NCAA Battling From Behind in Student Athlete Employee Suit (1)

The National Collegiate Athletic Association is set to spar Feb. 15 with Division I college athletes fighting to prove they can be considered employees.

Their case, pending before the US Court of Appeals for the Third Circuit, has major implications for the future of college sports, which brought in a record $1.16 billion in 2021.

Students won the last round, putting pressure on attorneys for the NCAA and its top tier member schools to make a goal line stand, halting the athletes’ advance before they score their ultimate victory: recognition as revenue generating workers.

“It’s really a very narrow question before the Third Circuit,” George Washington University law professor Ellen Zavian said. “The court is looking at whether the defendants can prevail on a motion to dismiss. The crux isn’t whether the athletes ARE employees, but whether they CAN BE considered employees. It’s a step process.”

Student athletes have been fighting for recognition as employees in the big money world of college sports since at least 2014 when a group of Northwestern University football players first attempted to form a National Labor Relations Board-recognized bargaining unit.

Circuit Split Potential

If the Third Circuit rules that the athletes can go forward with their claims, it would create a split with the Seventh and Ninth circuits, making it more likely the Supreme Court will review the case.

But resolution of the question whether the NCAA and schools must compensate athletes as employees is likely a long way off no matter how the appeals court rules.

“The case is in its infancy. Even if it goes up to the Supreme Court, it may end up back in the Eastern District of Pennsylvania,” attorney Angela de Cespedes with Saul Ewing LLP in Miami told Bloomberg Law. De Cespedes’ practice includes representation of US and international professional sports leagues, federations, and teams.

In the end, de Cespedes said, “the chances are equally good that the NCAA or the plaintiffs will prevail.”

The Seventh and Ninth Circuit decisions were predicated on amateurism, but the “landscape has changed” because of the US Supreme Court’s unanimous June 2021 ruling in NCAA v. Alston, de Cespedes said. “The question is whether it has changed enough,” she said.

The court in Alston, an antitrust case, opened the door to student athlete compensation, striking the NCAA restrictions on student athletes receiving education-related benefits like computers, internships, and academic achievement awards.

“I am hopeful there will be an agreement outside the courtroom,” Zavian told Bloomberg Law. She is also a sports agent and general counsel for USA Lacrosse.

The NCAA may be motivated to reach a resolution because it is facing headwinds in and out of court and to resolve uncertainties, Zavian said. “The NCAA isn’t in the best standing with the Supreme Court,” after the Alston decision, she said.

In Johnson v. NCAA, the case now before the Third Circuit, Judge John R. Padova of the US District Court for the Eastern District of Pennsylvania ruled in August 2021 that the student-athletes may proceed with their Fair Labor Standards Act claims against the colleges and universities they attended.

Padova cited the Alston decision, including Justice Brett Kavanaugh‘s concurring opinion. “The NCAA says that colleges may decline to pay student athletes because the defining feature of college sports, according to the NCAA, is that the student athletes are not paid. In my view, that argument is circular and unpersuasive,” Kavanaugh said.

One month later Padova ruled that the students could pursue their Fair Labor Standards Act claims against the NCAA because they plausibly alleged it, along with their schools, is their joint employer.

The NCAA and the schools appealed, arguing that the Seventh Circuit ruling that student athletes aren’t employees of the schools they attend remains good law that was “undisturbed by Alston,” but the trial court—which lies outside the circuit—"declined to follow it.”

The Road Ahead

It’s not only the courts—the NLRB is weighing in as well, Zavian said, citing the September 2021 memo issued by General Counsel for the NLRB, Jennifer Abruzzo, stating “certain players at academic institutions are statutory employees, who have the right to act collectively to improve their terms and conditions of employment.”

“The NCAA has three options,” Zavian said. “It can reach a collective bargaining agreement, which means declaring the players are employees, it can amend the rules governing working conditions, which would entail an agreement they are somehow compensated, or they can litigate.”

Even if the athletes are deemed employees, de Cespedes says, there is still a very long road ahead. “Initially, the fight will be over minimum wages,” but “at some point, potentially a decade from now, the goal will be to unionize,” she said.

“There is a danger in what collective bargaining would do to college sports,” de Cespedes said. “Not all colleges will be able to afford it,” which could drive them to shut down their programs, she said.

The panel hearing arguments in February consists of L. Felipe Restrepo, David J. Porter and Theodore A. McKee.

Wigdor LLP represents the athletes. Constangy Brooks Smith & Prophete LLP represents the NCAA, Cornell University, Fordham University, Lafayette College, Sacred Heart University and Villanova University.

The case is Johnson v. NCAA, 3d Cir., No. 22-1223, oral argument 2/15/23.