NCAA Deal Raises Question of Whether Athletes Are Now Employees

A recent settlement is poised to spark new litigation around college athletes’ employment status as they begin receiving direct compensation from schools for the first time, and has the potential to tip the scales in favor of student athlete organizing.

The agreement to settle three antitrust lawsuits against the NCAA and Division I schools is a gamble by administrators that sharing a fraction of the billions of dollars coming into college sports every year will quell the tide of lawsuits against them after already waging a five-year legal battle.

But labor and athletics attorneys say the new dynamic between schools and players will only intensify the debate over whether athletes should get employee rights and, if the gamble doesn’t work, could push university officials to come to the bargaining table with students. Such a move would mean the athletes’ would get access to legal shields, such as minimum wage and unionizing protections.

“Depending on how universities structure their revenue sharing deals and their NIL agreements, they could unintentionally create a pathway to employment for the athlete,” said Alicia Jessop, a sports administration professor at Pepperdine University.

The decision by Judge Claudia Wilkins of the US District Court for the Northern District of California to approve the $2.8 billion settlement has already been appealed by female athletes alleging that the deal’s payouts favor men in violation of Title IX.

Pay for Play Contracts?

The settlement, approved June 6, allows higher education institutions to pay their athletes out of a $20 million yearly pool. Jessop said schools are structuring these payments through revenue sharing or name, image, and likeness contracts directly with the athletes.

Players have been getting paid through third-party NIL deals since 2021 when the US Supreme Court struck down NCAA policies against the practice. But the new compensation avenues will mark the first time that athletes get paid to play directly from the schools.

Although the details vary widely from school to school, Jessop said the pacts resemble independent contractor deals by stipulating that the colleges aren’t employing the athlete. Independent contractors are unable to unionize or access legal protections that come with employee classification.

Despite these provisions, however, attorneys said the addition of direct payments could make employment arguments stronger, and the contracts will likely come under intense scrutiny.

Jessop and Mit Winter, an attorney with Kennyhertz Perry who heads the firm’s sports law practice, said they’ve reviewed many athlete agreements and some contain provisions exerting extensive control over the players, including requirements for athletes to be enrolled in the school, perform specific duties for the teams, and get permission before red-shirting—sitting out from competitions for a year to allow for a fifth eligible season with the NCAA.

“In some instances, the way they’re structured and the expectations that the university has in terms of deliverables, and the control over the athlete in how those deliverables are produced, certainly tees up a fact pattern that could lead to an employment classification down the line,” Jessop said.

Courts use various tests when evaluating misclassification claims, but all examine the control exerted over the worker and factors such as provided equipment and benefits, authority over business decisions, and whether the worker has an independent practice.

“If a court saw some of these agreements in an employment case, they would think ‘Yeah, this helps me determine that you’re an employee,’” Winter said.

Athletes and their advocates have been working to gain employment rights for years. The men’s basketball team at Dartmouth University unionized in March 2024 after a National Labor Relations Board official determined they were employees.

Player advocates also filed unfair labor practice charges against the University of Southern California, leading to administrative hearings which revealed the level of control exerted over the school’s football players.

Both cases were dropped after President Donald Trump won re-election, before the full NLRB was able to pass judgment on the merits.

The NCAA and several schools are also facing a wage and hour lawsuit from players who allege they were denied a minimum wage while playing. It’s the only active case over athletes’ employment, and currently is before a district judge in Pennsylvania.

Antitrust Liability and the ‘Only Solution’

While the settlement in House v. NCAA resolves the case’s immediate antitrust claims, parts of the settlement raise new threats, attorneys said, citing the $20 million payment pool, rules capping team sizes, and requirements for athletes to seek approval from a Deloitte-powered commission for some third-party NIL deals.

Caps on athlete mobility and pay have historically been struck down by the courts, but employers can get antitrust immunity when restrictions are bargained for and agreed upon by the workers’ union.

“Schools can pay their athletes but the cap is still there. It’s just gone from zero to $20 million,” said Winter. “It’s a cap that the athletes haven’t agreed to through collective bargaining.”

University of Tennessee Athletic Director Danny White called collective bargaining “the only solution” to college sports’ plague of antitrust litigation in a May interview with Chancellor Donde Plowman, and more college administrators may feel similarly if they continue to face lawsuits.

“It’ll just restart the clock on this thing that these schools just spent billions of dollars winding up,” said Jessop. “The minute that happens, I think the frustration is going to boil over and people are going to start asking themselves ‘Why do we keep doing this over and over when there’s a very clear solution right in front of us?’”

Collective bargaining and player unionization may come within the next five or ten years, whether it’s mandated by a court or agreed to by the universities, said Lance Compa, a senior lecturer emeritus at Cornell University.

“It will require a philosophical shift that is very difficult but it’s really the only way out,” he said. “It raises a whole lot of new problems but I have confidence in college athletes that they can sort it out.”