the sports of football and men’s basketball. The belief is underscored, not only by the fact that the complaint involves only three sports, but also by the reliance on the NCAA and its conferences earning millions of dollars in profit as a rationale for employment categorization. Never mind that the money from Division I football and men’s basketball is used to fund all other sports, including those in Division II and Division III, as well as the pre-professional league and Olympic training models; or that college athletes generally have a competition window of approximately four to five years. The economic fairness concerns disregard the institutional brand’s role in generating value to support broad-based opportunities, the limited and transitory nature of college athletes, and the educational value of sport within the larger context of higher education. Pending employment status decisions could also lead to athletes who perfect the exact same “job” for the same “employer” being classified differently (e.g., softball athletes and men’s basketball athletes).
Read the 2024 NCAA Compliance Report: College Athletics in Transition.