Update: Third Circuit to Decide Whether Student Athletes May Be Employees (February 7, 2020)
On June 21, 2021, the U.S. Supreme Court issued a historic opinion concerning the NCAA and its policies on student-athlete compensation. The Court’s ruling signals potentially drastic changes to come in the NCAA’s student-compensation rules and opens the door for future challenges by student-athletes.
Since its inception, the NCAA has argued that the “amateurism” of its college athletes is an integral part of the unique product of intercollegiate athletic competition. However, as college and university programs have increased their revenue from their athletic programs, the pressure on the NCAA to compensate student-athletes has grown. Until recently, student-athletes have been largely unsuccessful in their bid to receive compensation for their participation in college sports.
However, in NCAA v. Alston, the Supreme Court unanimously decided that the NCAA cannot limit “education-related benefits” for student-athletes, such as post-eligibility scholarships at graduate or vocational schools (e.g., medical or law schools). This means universities or conferences could provide benefits that the NCAA cannot cap so long as they are connected to education.
While the Supreme Court’s ruling was narrowly limited to a subset of NCAA rules restricting education-related benefits, and will not immediately lead to direct payments to student-athletes, the decision opens the door for future challenges to the NCAA’s compensation rules. The decision also signaled that the Supreme Court would not give the NCAA any special treatment under U.S. antitrust laws, or “overlook its restriction because they happen to fall at the intersection of higher education, sports and money.” Specifically, the Court summarily rejected the NCAA’s position that the unique characteristics of its industry deserved special deference under U.S. antitrust laws. Instead, the Court held that NCAA sports amount to a joint venture whose compensation restrictions are subject to antitrust scrutiny under a “rule of reason” analysis.
The rule of reason requires a court to conduct a fact-specific assessment weighing the restraint’s anti-competitive effects against any pro-competitive rationales for enacting the restraint. Ultimately, the Court upheld the district court’s determination that the NCAA has some pro-competitive rationale for limiting compensation to student-athletes, but it could achieve the same objectives through less restrictive means.
The NCAA also argued that a 1984 U.S. Supreme Court decision in NCAA v. Board of Regents of Univ. of Oklahoma, which described “the preservation of the student-athlete in higher education” as “ entirely consistent with the goals of the Sherman Act,” was dispositive of the issues before the Court. The Court rejected this argument, characterizing this dicta as no more than an “aside.” The Court stated that its holding in Board of Regents did not suggest that “courts must reflexively reject all challenges to the NCAA’s compensation restrictions.” The Supreme Court further recognized that the market realities have shifted “significantly” since the 1984 decision.
The potential ripple effects of the Alston decision were highlighted in the Supreme Court’s concurrence, written by Justice Brett Kavanaugh. He stated in no uncertain terms that “[t]he NCAA is not above the law” and that “[t]he NCAA’s business model would be flatly illegal in almost any other industry in America.” He also expressed clear doubt that, in addition to the education-related benefits the Supreme Court ruling addressed, the rest of the NCAA’s compensation rules also “raise serious questions under antitrust laws.”
The Court’s strong language against the NCAA and its position under antitrust laws sets the landscape for contentious litigation involving other forms of student-athlete compensation. As Justice Kavanaugh predicted, there may also be legislation or collective bargaining over the issue. Regardless, as the revenue generated by college athletics continues to grow, there will be ever-increasing pressure on the NCAA to change its approach to student-athlete compensation.
University administrators and athletic directors seeking to be proactive in light of the Alston decision should consider what types of benefits qualify as “education-related,” which education-related benefits to offer student-athletes, and how to use education-related benefits or offerings to compete for student-athletes to attend their school. They should also monitor the NCAA’s activities, as the NCAA will be meeting over the next two weeks to discuss potential rule and bylaw changes that would formally allow student-athletes to monetize their name, image and likeness rights.
McGuireWoods will continue to track these developments as they occur. For more assistance navigating the issue of student-athlete compensation in light of the Alston decision, please contact any of the authors of this article.