Challenges to the rules of the National Collegiate Athletics Association (NCAA) have increased in recent years. The U.S. Supreme Court struck the NCAA’s rule against paying intercollegiate athletes for use of their name, image and likeness (NIL) in 2021.[1] The General Counsel of the National Labor Relations Board, a federal agency that regulates labor relations in the private sector, stated that intercollegiate athletes can be classified as employees and allowed them to attempt to unionize[2]—as the recent case involving Dartmouth College demonstrated.[3] The NCAA and several Division I athletic conferences recently settled a $2.8 billion lawsuit brought by former intercollegiate athletes who demanded payment for NIL usage that accrued prior to the Supreme Court’s 2021 ruling.[4] And on July 11, 2024, the U.S. Court of Appeals for the Third Circuit ruled that six intercollegiate athletes could maintain a lawsuit against the NCAA and the institutions they attended that claims that they are employees under the federal Fair Labor Standards Act (FLSA) and thus deserve pay for the time spent in athletics activities.[5]

The students, who had participated in one or more Division I sports (including football, baseball, swimming and diving, tennis, and soccer), claimed that the amount of control of their activities levied by their coaches, and the restrictions on how they spent their time while enrolled, meant that they met the requirements of the wage and hour law for employment protection. Thus, they claimed, they deserved at least minimum wage for the hours that they spent in these mandatory activities. The defendants disagreed, arguing that the students were amateur athletes, not professionals, and did not qualify for the protections of the FLSA. The defendants moved to have the case dismissed by the U.S. District Court for the Eastern District of Pennsylvania, but that court denied the motion, ruling that Division I intercollegiate athletes were analogous to unpaid interns.[6] That court analyzed the students’ claims under a test used by the U.S. Department of Labor for determining whether interns were entitled to pay under the  FLSA.[7] The court also reviewed a 2016 case, Glatt v. Fox Searchlight Pictures, Inc.,[8] that analyzed whether college students serving as interns should be paid. The trial court in Johnson found that the allegations of the students with respect to the time they spent, their lack of control over how they spent their time, and several other of the factors involving interns, could meet the test for employee status, and that dismissal was inappropriate. The NCAA and college defendants asked the trial court to certify its ruling for an interlocutory appeal, rather than waiting until the trial court had ruled on the merits, and that court did so.[9] The appellate court agreed to hear the appeal.

On July 11, 2024, the U.S. Court of Appeals ruled 3-0 that the students could proceed with their case.[10] The appellate court rejected the “amateurism” defense, and agreed with the trial court’s denial of the motion to dismiss, although for other reasons, finding that the students might be able to provide sufficient evidence to meet the FLSA requirements for employee status. The appellate court found that the trial court’s use of the test for interns was erroneous, but affirmed the trial court’s ruling on different grounds. The appellate court said that the Glatt test did not control this set of facts because interns are learning skills that relate to their academic training, while intercollegiate athletics did not relate to the students’ academic curriculum. The court noted that time spent in required athletics activities actually was detrimental to the students’ academic performance because the time and scheduling requirements interfered with their choice of courses and, in some cases, their choice of majors.

Referring to earlier cases involving the determination of whether a particular individual or set of individuals were “employees” entitled to FLSA protections, the appellate court created a four-part test:

1. Whether the individual(s) perform services for another party;

2. Whether the services are necessarily and primarily for the other party’s benefit;

3. Whether the individual(s) are under that party’s control or right of control; and

4. Whether the services are performed in return for express or implied compensation or in-kind benefits.[11]

The court added: “The touchstone remains whether the cumulative circumstances of the relationship between the athlete and the college or NCAA reveal an economic reality that is that of an employee-employer.”[12]

It is likely that this litigation will be protracted because the stakes are so high and the arguments are so novel. A ruling that Division I intercollegiate athletes are employees could potentially entitle them to additional protections under other employment laws, such as worker’s compensation, employment discrimination laws, collective bargaining laws, or Social Security requirements, to name a few. For colleges and universities, determining which laws may apply, and whether a particular issue involves the athlete’s status as a student or as an employee, could be complicated. The application of laws affecting intercollegiate athletics has changed dramatically in just a few years, and it is quite likely that more change will come. 

