Legal Standpoint: Lawsuits Drive Changes in Athletics

By Lee Tyner    //    Volume 31,  Number 3   //    May/June 2023

The cover story in the last issue of Trusteeship was all about the pace of change in college athletics. Much of this transformation has been driven by lawsuits challenging the fundamental nature of the relationship between universities and student-athletes.

The Traditional Model: Students Who Are Athletes. The traditional understanding of the relationship between institution and athlete is enshrined in National Collegiate Athletic Association (NCAA) bylaws: athletes are primarily students, who as a part of the student experience compete in intercollegiate athletics. Under this definition, students are amateurs. They are not employees; they are not paid wages or compensated for their athletic abilities or efforts. Nevertheless, colleges and universities may provide financial aid to athletes, just as they may provide scholarships to other students who bring special skills or talents to campus.

The amount of financial aid a college may provide depends on the rules that institutions have collectively adopted, acting through the NCAA. The amateur model looks different in each NCAA division. Members of Division I allow more benefits to student-athletes than those in Division II, and Division II allows more benefits than Division III.

Antitrust Challenges. In a series of cases beginning in 2009 with O’Bannon v. NCAA, student-athletes have challenged the traditional model under antitrust laws. These
lawsuits have claimed that NCAA rules defining amateurism are illegal restraints on competition adopted by universities to fix the price for the services of athletes. They argue that but for the universities’ collusion, competition would drive universities to offer more than the fixed value of an athletics scholarship.

In response, the NCAA has maintained that amateurism makes intercollegiate athletics a better, more competitive product for the sports and entertainment dollar. Because amateurism is pro-competitive, antitrust laws allow universities to collude to preserve the intercollegiate model. Thus far, federal courts have adopted the NCAA’s position. But the courts have held that NCAA bylaws may not restrict competition more than reasonably necessary to secure amateurism’s pro-competitive effects.

Even though O’Bannon was a win of sorts for amateurism and the NCAA, it has led to additional lawsuits attacking one NCAA rule or another as unreasonable—as more restrictive than necessary to preserve amateurism. One of those cases, Alston v. NCAA, reached the Supreme Court a few years ago. In its 2021 decision, the Supreme Court ruled NCAA amateurism rules were too restrictive because they did not allow awards related to academic achievements or reimbursement for certain academic expenses. Although the core holding of O’Bannon was not before the court, the decision raised doubts about whether universities could legally adopt any rules to preserve amateurism. Justice Brett Kavanaugh’s concurring opinion expressed the court’s skepticism:

Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate.

After the Alston decision, many believe the handwriting is on the wall: Any NCAA rules that restrict competition for athletes’ services will eventually fall. Other NCAA bylaws that restrict eligibility or transfer may also be suspect.

Name, Image, and Likeness. One of the rules that student-athletes sought to strike down in O’Bannon was the NCAA bylaw that prevented them from earning income based on their name, image, and likeness (NIL). The attention brought to NIL rights by O’Bannon led to a new California law prohibiting the NCAA from limiting an athlete’s ability to earn money from their publicity rights. Other states followed suit, and by the summer of 2021, the NCAA announced it would no longer enforce NCAA bylaws prohibiting athletes from benefiting from their publicity rights. In the last two years, the boundaries between NIL payments and “pay-for-play” have blurred. Although most agree that college athletics needs some rules to distinguish between market-based NIL deals and boosters paying for play, the NCAA risks antitrust liability if it attempts to do so.

The Right to Organize. On September 29, 2021, Jennifer Abruzzo, the general counsel for the National Labor Relations Board (NLRB) issued a memorandum (Memorandum GC-21-08) announcing her enforcement position under federal labor law that players at certain academic institutions are “employees” with the right to organize and form unions. “Misclassifying such employees as mere ‘student-athletes,’ and leading them to believe they do not have statutory protections” may be a violation of the National Labor Relations Act.

Shortly thereafter, the College Basketball Players Association filed a charge against the NCAA with the NLRB in Indianapolis, claiming the NCAA engaged in unfair labor practices by describing college athletes as “student-athletes.” In February of 2022, the National College Players Association filed unfair labor practice charges in two different actions against the NCAA, PAC-12, University of Southern California, and University of California Los Angeles.

Fair Labor Standards Act. In 2019, five student-athletes sued the NCAA and 25 colleges in Johnson v. NCAA, claiming that athletes are “employees” of their institutions under the Fair Labor Standards Act (“FLSA”). These athletes assert they should be paid for time spent on athletics activities. Even though the United States Court of Appeals for the Seventh Circuit rejected a similar FLSA claim in 2016, the Pennsylvania federal court denied the NCAA’s motion to dismiss. In rejecting the NCAA’s legal argument that student-athletes are not employees, the trial court cited the Supreme Court’s 2021 Alston decision and the Kavanaugh concurrence. The NCAA has appealed the loss to the United States Court of Appeals for the Third Circuit, which heard arguments in February 2023.

Takeaways for Trustees. This is not just about football. While big-money sports have garnered most of the public attention and sentiment, many of the legal arguments apply to all sports at all levels of competition. Title IX may also require universities to implement changes evenly across all sports, even those that do not generate revenue.

If Congress intervenes to exempt college athletes from employment laws or to allow some set of national rules regulating pay for play, any federal scheme will likely bring changes to the traditional model, possibly including increased healthcare or other benefits for student-athletes.

The only thing that is certain: more change is coming.

Lee Tyner is general counsel at Texas Christian University:


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Trusteeship Magazine Article
Legal Standpoint: The Rule of Law

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