Employee Athletes Would Lead to Seismic Shift in College Sports

A hearing before an administrative law judge in Los Angeles could change the nature of college sports forever.

The National Labor Relations Board filed a complaint against the University of Southern California, the Pac-12 Conference, and the National Collegiate Athletic Association on May 18 alleging that those entities, acting in concert, unlawfully misclassified scholarship athletes as “student-athletes” rather than “employees.”

This complaint follows an extraordinary memorandum issued by the NLRB’s general counsel on Sept. 29, 2021, that adopted that same position. The NLRB is now putting its analysis into action in the administrative hearing that began Nov. 7.

The legal theory underlying the NLRB’s case is quite simple, even if the consequences from a successful outcome could be catastrophic for college athletics. According to the NLRB, college athletes receive money in the form of scholarships in exchange for “services”—playing college sports. The universities, conferences, and NCAA exercise control over the lives of those athletes in the form of strict rules regulating their eligibility, practice, game schedules, and other aspects of their athletic and personal life.

Under that equation, those athletes are “employees” entitled to the benefits of federal and state labor laws. That would include the right to unionize and strike, access to unemployment and workers’ compensation benefits, liability under laws prohibiting discrimination in the workplace, disability benefits, improved health care, and other benefits either mandated by law or obtained through collective bargaining.

Unionization efforts on college campuses extended into sports in September, when the Dartmouth men’s basketball team filed a petition with the NLRB to unionize, the first collegiate team to do so since the unsuccessful efforts of the Northwestern University’s men’s football team in 2014.

In the Northwestern case, the NLRB regional director in Chicago ruled that the football players were employees entitled to the benefits and protections of federal labor laws. On appeal to the full NLRB Board in Washington, the board nullified that decision and refused to weigh in on the employee issue on narrow jurisdictional grounds.

The NLRB lacks jurisdiction over public colleges and universities; although Northwestern is a private university, 108 of the 125 teams in the NCAA’s Division I Football Bowl Subdivision are public schools. The board declined jurisdiction in the Northwestern case on the grounds that issuing a ruling in a single case involving a single team “would not promote stability in labor relations across the league.” Put bluntly, the board punted on the issue—pun fully intended.

And this is where the NLRB’s allegation of concerted action by USC, the Pac-12 Conference, and the NCAA comes in. The NLRB accuses them of being “joint employers” in that they all have rules, regulations, and policies that exercise significant control over athletes’ lives. Joint employers may be held liable together for unfair labor practices and other violations of the NLRA.

This “joint employer” theory in the context of college sports isn’t new. The NLRB’s general counsel specifically warned about its applicability in her Sept. 29, 2021, memorandum. In the USC case, the NLRB is using the joint employer theory to lay the groundwork for exercising jurisdiction over public colleges and universities which, as noted above, comprise the vast majority of schools in the FBS.

Although USC is a private institution, if the Pac-12 and NCAA are determined to be “joint employers” with USC and therefore subject to the NLRA and the rules and regulations of the NLRB, that ruling could extend to athletes at public schools as well.

A similar issue is now before the federal US Court of Appeals for the Third Circuit in Philadelphia. In that case, former Division I athletes filed suit against several universities under the federal Fair Labor Standards Act and state labor laws, arguing that they were “employees” deserving of minimum wages and overtime pay during their playing days. The trial court agreed with the athletes, and the case is now on appeal to the Third Circuit. A highly anticipated ruling is expected any day.

But “employee” classification, while perhaps beneficial to the athletes, has other consequences as well. If an athlete is an employee, there’s no limit on what the college or university can pay them. That will result in an arms race where the richest schools with the biggest budgets can offer the highest compensation packages.

And what about scholarship athletes in so-called non-revenue sports—those other than football and basketball? Will they get paid too? Will a member of the men’s tennis team or woman’s volleyball team get a paycheck, and how will that compare to the compensation of a star quarterback?

That leads to the issue of Title IX, the federal statute that mandates that men and women have an equal opportunity to participate in sports. One financial requirement of Title IX is that aggregate scholarship money for all sports programs at a university must be divided proportionally between men and women in the same ratio as their participation rates. What happens to this calculation when salaries, bonuses, and benefits are factored into the financial package provided to an athlete?

The NCAA, athletic conferences, and schools have sought shelter in Congress. Several bills have been introduced that would specifically exclude college athletes as “employees.” On Oct. 17, the Senate Judiciary Committee held a hearing on that issue. But with the current dysfunction in Washington, there seems to be little hope for a legislative solution in the near term.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Kenneth A. Jacobsen is a practice professor at Temple University Beasley School of Law and director of its sports law program.

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