For any questions on how this information may affect your institution, please contact Barbara A. Lee, any attorney in Bond’s higher education practice or the Bond attorney with whom you regularly work.

[1] Alston v. NCAA, 141 S. Ct. 2141 (2021).

[2] NLRB, Statutory Rights of Players at Academic Institutions (Student-Athletes) under the National Labor Relations Act, General Counsel Memorandum 21-08, September 29, 2021.

[3] On February 5, 2024, a NLRB Regional Director ruled that the players on Dartmouth College’s varsity basketball team were employees under the NLRA’s definition, and ordered the College to bargain with the union representing these players. Trustees of Dartmouth College, Case No. 01-RC-325633 (February 5, 2024). The players voted to be represented by a union later that spring.

[4] Kristi Dosh, “10 Things to Know about the NCAA’s House Settlement,” Forbes, May 24, 2024, available at https://www.forbes.com/sites/kristidosh/2024/05/24/10-things-to-know-about-the-ncaas-house-settlement/

[5] Johnson v. NCAA, 2024 U.S. App. LEXIS 16953 (3d Cir. July 11, 2024).

[6] Johnson v. NCAA, 556 F. Supp. 3d 491 (E.D. Pa. 2021).

[7] U.S. Department of Labor. Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act, January 2018. https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships.

[8] 811 F.3d 528 (2d Cir. 2016).

[9] 2021 U.S. Dist. LEXIS 246324 (December 28, 2021). An interlocutory appeal is an appeal of a ruling that is not final; its purpose is to resolve an unresolved matter of law prior to a ruling on the merits of a case.

[10] Although all three judges supported the outcome of the case, one judge, in a concurring opinion, stated that he disagreed with the reasoning of the case, but not its outcome.

[11] Johnson v. NCAA, 2024 U.S. App. LEXIS 26953 at *30.

[12]  Id.

Only about .007% of athletes who complete in NCAA sports are transgender. However, this group has attracted an outsized amount of social, media, regulatory and now litigant, attention. Under National Collegiate Athletic Association (NCAA) rules dating to January 2022, transgender female athletes may compete in women’s events if the national governing body for the specific sport allows transgender athletes to compete.

Read More >> Past and Present College Athletes Sue NCAA Over Transgender Participation Rules

As part of the NCAA’s efforts to promote diversity and gender equity in intercollegiate athletics, NCAA Bylaw 20.2.4.3 requires that all Division I athletic departments perform a diversity, equity and inclusion (DEI) assessment and file an attestation of completion of the review with the NCAA by November 3, 2023.   

Read More >> November 3, 2023 Deadline for NCAA Division I DEI Self-Assessment and Attestation

The General Counsel for the National Labor Relations Board (NLRB or Board), who has authority for setting prosecutorial policy for the NLRB, issued a General Counsel Memorandum (GC Memo) today, reversing the prior Board General Counsel’s position and asserting the employee status of certain student athletes at private educational institutions. Board General Counsel Jennifer Abruzzo conveyed her enforcement position in a memorandum to the Board’s Regional Directors. Because non-unionized employees have rights under the federal labor law, the immediate impact will be that the NLRB’s enforcement arm will be processing complaints related to allegations of adverse treatment of certain student athletes for all variety of internal complaints against private institutions.

Read More >> NLRB General Counsel Abruzzo Issues Memo on Employee Status of Players at Academic Institutions

One month has passed since the NCAA Board of Directors adopted emergency legislation permitting student-athletes to monetize their name, image and likeness (NIL) without violating the long-standing amateurism requirements of NCAA Bylaw 12. Specifically, the NCAA: (1) acknowledged that a state law/executive order regarding NIL supersedes NCAA rules; and (2) provided blanket NIL coverage to student-athletes located in states that do not have a state law/executive order in place. This major change in NCAA legislation is charting new pathways for how student-athletes must be monitored by their institutions to avoid ineligibility. The creation of an internal institutional policy is one way to help organize and manage this new process.

