Title IX’s Journey in Higher Ed: From NIL Beginnings to the House Settlement (Part 2)

Article

11.22.2024

In Part 2 of this series, we’ll delve into how the Title IX regulations align with the terms of the House Settlement. The latest iteration of the settlement agreement received preliminary approval from Judge Wilken on October 7, 2024. It outlines three primary terms, each with its own Title IX issues: 1) nearly $2.8 billion in backpay to former athletes; 2) direct payments (also known as revenue sharing) to current athletes; and 3) roster limitations.[1]

Depending on the final approval date, these changes could be implemented as early as Fall 2025 and the pending approval is prompting administrators and coaches to make crucial decisions now, including how to implement the new structure and adjust recruitment strategies.

Backpay and Title IX

Courts have established the method for calculating backpay for lost NIL revenue, limiting the influence of campus administrators on this decision. The awarded funds for lost NIL revenue are considered damages and are likely not subject to Title IX scrutiny. However, since the backpay was calculated based on each athlete’s “market value,” which predominantly favored male athletes, this could potentially lead to a Title IX argument regarding future direct payments to athletes.

State representatives are also addressing this issue. The Democratic Women’s Caucus (DWC) has sent a letter to current United States Secretary of Education Miguel Cardona asking for clarity on how Title IX applies to collegiate athlete pay.[2] The DWC classified the distribution of funds in the settlement as “incredibly lopsided” and stated, “we are deeply concerned that, if approved, the back-payment thresholds established in the settlement could be misinterpreted as compliant with Title IX or used as a justification to not apply Title IX to athlete compensation going forward.”

Direct Payments and Title IX

The settlement paves the way for institutions to directly pay athletes and allow them to receive a portion of the institution’s athletics revenue, known as “House payments.” This represents a significant shift from the NCAA’s previous stance, which strictly prohibited institutions from paying athletes to maintain the principle of amateurism. Additionally, while many state laws currently prohibit direct compensation to athletes, these laws are being revised in response to the House settlement.[3]

Institutions are understandably concerned about this aspect of the settlement due to the significant annual price tag. Institutions that choose to “opt in” will be allowed to share over $20 million annually with their athletes, with this amount increasing by 4% each year for the next nine years.

Each institution will decide how to distribute these payments. Some are considering splitting the revenue equally between female and male athletes or distributing it proportionately based on gender participation.[4] Others have suggested allocating the money according to each sport’s contribution to overall athletic revenue, which would result in football athletes receiving around 80% of the total pool, with men’s basketball athletes receiving the next largest share, roughly 10%.[5]

This latter model likely disproportionately favors male athletes and raises concerns about potential Title IX violations. The issue is whether these House payments meet the definition of athletic financial assistance under Title IX. According to Title IX, athletic financial assistance is defined as “athletic scholarships or grants-in-aid” (34 C.F.R. § 106.37(c)). To comply, institutions must distribute athletic financial assistance to male and female athletes in a manner substantially proportionate (within 1%) to their athletic participation rates. For example, if women participate in athletics at a rate of 55% and men at 45%, women athletes should receive 54-56% of athletic financial aid, and men should receive 44-46%, unless the institution can show legitimate and non-discriminatory reasons for deviations outside of 1%. If House payments are considered athletic financial aid under Title IX, female athletes would need to receive the largest share, and anything less than 54% could constitute a Title IX violation.

Others argue that House payments should not be considered athletic financial aid under Title IX, but rather that market demands justify higher compensation for football and men’s basketball athletes. Interestingly, this approach was used to calculate and award backpay, with minimal pushback regarding gender equity.

Without any meaningful guidance, when implementing House payments, institutions should carefully evaluate and consider the Title IX risks associated with their decisions.

Roster Limitations and Title IX

This aspect of the settlement agreement has been overlooked but may have a greater impact on sport sponsorship than initially anticipated. The new roster limitations increase scholarship opportunities across all sports but also reduce participation opportunities in certain sports, raising potential Title IX concerns.

For decades, the NCAA has capped the number of scholarships that can be offered in each sport, without limiting roster spots. For instance, baseball coaches are currently allowed to award up to 11.7 scholarships across 27 athletes (referred to as “counters”).

This will change after the House settlement, as all Division I institutions participating in the settlement will face new roster limitations. Institutions will be able to award more scholarships to athletes, provided they stay within the roster limit. For example, the new roster limit for baseball is 34, allowing schools to offer full scholarships to 34 baseball players. However, while coaches can award more scholarships, the number of roster spots will decrease for programs that carry more than 34 athletes. To put this into perspective, the average Division I baseball team roster size is 41.9 athletes, meaning that each team will have about eight fewer opportunities. Multiply this across 295 Division I baseball teams, and this new structure will result in approximately 2,200 fewer roster spots, mostly affecting walk-ons or those not receiving scholarships. Thirteen men’s sports and eight women’s sports are at risk of losing roster opportunities.

