Could College Athletes Be Legally Classified as Employees?

College sports are perhaps more popular than ever. Earlier this year, enthusiasm over superstar players like Caitlin Clark and Angel Reese propelled the NCAA Women’s Basketball Tournament to record-breaking TV ratings. The men’s March Madness tournament prompted millions of fans to fill out brackets in hopes of correctly predicting the winners on the court. Last year, over 92,000 fans filled the University of Nebraska’s Memorial Stadium to attend a women’s college volleyball match – the largest turnout for such a contest and the most attended women’s sporting event ever. College football, the most popular of all college sports in the U.S., boasts attendance and viewership numbers that even outpace all professional sports but the NFL.

These popular sports generate massive revenue, especially for top-tier programs. Broadcast rights for the March Madness tournament and the College Football Playoffs alone generate around $14 billion in revenue for the NCAA and its constituent conferences and schools. Coaches are often paid multi-million dollar annual salaries. In forty states, the highest-paid public employee is a university coach.

On the other hand, the athletes themselves have been restricted from receiving any direct payments for their contributions toward the multi-billion dollar enterprise. The NCAA has barred payments to athletes beyond scholarships and reimbursements for certain educational costs since 1956. Seeking to change this, a group of athletes brought suit against the NCAA and their schools in 2019, seeking to recover at least minimum wage for their efforts, in Johnson v. NCAA.

Ruling Tips the Scales Toward Athlete Compensation

While the Johnson case has yet to reach its ultimate conclusion, a recent ruling from the Third Circuit Court of Appeals created shockwaves through the world of college athletics by holding that college athletes could be legally classified as employees of their schools.

The NCAA and defendant colleges responded to the Johnson suit by filing a motion to dismiss the claims, arguing that athletes could not claim to be employees because of the historical tradition of amateurism in college sports. The district court denied that motion, and the defendants appealed to the Third Circuit, citing nearly four decades of court opinions that suggested legal support for their position.

The Third Circuit judges were not convinced, however. Before the Johnson parties were still sparring in the preliminary stages of their suit, a 2021 decision from the U.S. Supreme Court, NCAA v. Alston, paved the way for athletes to receive a new type of compensation for the use of their name, image, and likeness (NIL) rights. Not only did this ruling create a monumental shift in the landscape of college athlete compensation at the highest levels, but it also featured sharp criticism of that line of legal reasoning.

Convinced by evidence that athletes in college are greatly restricted from many normal academic activities because of their restricted schedules and noting the massive revenues generated by profitable sports, the Third Circuit judges sent the case back to the district court with instructions to apply a new multipart test to determine whether the athletes could prevail in their claims for the protections granted to employees. This test will assess whether college sports are played primarily for the benefit of the universities, the degree to which athletics directors and coaches control the “work” of athletes, and whether college athletes participate in sports for benefits or compensation, whether promised or implied.

With this new directive, the case returns to the district court for evaluation on the merits through that prism. If the plaintiffs succeed, college athletes across the nation could claim the pay and protections due to employees.

Major College Sports Revolutionized by Name, Image, and Likeness Rights

Before the Alston ruling in 2021, the NCAA completely forbade athlete pay in college sports, even from outside entities (commonly called “boosters”). Allowable booster contributions to college athletic programs were strictly limited to certain types of generic improvements, such as locker room equipment or improved training facilities.

Despite that, boosters sought ways to circumvent those rules or conceal forbidden payments in an effort to recruit the most talented players. High-profile scandals brought strict penalties to the universities who were caught. Perhaps the most dramatic example of NCAA sanctions was the “death penalty” that canceled two seasons of Southern Methodist University football after repeated violations, including envelopes stuffed with cash, free apartments, and even new cars given to so-called amateur players who suited up at SMU.

In the post-Alston landscape, players still cannot be paid to play sports, but they can receive compensation for allowing their personal brands to be used in product advertisements, social media promotions, and even video games. In fact, for over a decade, Electronic Arts could not produce a college football video game because of legal disputes about the use of player names and physical depictions of the actual players.

Now, fans can play the first college football video game released since 2013, and boosters have scrambled to find ways to recruit and compensate players legally by establishing new organizations, called NIL collectives, that pay players for the use of these rights. The NIL collectives work closely with the universities, which cannot pay players directly but offer support to ensure compliance with the new rules. They work so closely together that school officials end up as defendants in lawsuits over paid NIL payments, like the University of Florida’s head football coach, who was sued by a recruit after payments allegedly fell short of promises.

NCAA Inches Toward Settlement but Uncertainty Looms

In yet another case, House v. NCAA, the landscape of player payment could change again as the parties move closer to a settlement that would finally allow colleges to pay athletes directly but stops short of classifying the players as employees. Although there is big money in college football and basketball, universities fear that athletes in the non-revenue sports like track and swimming could claim pay as well. The NCAA and the schools are angling toward a settlement that enables them to take control of regulating NIL payments and to essentially cap payments at a percentage of revenue.

The final decision in the Johnson case could demolish the structure of any agreement resulting from the House case. Should the courts ultimately determine that college athletes are, in fact, employees of their colleges and entitled to minimum wages under federal law, any agreed pay structure would need to be completely reworked.

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