Read More >> NCAA Student-Athlete Name, Image and Likeness

On June 21, 2021, in an opinion providing a very interesting historical overview of collegiate athletics going back to the 19th century and the founding of what is now the National Collegiate Athletic Association (NCAA), the U.S. Supreme Court released its decision in the NCAA v. Alston case. The Supreme Court affirmed the lower court’s injunction of NCAA rules that restrict education-related benefits to Division I basketball and bowl subdivision football student-athletes. 

Read More >> NCAA v. Alston Case: Supreme Court Strikes Down NCAA Rules Restricting Benefits to Student-Athletes

On August 8, the NCAA Division I Board of Directors adopted Proposals 2018-16_and_2018-17.  These proposals, which arose out of the work of the Commission on College Basketball (and associated working groups), will necessitate new content in employment agreements with certain institutional personnel executed, extended or renewed on or after August 8, 2018.

Read More >> New NCAA Legislation Necessitates Changes to Institutional Employment Agreements

The Supreme Court of the United States has denied both the NCAA’s and plaintiffs’ petitions for certiorari in the O’Bannon case.  The parties had petitioned for review of the United States Court of Appeals for the Ninth Circuit’s decision issued in September 2015. In that decision, the Ninth Circuit sided with the NCAA by vacating that portion of the District Court’s decision that would have required the NCAA to allow member institutions to pay limited deferred compensation to student-athletes for the use of their names, images and likenesses. At the same time, the Ninth Circuit also partly favored plaintiffs by upholding that part of the District Court’s ruling that enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance. The Supreme Court’s denial, which signifies only that it declined to review the case and not that it agreed with the Ninth Circuit’s decision, means that the Ninth Circuit’s decision will stand unchanged.

On March 15, 2016, plaintiffs in the O’Bannon case sought U.S. Supreme Court review of the United States Court of Appeals for the Ninth Circuit’s decision issued in September 2015.  In that decision, the Ninth Circuit sided with the NCAA by vacating that portion of the District Court’s ruling that would have required the NCAA to allow member institutions to pay limited deferred compensation to student-athletes for the use of their names, images and likenesses. The Ninth Circuit’s decision did not wholly favor the NCAA, however, as it also upheld that part of the District Court’s ruling that enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance. Reports indicate that the NCAA had earlier requested an extension of time to file its own petition to seek U.S. Supreme Court review and that it continues to consider this option following the O’Bannon plaintiffs’ request.

On January 26, U.S. District Judge John Lee of the United States District Court for the Northern District of Illinois granted preliminary approval of a new settlement of consolidated class action litigation involving the NCAA and former NCAA student athletes, in which the NCAA agreed to provide $70 million towards concussion research, testing and diagnosis. This settlement is largely a restatement of an earlier proposed settlement that had been rejected by the Court. As part of the original settlement, the NCAA agreed to invest in concussion research and education, and to fund physical examinations, neurological measurements, and neurocognitive assessments of individuals who in the past 50 years competed in contact sports for NCAA member institutions. All of these things were restated in the new settlement, with the addition of a greater emphasis on strengthening game time concussion protocols (“return-to-play” rules) and instruction to begin to notify those former student athletes eligible for neurological testing and assessment. Notably, neither the prior proposed settlement nor the approved settlement shields NCAA member institutions or the NCAA itself from current or future concussion lawsuits. Unlike the NFL concussion settlements in which the NFL directly compensated injured plaintiffs, the money paid by the NCAA goes straight to funding the research, education, prevention and testing discussed above. As a result, student athletes retain the ability to sue the NCAA or their institutions on grounds relating to concussion diagnosis and/or treatment, or lack thereof. In fact, the awareness initiatives funded by the settlement may increase the likelihood of claims, at least in the short run. Relatedly, about one week prior to the announcement of the approved settlement, the “Power Five” NCAA conferences proactively voted to give team trainers and physicians the “unchallengeable” authority to decide whether and when a student athlete should return to competition. This action, while not literally required by the settlement, certainly was a move toward alignment with developing best practices, and offers the potential for prospective liability protection.