The settlement also eliminates “head count” sports, which previously required full scholarships for each student.[6] Under the new terms, each sport is now an “equivalency” sport, allowing scholarships to be divided among team members..

While this expansion of scholarships benefits some athletes, it does not benefit all, particularly male athletes in Olympic sports at schools that sponsor football. In a highly competitive environment where schools aim to “win at all costs” in revenue-generating sports, institutions will likely strive to provide full scholarships to all 105 football athletes, the new limit under the settlement. With a finite amount of money available and the unlikelihood of increased scholarship budgets—especially under a new structure allowing direct payments to athletes—schools may reallocate awards from men’s Olympic sports to football or other areas within the department.

For female athletes, the outlook is somewhat better. Title IX provides a certain level of protection, and in most sports, the settlement caps do not exceed the average team size. For example, the women’s sport with the most lost opportunities is soccer, with an average team size of 31.2 and a settlement limit of 28, resulting in a loss of three spots per team. However, if women are the underrepresented sex, institutions should consider increasing opportunities in another women’s sport within the mandated limits to avoid unequal opportunities for male and female students.

The increase in roster opportunities can be misleading. While it appears to be good news, most women’s sports coaches have already been encouraged to maintain larger rosters than the current average to offset the numerous football opportunities. Experience shows that adding more athletes requires additional resources, such as coaches, locker rooms, and training staff, which can deter coaches. Therefore, although these increases seem promising, they are unlikely to significantly expand future opportunities for women.

Overall, it appears inevitable that roster spots will be eliminated. This week, a Power Four institution announced it will reduce roster sizes by 150 athletes,[7] while another revealed plans to cut its athletic program by at least 115 athletes.[8]

With the elimination of roster spots and the gradual reallocation of scholarships, institutions risk violating Title IX, making them susceptible to OCR complaints and lawsuits. This risk is heightened if institutions lack a Title IX gender equity plan and do not annually assess whether they are providing equitable participation opportunities, athletic financial aid, and benefits and treatment. Before formally eliminating roster spots, institutions should ensure they continue to provide equitable opportunities for the underrepresented sex (often women) and avoid cutting women’s sports and roster spots. Additionally, institutions should ensure their scholarship distribution falls within the 1% safe harbor as required by Title IX.

Title IX issues continue to be at the forefront of college athletics transformation, especially as administrators navigate the post-House settlement landscape. If your institution has questions in this area or would benefit from a Title IX gender equity review and plan prior to making final decisions, please contact our experienced team. We are prepared to assist you in navigating this new territory with an eye on compliance.

^{[1] In case you missed it, check out our recent publication for an overview of the House v. NCAA Settlement}

^{[2] Democratic Women’s Caucus (November 15, 2024). Democratic Women’s Caucus Letter Calls for Application of Title IX to Collegiate Athlete Pay.}

^{[3] For example, in August 2024, Ohio lawmakers introduced a new bill, Ohio Bill 660, that would allow schools to directly compensate athletes for NIL. On November 18, 2024, Ohio Governor Mike DeWine signed Executive Order 2024-08(D) allowing post-secondary educational institutions (that are covered by the Settlement) to directly compensate their athletes for NIL immediately, so long as institutions do not use funds allocated by the State of Ohio for such compensation. Virginia allowed similar payments starting July 1, 2024.}

^{[4] Kaufman, J. Ohio State to pay athletes maximum allowed following NCAA settlement, Ad Ross Bjork says. The Columbus Dispatch. (June 20, 2024). Henderson, N. Big ten schools indicate future athlete payment is subject to title IX regulation... will others follow?. NIL Daily On SI. (June 22, 2024).}

^{[5] Postins, M. Power conference schools receive initial revenue-sharing figure: Report. NIL Daily On SI. (Nov. 2, 2024).}

^{[6] Men’s head count sports included FBS football and basketball. Women’s head count sports included basketball, gymnastics, tennis, and volleyball.}

^{[7] Krajisnik, S. Ohio State AD Ross Bjork issues letter to fans regarding changing landscape of college athletics. Cleveland.com. (Nov. 21, 2024).}

^{[8] Cunningham: Changes In College Athletics – And The Impact On Carolina. University of North Carolina Athletics. (Nov. 20, 2024).}