Will Student Athletes Pass the Test to Decide if They are Employees?

On July 11, 2024, The United States Court of Appeals (“COA”) for the Third Circuit in response to a motion to dismiss filed by the defendants in Johnson, et al. v. National Collegiate Athletic Association, et al., denied the defendant’s motion and instead held that student athletes are not barred from being considered employees under the Fair Labor Standards Act (“FLSA”). Yes, in a decision that might well represent the last nail in the coffin for the NCAA’s “amateurism” argument, the court took the position that college athletes whose efforts primarily benefit their schools may qualify as employees deserving of pay under federal wage-and-hour laws.

In Johnson, the plaintiffs allege in their District Court filing that Division I student athletes are in fact employees of the NCAA and some of its member colleges and universities (under the FLSA and various state wage and hour laws), similar to students engaged in work study programs. The matter before the COA for the Third Circuit in July was a previous denial by the District Court of a Motion to Dismiss filed by counsel for the NCAA in which the NCAA asserted that college athletes are amateurs and are not employees of their schools or the NCAA. The COA found the NCAA’s arguments unconvincing and upheld the District Court’s denial of the NCAA’s motion to dismiss. The COA then remanded the matter back down to the District Court for further fact finding, with one caveat: the COA concluded the District Court erred in applying the test from the Second Circuit’s decision in Glatt v. Fox Searchlight Pictures, Inc., in which the Second Circuit considered whether unpaid interns must be deemed employees under the FLSA and compensated for their work. The Third Circuit felt the Glatt test was inappropriate because, among other reasons, “interscholastic athletics are not part of any academic curriculum,” unlike unpaid collegiate internships, which sometimes are part of the curriculum.

So, what is the best method for determining whether student-athletes are employees? A test of course! And just like life: it is a cumulative circumstances test. The COA said a test should be developed to differentiate between students who play college sports for fun and those whose effort “crosses the legal line into work.” “With professional athletes as the clearest indicators, playing sports can certainly constitute compensable work,” U.S. Circuit Judge L. Felipe Restrepo wrote in his opinion. “Ultimately, the touchstone remains whether the cumulative circumstances of the relationship between the athlete and college or NCAA reveal an economic reality that is that of an employee-employer.”

To this end the Third Circuit ordered that the District Court apply the “economic realities” test, which the Third Circuit felt is the more appropriate test. Specifically, the Third Circuit held that college athletes may be employees under the FLSA when they: a) perform services for another party; b) necessarily and primarily for the other party’s benefit; c) under that party’s control or right of control; and d) in return for express or implied compensation or in-kind benefits. The court stated it would not use a “‘frayed tradition’ of amateurism with such dubious history to define the economic reality of athletes’ relationships to their schools.”

Tellingly, the Third Circuit also purposefully declined to use the term “student athlete” in its opinion, noting the term is a brand name and an “NCAA marketing invention designed to ‘conjure the nobility of amateurism’ . . . and ‘obfuscate the nature of the legal relationship at the heart of a growing commercial enterprise.’” This unvarnished rebuke to the rhetoric used for decades by the NCAA to defend what is now largely being viewed by the courts and society as inequitable treatment of their athletes, made it clear the Court of Appeals for the Third Circuit holds well defined views on the subject of college athlete employee status, and that they do not favor the NCAA.

Further illustrating the broader tide change against the NCAA on this issue, the July 11, 2024 ruling in Johnson follows unfavorable decisions for the NCAA from the Ninth and Seventh Circuits as well as National Collegiate Athletic Association V. Alston et al., a 2021 Supreme Court decision that led the NCAA to amend its rules to allow athletes to profit from their name, image, and likeness. In May, the NCAA announced a nearly $2.8 billion revenue-sharing plan that could steer millions of dollars directly to athletes by next year. The unanimous Supreme Court decision lifted the ban on college compensation beyond full-ride scholarships. Schools recruiting top athletes now can offer big money in education-related benefits including (but not limited to) study-abroad programs, computers, and graduate scholarships. Justice Brett Kavanaugh wrote in a concurring opinion, “Traditions alone cannot justify the NCAA’s decision to build a massive money-raising enterprise on the backs of student athletes who are not fairly compensated,” and went on to state that, “The NCAA is not above the law.”

No matter who ultimately prevails in District court on the merits, their decision will be appealed to the Third Circuit. And when it then arrives back with the justices of the Third Circuit Court of Appeals, we likely have already seen a preview of how they may rule on an appeal of the case’s merits.

So bottom line: The winds of change are blowing in the world of college athletics, and a change in status for players to be considered employees brings with it many additional, and as of yet unanswered, questions. Particularly interesting to those reading this who are practicing in the workers’ compensation arena, is the question of work-related injuries for employee-athletes. Will a sports injury now be considered compensable under a workers’ compensation statute? Does a sports rule violation constitute Willful Misconduct and thus present a bar to compensability for those claims? The trend towards pro-player decisions from the higher courts seems locked in at this point, so it seems likely that questions like these will need to be addressed in the near term if we want to assure fairness to the newest members of the American workforce.

Should you have any questions about the issues discussed here or other legal issues, please do not hesitate to contact the lawyers at Ford Richardson.

Ford Richardson is a full-service law firm with headquarters located in Richmond’s financial district and satellite offices in Roanoke, Fairfax and Virginia Beach and Washington, D.C..

Our commitment to our clients is simple: offer top-tier clear legal solutions that allow our clients to excel in their business.

We are privileged to give back to our community and believe it is our responsibility to do so. Our attorneys and support staff serve as leaders and volunteers to a wide array of civic and charitable organizations.

Posted In: E-Blast