Last week, a three-judge panel for the United States Court of Appeals for the Ninth Circuit voted 2-1 to deny the O’Bannon plaintiffs’ petition for a rehearing en banc of the Ninth Circuit’s September 30, 2015 decision on the NCAA’s appeal of the District Court’s 2014 decision.  On appeal, the Ninth Circuit had upheld that part of the District Court’s ruling which enjoined the NCAA from enforcing its rules precluding member institutions from providing athletic scholarships up to the full cost of attendance, but disagreed with that part of the District Court’s decision which would have required the NCAA to permit member institutions to pay deferred compensation to student-athletes in an amount up to $5,000 per year for the use of their names, images and likenesses.  While the parties’ next steps in the case are presently unknown, both the O’Bannon plaintiffs and the NCAA could potentially seek U.S. Supreme Court review of the Ninth Circuit’s decision.  

The United States Court of Appeals for the Ninth Circuit issued its highly anticipated decision in the O’Bannon case on September 30, 2015. This case was an appeal of the United States District Court for the Northern District of California’s decision finding that certain NCAA rules were an unlawful restraint of trade in violation of federal antitrust law. Specifically, the District Court issued a permanent injunction prohibiting the NCAA from enforcing rules regarding scholarship caps, and requiring the NCAA to allow member schools to pay deferred compensation to certain student-athletes of up to $5,000 per year of eligibility to compensate them for revenues generated from the use of their names, images and likenesses. The Court of Appeals affirmed the portion of the District Court’s decision regarding scholarship caps and vacated the portion pertaining to deferred compensation. In reaching its decision, the Court of Appeals found that while the NCAA rules in question were procompetitive, they were not exempt from antitrust scrutiny, and were subject to antitrust law’s “Rule of Reason” test. Using this test, the Court of Appeals agreed with the District Court that the plaintiffs had demonstrated that the NCAA’s amateurism rules had an anticompetitive effect on the college education market. The analysis then turned to the procompetitive justifications for the amateurism rules posited by the NCAA. The Court of Appeals accepted two of the NCAA’s four proffered justifications as identified by the District Court: “integrating academics with athletics” and “preserving the popularity of the NCAA’s product by promoting its current understanding of amateurism.” The Court of Appeals next observed that not all of the NCAA’s compensation rules that restrict the market are necessary to preserve the “character” of collegiate athletics, and moved to consideration of whether there were “substantially less restrictive alternatives” to the NCAA’s compensation rules at issue in this case. The Court of Appeals agreed with the District Court that permitting institutions to set the grant-in-aid cap at student-athletes’ full cost of attendance was a less restrictive alternative to the NCAA’s current restrictions on compensation. In so doing, the Court of Appeals observed that the NCAA’s current rule “has no relation whatsoever to the procompetitive purposes of the NCAA: by the NCAA’s own standards, student-athletes remain amateurs as long as any money paid to them goes to cover legitimate educational expenses.” However, the Court of Appeals disagreed with the District Court regarding the payment of compensation to student-athletes for the use of their names, images and likenesses. According to the Court of Appeals, when the District Court found “that paying student-athletes would promote amateurism as effectively as not paying them,” the District Court “ignored that not paying student-athletes is precisely what makes them amateurs.” (Emphasis in original). The Court of Appeals continued:

The difference between offering student-athletes education-related compensation and offering them cash sums untethered to educational expenses is not minor; it is a quantum leap. Once that line is crossed, we see no basis for returning to a rule of amateurism and no defined stopping point…

To summarize, the Court of Appeals’ decision permits the offering of grants-in-aid up to the full cost of attendance (which, notably, had already been approved by the so-called “autonomy conferences” and was scheduled to take effect on August 1, 2015), but continues to permit the NCAA to enforce its rules prohibiting (among other things) the payment of deferred compensation to student-athletes in the form contemplated by the District Court. At this point, either party could seek review of the decision by the full Court of Appeals (as this decision was rendered by a three judge panel) or seek to appeal to the U.S. Supreme Court. The Court of Appeals’ decision is important in that it makes clear that the NCAA’s rules are not exempt from scrutiny under antitrust law, and specifically a “Rule of Reason” analysis. However, the decision regarding deferred compensation signifies a potentially important victory for the NCAA’s tradition and principles of amateurism, and may prove beneficial to the NCAA in its defense of Jenkins v. NCAA and other similar lawsuits. Elizabeth D’Agostino, a 2015 graduate of Albany Law School who is awaiting admission to the New York State bar, contributed to this blog post.