As the 2024 college football season gets underway, the legal rights and classifications of college athletes are in the midst of a historic and rapid transformation, initiated by a spate of lawsuits starting in 2009 which have primarily challenged the National Collegiate Athletic Association’s (NCAA) (1) restrictions on college athletes’ use and monetization of their name, image, and likeness (NIL), and (2) classification of college athletes as “amateurs” who are not eligible to be legally recognized and compensated as “employees” under state and federal law. In 2021, the U.S. Supreme Court rocked the college sports world with its NCAA v. Alston decision, unanimously holding that the NCAA’s outright prohibition on compensation for college athletes violated federal antitrust law. This decision ushered in the so-called “NIL era” of college sports and, with it, the escalation of legal challenges to the NCAA’s continuing restrictions on compensation.
Recently, there have been separate and groundbreaking legal developments in the two realms of NIL rights and college athlete employment status, which continue to make their way through the legal system. As they do, the NCAA has implemented new NIL rules governing the NIL rights of college athletes and universities.
What are the NCAA’s Current NIL Rules?
On August 1, 2024, the NCAA implemented their revised NIL rules. The NCAA introduced an NIL platform called NCAA NIL Assist which provides key information to student-athletes seeking NIL deals. It includes resources for college athletes to understand their NIL rights and provides a centralized registry of potential service providers (e.g. businesses, brands, NIL collectives).
Facilitating NIL Deals for College Athletes
These new NIL rules permit universities to provide NIL assistance and services to college athletes. This includes identifying NIL opportunities and facilitating deals between college athletes and third-party NIL service providers. Universities are permitted to contract with third-party service providers (e.g. multimedia rights holders, attorneys, NIL marketplace) for NIL-related services, but they are still prohibited from using NIL activities to compensate a college athlete for athletics participation or achievement.
Universities are also required to allow college athletes to maintain independent authority over their NIL agreements and use their own NIL service providers if desired. This creates more opportunities for third-party service providers to directly facilitate deals with college athletes since universities cannot require students to use their institutional assistance or services.
NIL Disclosure Requirements
The new rules require college athletes to disclose NIL agreements of $600 or more to their universities within 30 days. College athletes may elect not to disclose their NIL activities but, doing so would make them ineligible to receive the university’s assistance and services.
NIL Legal Developments
Recently, in the federal case of House et al. v. NCAA et al. out of the U.S. District Court for the Northern District of California, the NCAA and a proposed class of current and former Division One college athletes reached a nearly $2.8 billion settlement agreement which would require universities to pay damages to certain college athletes for lost NIL earnings, and it would allow universities, for the first time ever, to directly pay college athletes for NIL activities.
This proposed settlement has the potential to fundamentally alter the NIL landscape for college athletes and universities, but it first must go through a months-long court process for approval. On September 5, 2024, the court will consider whether to grant preliminary approval of the proposed settlement agreement, which is the first step in the approval process.
College Athletes as Amateurs vs. Employees
The NCAA still classifies college athletes as amateurs and opposes their classification as employees under federal laws such as the Fair Labor Standards Act (FLSA), which establishes the right to a minimum wage for most employees. In Johnson et al. v. NCAA et al., a federal case out of the U.S. District Court for the Eastern District of Pennsylvania, a class of college athletes have challenged this classification, alleging that they are employees entitled to be paid the federal minimum wage under the FLSA.
In a July 2024 appellate decision, the U.S. Court of Appeals for the Third Circuit court made three consequential rulings in the Johnson case: (1) the court expressly rejected the NCAA’s “amateurism” classification of college athletics; (2) the court held that, as a matter of law, college athletes could qualify as employees entitled to compensation under the FLSA; and (3) the court adopted a new test for determining whether college athletes qualify as employees under the FLSA.
So, Are College Athletes Now Employees?
No, not quite. While there is significant legal headwind in that direction, there has been no court ruling establishing as a matter of law that college athletes are employees under federal law, and cases continue to be vigorously litigated across the country. Given the volume of legal challenges and the potential impact of these recent court decisions, the U.S. Supreme Court may take up one of these cases and provide a definitive answer on the employment status of college athletes.
Final Takeaways
The classification and compensation models for student-athletes are in a period of historic change, and there is more opportunity now than ever for talented young athletes to negotiate deals and earn money for their athletic performances. Current and incoming college athletes should familiarize themselves with the NCAA’s existing NIL rules and pay particular attention to the proposed settlement agreement in the House case. Berenzweig Leonard LLP will continue to monitor and provide updates on the legal developments across college sports.
Charles Bonani is an Associate Attorney at Berenzweig Leonard. You can reach him at cbonani@berenzweiglaw.com or (571) 615-0430.