- Brian D. Barger, Partner, McGuireWoods LLP (Moderator)
- Michael R. Phillips, Partner, McGuireWoods LLP
- Sarah K. Wake, Partner, McGuireWoods LLP
Every LEAD1 athletics department should be aware of legislative, judicial, and administrative developments that may affect the status of college athletes. Because of these possible changes, on Wednesday, LEAD1 Association (“LEAD1”) hosted its latest webinar with expert employment law attorneys at McGuireWoods LLP to discuss preparing for a possible future with college athletes defined as employees. Although likely a couple years away from a final outcome (due to the possibility for appeals), perhaps the most imminent way that college athletes could be defined as employees is the Johnson v. NCAA case in the U.S. Court of Appeals for the Third Circuit, where the essential question is whether college athletes can be employees under the Fair Labor Standards Act (FLSA). Here are some of the important takeaways from the webinar:
- A Third Circuit ruling on interlocutory appeal, while likely not definitive, could open the door for athletes to be considered employees under the FLSA. Johnson v. NCAA is being heard by the Third Circuit on interlocutory appeal, which means in the middle of the case or before the District Court resolves the case on the merits. This means that even after a Third Circuit ruling, the case will go back to the District Court for further resolution. But the Third Circuit ruling that college athletes could be employees under the FLSA would create a circuit split on the employment issue given previous court rulings in the Seventh and Ninth Circuits, where both circuits have held that college athletes are not employees. A circuit split generally increases the possibility of the U.S. Supreme Court hearing a case.
- There are many practical questions that would arise from college athletes being defined as employees under the FLSA, such as, would college athletes be entitled to a minimum wage? Yes. The FLSA applies to both public and private schools, and so college athletes would be entitled to federal minimum wage standards, and subject to their state minimum wage laws, which vary by state.
- Would college athletes be paid for overtime hours? Most likely. College athletes would most likely be considered non-exempt employees under the FLSA, which means they must be paid overtime wages. Under the FLSA, unless exempt, employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than one-half their regular rates of pay. Accordingly, it would be essential to determine what would be considered “compensable time” under the FLSA. One way to define compensable time could be any hourly activity directly related to athletics, such as working on strength and conditioning. But with a potentially blurry definition, it could open the floodgates for other activities like time spent on academics or even travel to be considered compensable. A possible exempt status (not subject to overtime) under the FLSA would likely need to be created by the Congress, which would be highly impractical.
- Could there be a set pay structure for college athletics? It is highly unlikely that the NCAA and/or the conferences could cap certain pay structures given the potential for liability under antitrust law, however, a ruling under the National Labor Relations Act (NLRA) with collective bargaining involved could create a more controlled wage structure.
- Could there be an open economy allowing schools to compete for athletes for higher wages? Yes. It is possible that if college athletes were entitled to hourly wages and not considered exempt that competition in the marketplace, like in other industries, could dictate wages, particularly given antitrust concerns with institutions potentially conspiring to control wages.
- Could college athletes be considered “at-will” subject to termination and might college athletes be able to negotiate their compensation? Yes. Institutions could either set up their employment structure as (1) “at-will” where college athletes could be potentially fired for bad performance (or for any other legal reason) or (2) for a definite term, such as a four-year contract where athletes could be involved in negotiating their contract and penalties could be imposed for leaving their institution. In other words, an employment structure could be at-will or arranged as more of a definite contract.
- Would Title IX be affected? Most likely. If there were an open economy, those institutions with larger budgets may be in a better position to offer higher wages to college athletes. In such a scenario, such as, for example, the football team being offered higher wages, there would be gender equity implications.
- Could scholarship aid be impacted? Yes. Scholarships would not be considered wages. Thus, athletes who receive need-based aid may be less eligible due to being paid wages. In addition, such wage income would be taxed. On the other hand, because institutions may not be able to afford paying their athletes both hourly wages and scholarship aid, they may be more inclined to revoke scholarship aid, which unlike hourly wages, wouldn’t be required under federal law.
As such, Wednesday’s webinar provides LEAD1 athletics departments with questions that they should begin considering, as the employment issue continues to be adjudicated in some of the country’s highest courts.