The saga continues: Are student athletes employees?

This question, once settled, has seen increased scrutiny in recent years both from the National Labor Relations Board¹ and courts that have considered the issue.² One of those courts – the Third Circuit Court of Appeals, which covers Pennsylvania, New Jersey and Delaware – will soon have the opportunity to add its opinion to the mix as it considers whether student-athletes are employees for purposes of the Fair Labor Standards Act (FLSA) in Johnson, et al v. The National Collegiate Athletic Association, et al.

But, before we get to the facts in Johnson, we would be remiss if we did not note that intercollegiate athletics looks markedly different now than it did when the issue of student-athletes-as-employees first took shape, and this new landscape may impact how this weighty issue is ultimately decided.  The trajectory of name, image and likeness rules (and laws) alone serves to highlight this evolution.  From Board of Regents of the University of Oklahoma to O’Bannon to Alston, the rise of NIL may have paved the way for future seismic activity.³

So, what is Johnson about? The facts are rather straight forward: former and current Division I student-athletes are suing the schools they attended, and the NCAA, and are seeking compensation for their services. More specifically, they are seeking wages for their participation in Division I athletics under the FLSA and various state laws. Putting a finer point on it, the student-athletes are arguing that they were employees, in part because of the control the NCAA and the universities held (and hold) over their activities and the revenue generated by their sports.⁴

The schools and the NCAA moved to dismiss the complaint, but the District Court denied the motion and held that the student-athletes “plausibly allege[d]” that they were employees.⁵ Unhappy, the schools and the NCAA appealed the District Court’s decision, arguing, among other things, that the District Court improperly disregarded the 7th Circuit Court’s ruling in Berger, and improperly applied and weighed elements of the multifactor test used to evaluate the status of student interns.⁶

Recall that in Berger, the Seventh Circuit held that student athletes were not employees under the FLSA because (1) participation in collegiate athletics is entirely voluntary and (2) the long tradition of amateurism in college sports, by definition, shows that student athletes—like all amateur athletes—participate in their sports for reasons wholly unrelated to immediate compensation.⁷

What is the question before the Third Circuit?  To start, the question is not necessarily whether student-athletes are employees. Instead, the question is whether the District Court properly denied the motions to dismiss. And while this could be a distinction without a difference, it is certainly possible that the Third Circuit issues its opinion without addressing the larger question of whether student-athletes are employees. That said, during oral argument, the court challenged counsel on a number of points that go to the very heart of the inquiry, including:

• Title IX. The NCAA argued that categorizing student athletes as employees would create a situation in which schools are caught between inconsistent standards under Title IX and Title VII with respect to Title IX’s mandate regarding equal opportunity to participate in athletics for men and women. The NCAA said that prong has the tendency to fall “disproportionately on female shoulders” because it may undo advancement. The Judges seemed unconvinced of this argument, noting that disparities are already prevalent.
• Substantial control. The Judges highlighted that the institutions appear to exercise substantial control over student athlete’s schedules. The NCAA could implement rule changes to lessen the control over student athletes and avoid the claim that student athletes are employees. For example, the Plaintiffs said that the NCAA could allow athletes to enroll in elective courses that conflict with practice schedules without fear of punishment.
• Scholarships. Following oral argument, the Third Circuit also asked the NCAA counsel to provide a supplemental letter brief regarding whether an athlete loses their scholarship if they quit or are removed from the team.⁸

In the end, the details of the Third Circuit’s ruling will likely dictate whether an appeal to the Supreme Court is in the cards, though at the motion to dismiss stage the record of the case is necessarily somewhat thin. Regardless, the Supreme Court’s decision in Alston undoubtedly looms large in any further appellate considerations.

What does this case mean for your campus? Right now, nothing specific. But, zooming out, there is considerable uncertainty in the student-athlete space, and institutions would do well to start thinking through how certain decisions will impact their campus and their stakeholders. What would happen on your campus if student-athletes were deemed employees? How would that impact your operations? Circling back to the Circuit Court’s question at oral argument, what would it mean for your Title IX compliance obligations? 

Our team will continue to follow this issue. Stay tuned for updates regarding the Johnson v. NCAA decision, the NLRB’s actions and other developments regarding student-athlete compensation.