NCAA Athlete Wage Case Invites Students to Sue More Colleges

A federal appeals court decision advancing student athletes’ minimum wage claims opens the NCAA and the nation’s colleges up to more lawsuits that could be worth millions, attorneys say.

Players from universities including Cornell, Fordham, and Villanova were allowed to pursue their Fair Labor Standards Act case after a divided US Court of Appeals for the Thirds Circuit panel on July 11 found that they plausibly alleged the NCAA and the schools were their joint employers.

The decision in Johnson v. NCAA—which created a circuit split that could eventually reach the US Supreme Court—signals a distinct shift in courts’ attitude towards athletes’ argument that they deserve rights and protections as employees. That issue is also being debated before the National Labor Relations Board in the context of players unionizing and has caught the attention of congressional lawmakers.

The ruling increases the possibility of more current and former players lodging suits to seek back pay for unpaid minimum wages and overtime, according to Mit Winter, an attorney with Kennyhertz Perry who heads the firm’s sports law practice.

“I would definitely not be surprised if there are some cases similar to Johnson filed now after this decision,” he said. “If you can make a class action out of your case those damages would probably add up real quick. That can be appealing for some plaintiff attorneys.”

Joseph Schmitt, an employer-side attorney with Nilan Johnson Lewis, said athletes and their attorneys might choose to file their wage and hour suits sooner rather than later because of how the FLSA’s statute of limitations is structured. Workers can only claim damages for violations within the past two years—a period that extends to three if the violation was committed willfully by the employer.

“Every day you wait has consequences,” Schmitt said. “For people who graduate, the amount of damages they can get will keep going down, maybe to zero. So that’s going to be something that the plaintiffs and their lawyers are going to have to mull over.”

An NCAA spokeswoman said in an emailed statement that the association is working to “modernize” college athletics.

“Student-athlete leadership from all three divisions agree that college athletes should not be forced into an employment model, which they expect will harm their experiences and needlessly cost countless student-athletes opportunities in women’s sports, Olympic sports, and sports at the HBCU and Division II and Division III levels,” she said.

Death of Amateurism?

The Third Circuit’s opinion is the latest blow to the NCAA’s amateur model after colleges agreed to pay players a portion of media revenue in order to settle a trio of antitrust lawsuits.

Circuit Judge L. Felipe Restrepo, a Biden appointee, rejected that model, saying in the opinion that the term “student-athlete” was a “marketing invention” that the NCAA invented to “obfuscate the nature of the legal relationship at the heart of a growing commercial enterprise.”

“The argument that colleges may decline to pay student athletes because the defining feature of college sports is that the student athletes are not paid is circular, unpersuasive, and increasingly untrue,” Restrepo said, citing Justice Brett Kavanaugh in the Supreme Court’s 2021 NCAA v. Alston ruling that paved the way for collegiate athletes to profit off their name, image, and likeness.

Jason Stahl, president of the College Football Players Association, said the opinion reflects the court and public’s growing distaste for how the NCAA treats its players.

“You’ve got to stop treating the athletes as children, as opposed to the workers who generate all your wealth,” he said. “And so until they get that, I don’t see lawsuits stopping.”

The Third Circuit majority remanded the case back to Judge John R. Padova of the US District Court for the Eastern District of Pennsylvania, instructing him to apply “an economic realities analysis grounded in common-law agency principles.”

The athletes should be considered employees if they are under control of the employer, perform services that are “primarily” for the employer’s benefit, and perform work in exchange for “express or implied” compensation or benefits, the Third Circuit panel said.

Laura O’Donnell, chair of Haynes and Boone LLP’s Wage and Hour Litigation Practice Group, said the decision still leaves many unanswered questions that district courts will have a “difficult time” interpreting.

“The opinion states there is a difference between athletes who play their sports for predominantly recreational and non-commercial reasons, but what does that mean?” she said. “What is it about a player that crosses them into work? Is it how much profit the college can tie to them? Is it how much they sacrifice for the sport? And how are the players going to show that?”

Other untested issues include what actions count as work, and whether employment determinations can be made for each individual as opposed to whole teams, O’Donnell said.

Schmitt said he believes Padova will find the athletes to be employees in this case, but that it would take further litigation to figure out which type of players and which schools meet the bar for employment status under the FLSA.

“It’s going to take a long time to flesh this stuff out because it’s a messy analysis,” he said. “And there’s a lot of different sports at a lot of different colleges. The size of the college matters, the type of sport matters.”

Labor Law Influence

The athlete employment question is also playing out at the NLRB, as the board weighs the status of men’s basketball players at Dartmouth College—who voted to unionize in March—and football and basketball players at the University of Southern California.

The labor board uses the common law test for determining who is an employee, and relies heavily on the level of control and the presence of payment to determine a worker’s status.

Applying that standard, an NLRB regional director declared the Dartmouth men’s basketball players are employees, saying they received payment in the form of gear, tickets, and travel in return for their labor.

The debates before an NLRB judge in the USC case also focused on the control exerted over players by the school.

The Third Circuit’s decision pointed to NLRB cases to demonstrate how common law employment principles could be applied to athletes as a new class of workers.

“We recognize that the NLRA and FLSA have distinct policy goals, but their shared history often inspires courts to draw interchangeably from each statute’s case law to answer fundamental questions related to the equitable regulation of the American workplace,” Restrepo said in the decision.

O’Donnell said that while the employment test under the FLSA is different than that under the National Labor Relations Act, the courts and the board can use the other’s rulings to support their own.

On the Hill

The decision also could increase momentum behind a push to get Congress to act on the players’ employment status, Winter said.

House Republicans approved a bill that would prohibit the athletes from gaining employee rights and congressional Democrats are struggling to balance their pro-union views with the potential consequences of re-classifying them.

“Maybe some people are seeing the writing on the wall and saying, ‘All right, we’re probably going to have to operate in a model where at least some of our college athletes are employees. So let’s start getting ready for that,’” Winter said.

“But you’re obviously going to have other people who are going to push back against that really hard and keep lobbying with Congress,” he said.

The case is Johnson v. NCAA, 3d Cir., No. 22-01223, 7/11/24.