January 11, 2017
Update: Third Circuit to Decide Whether Student Athletes May Be Employees (February 7, 2020)
Several recent legal efforts have attempted to provide student-athletes with a piece of the financial pie resulting from events like Monday’s national championship game, which reportedly netted the NCAA around $470 million in television rights. On Jan. 4, 2017, the 7th U.S. Circuit Court of Appeals denied en banc rehearing of one such case, Berger v. National Collegiate Athletic Association. In Berger, two former University of Pennsylvania (Penn) women’s track and field athletes sued Penn, the NCAA and 120 other member institutions, alleging they had violated the Fair Labor Standards Act (FLSA) by not paying minimum wage for their athletic endeavors. Although the 7th Circuit panel opinion held that the plaintiffs were not employees under the FLSA, much less attention has been paid to the concurring opinion, which questions whether the same result would apply to scholarship athletes from revenue-generating sports, like those who played in the National Championship Game.
Berger v. National Collegiate Athletic Association
The majority opinion in Berger held that the two plaintiffs were participating in the equivalent of an extracurricular activity that the Department of Labor has specifically excluded from the FLSA. Noting that “student participation in collegiate athletics is entirely voluntary,” the 7th Circuit ruled that these athletes were no different from those participating in other clubs or group activities like student government or the university radio station.
Additionally, the Berger court agreed with the district court’s finding that these students were only amateur athletes. Citing to various precedents, the 7th Circuit went on to say that “the long tradition of amateurism in college sports, by definition, shows that student athletes — like all amateur athletes — participate in their sports for reasons wholly unrelated to immediate compensation.” The eligibility rules devised by the NCAA and its member institutions “define what it means to be an amateur or a student-athlete, and are therefore essential to the very existence of collegiate athletics.”
Judge Hamilton’s Concurrence
Though he joined in the Berger opinion dismissing the plaintiff’s claim, 7th Circuit Judge David F. Hamilton took a different approach than the majority. Judge Hamilton wrote separately to “add a note of caution,” indicating that there might be a fundamental difference between track and field athletes at an Ivy League school and the players who clashed on Monday night. His opinion highlights the lingering uncertainty concerning the status of student athletes.
Judge Hamilton first notes that, like other Ivy League schools, Penn did not offer the plaintiffs a scholarship. Participation in their sport truly was voluntary. Other NCAA schools, on the other hand, condition scholarships given to their athletes on the athlete’s continuing play. Athletes can lose their scholarships if they fail to show up to practice, become injured or are otherwise unable to play.
Second, Judge Hamilton points out that track and field “is not a ‘revenue’ sport at Penn or any other school.” Based on that, Judge Hamilton agrees with the majority that “the economic reality and the sometimes frayed tradition of amateurism both point toward dismissal of these plaintiffs’ claims.”
By contrast, Forbes estimates that the University of Alabama earned over $45 million from its 2015 championship football program on revenues of over $95 million. Judge Hamilton comments in his concurring opinion that it is less clear that the Berger court’s “reasoning should extend to students who receive athletic scholarships to participate in so-called revenue sports like Division I men’s basketball and FBS football. In those sports, economic reality and the tradition of amateurism may not point in the same direction.”
The widely discussed O’Bannon case from the 9th Circuit dealt with a similar question. In O’Bannon, a group of current and former players led by former UCLA basketball standout Ed O’Bannon sued the NCAA on an antitrust theory to overturn a rule prohibiting players from benefitting from the sale of their names, images and likenesses. The District Court held that the rule was indeed in restraint of trade and awarded damages to the athletes. The Ninth Circuit disagreed with the remedy but found that ruling to be “largely correct” and held that NCAA rules restricting athlete compensation are not insulated from antitrust scrutiny.
Implications for Universities Moving Forward
Although universities and the NCAA scored points in the Berger decision, the game is far from over. Judge Hamilton’s concurrence and the O’Bannon ruling indicate an increasing judicial willingness to examine the “economic realities” of college sports. Those realities include that revenue sports are big business. Scholarship athletes will likely continue to challenge the long-held belief that they are students and not employees. Institutions should prepare for these challenges and seek appropriate legal guidance to minimize legal risk.
Should you have questions about the current status of student athletes or need assistance in evaluating your own institution’s risk profile, please contact the authors, your McGuireWoods contact, or any member of the firm’s labor and employment group.