Developing a NIL policy: Enforcement and other considerations (Part 7)

In our Developing a NIL policy checklist series to date, we’ve reviewed: (1) the five foundational pillars, (2) general statements to include; (3) the use of institutional logos, marks, and facilities; (4) disclosure and institutional review of contracts, (5) limitations on NIL activities; and (6) student-athlete representation and international students. In this seventh and final installment, we address a handful of “clean-up” considerations as well as how policy enforcement may look. 

As we’ve noted, before using this checklist, please note that NIL requirements (and interpretations) differ between states. Be mindful that the changing regulatory landscape all but mandates that you consult with your institution’s stakeholders and counsel, as our checklist may not reflect your institution’s priorities or approach.

1. Additional policy considerations

While we’ve left these considerations to the end of our series, they are by no means less significant than those that came before. In fact, many are worth keeping front of mind as your policy takes shape or is modified this summer. 

Caution student-athletes on the application of state law. When we began this series, states were quickly rolling out laws to support their student-athletes (and, no doubt, business community) in remaining competitive in the NIL space. Now, as we conclude, a handful of states are rolling them back. Student-athletes may understandably be confused about the status of the state law or, if they reside in a state different from where they attend college, may be confused about which law applies to them. To that end, in addition to including language that reminds student-athletes to review any potentially applicable state laws, consider how your training may need to be adjusted. 

Financial aid and tax consequences of entering into NIL deals. While early NIL participants have likely worked through this, others may not understand that receiving money or goods in exchange for their NIL could impact their financial aid status or have tax consequences that requires them to pay money back to the municipal, state and/or federal government come tax time. We encourage institutions to spend considerable time – and space in a policy – reminding student-athletes that an NIL deal is a contract, which means that consideration must exist. Remind student-athletes that NIL income is “self-employment” income and that, depending on the amount earned, certain federal and state taxes may apply. 

Institutional use of student athlete’s NIL. It may seem basic, but don’t forget that institutions should be clear that they have a right to continued (if limited) use of a student-athlete’s NIL without compensation. This includes use in program recruiting, press releases and on the institution’s website. Though we haven’t seen student-athletes take issue with this continued use, it may be worth an ounce of prevention.

FERPA meet NIL, NIL meet FERPA. We could go on for pages about the intersection of NIL and FERPA but nothing about NIL has altered the application of FERPA in the slightest. The disclosure analysis remains the same. 

Before any employee of your institution can discuss an individual student athlete’s NIL deal or that the institution is even reviewing an NIL deal, the institution must have a signed FERPA waiver from the student-athlete in which the student-athlete expressly waives their FERPA rights with respect to that third party and on the topic of NIL.

The desire to see the details of NIL deals is high and there is going to be considerable pressure on public institutions to strike the balance between public records requirements and FERPA or other state-specific laws. 

Title IX. It promotes equity in sex among student athletic programs, and it may also impact how your institution applies its NIL policy. This becomes particularly true with institutions that are becoming more and more involved in creating NIL opportunities for their student-athletes. In so doing, it serves to highlight the importance of maintaining equity in the program. Opportunities (training, relationships, etc.) and privileges (logo usage or facilities access) need to be doled out in equal measure. 

2. Internal enforcement of your NIL policy at your institution

Our hope is that your NIL policy is drafted in a way to give users (student-athletes and staff alike) the flexibility they need to navigate this evolving process. However, it’s only a matter of time before someone runs afoul of it. Of that, we’re sure. To that end, the questions that institutions must answer are:

• How does non-compliance with a NIL policy tie into existing codes of conduct or handbooks?
• What dispute resolution procedures are available and appropriate to handle NIL non-compliance?
• What sanctions, if any, are appropriate for NIL non-compliance?

Remember, there will be different shades of non-compliance. The failure to submit a proposed NIL contract for review may differ from impermissible facilities usage and from impermissible logo usage. Regardless, how sanctions are meted out will be viewed closely by the campus community and well beyond, so stay true to your ethic of care and ensure that discipline is fair and consistent.