California Continues to Lead the Way on Collegiate Athletics Reform

April 21, 2022

The California State Senate’s education committee is set to vote on SB-1401, the College Athlete Race and Gender Equity Act, which would require colleges and universities to compensate athletes in their revenue-generating sports.

As currently drafted, the bill requires colleges and universities to split funds equally among a team’s athletes and place the money into an “Athlete Degree Completion Fund” that is available once the athlete graduates. Sportico reported that the bill would apply to team sports that generate more than twice as much money as they spend on athletic scholarships, which would encompass football, men’s basketball and women’s basketball. Sportico also reported that, “[b]ased on 2018 financial figures schools provided to the U.S. Department of Education, the legislation would have worked out to FBS football players in California earning, on average, $132,000 per year … while men’s basketball players would receive an extra $107,000 and women’s basketball players would get $15,000 more annually.”

If the bill passes in the education committee, the judiciary committee will hear the bill next. If the bill passes in both the education and judiciary committees, it will then head to the appropriations committee before going to the Senate floor.

Regardless of the outcome of the committee votes, the current model for collegiate athletics will continue to face scrutiny and challenges on several fronts, and it seems inevitable that significant changes are coming. As McGuireWoods reported in a Feb. 10, 2022, alert, an unfair labor practice charge filed with the National Labor Relations Board against the NCAA, PAC-12 Conference, University of Southern California, and University of California, Los Angeles, alleges the schools and organizations violated the National Labor Relations Act by misclassifying the athletes as non-employees and interfering with their rights as employees. The unfair labor practice charge is still pending.

McGuireWoods also reported in a Feb. 3, 2022, alert that the U.S. Court of Appeals for the Third Circuit agreed to hear an interlocutory appeal on the question of whether Division I student athletes can be employees of their schools under the Fair Labor Standards Act solely by virtue of their participation in interscholastic athletics. The Third Circuit has yet to rule on that issue.

These challenges are taking place as student athletes continue to profit from their names, images and likenesses (NIL) since various state NIL laws went into effect in 2021 and the NCAA implemented an interim policy allowing student athletes to receive compensation for their NIL. Notably, California was the first state to enact an NIL law, clearing the way for other states to do so and starting a significant sea change. Moreover, an increasing number of schools are providing student athletes with up to $5,980 per year, which is the maximum the NCAA allows for “academic awards” after the U.S. Supreme Court’s unanimous decision in the Alston case in June 2021.

As was the case with NIL laws, it seems likely that additional states will propose laws similar to California’s College Athlete Race and Gender Equity Act, and the U.S. Congress may propose similar federal legislation.

For further information on this topic, including how to best prepare your institution for potential changes, please contact one of the authors.