Articles

Intercollegiate Athletics and Collective Bargaining Agreements

Date: June 7, 2019
 For close to a century, intercollegiate athletics under the umbrella of the National Collegiate Athletic Association (the “NCAA”) has operated under the amateurism model, as propagated by the courts, which have consistently held that athletes are students and not employees of the institutions of higher education in which they matriculate.  Thus the origin of the term “student-athlete”, which is a term of art denoting amateurism.  This determination by the courts, although arguably flawed in its reasoning, has provided substantial economic advantages to many of the NCAA member institutions as they generate large amounts of revenue from ticket sales, sponsorships, marketing and sales, lucrative television contracts, merchandising and licensing and sales of paraphernalia to fans with great affinities for their university athletic teams.  The revenue streams, which inure to the most prominent institutions such as those resident in what is referred to as the Power 5 (also referred to as the Big 5) conferences, mirror the sources of revenue generated by professional sports franchises in the major professional sports leagues which have historically been referred to as the Big 4 (i.e. the National Football League (“NFL”); the National Basketball Association (“NBA”); the Major League Baseball (“MLB”); and the National Hockey League (“NHL”)).  The fundamental difference between major college athletics, which has become highly commercialized, and its professional counterpart, in the 21st Century, is that one has access to relatively inexpensive labor costs with limited bargaining power and the other has substantial labor costs with greater bargaining power due to unionization and collective bargaining.  Collective bargaining provides the professional athlete with far greater power to negotiate not only compensation, but also benefits to include health and retirement benefits, long term medical care for catastrophic injuries, termination, guaranteed contracts and standard form playing agreements with clubs as well as a plethora of other issues such as second medical opinions and choice of physician in the case of surgery.  Needless to say, historically, the student-athlete engaged in “amateur intercollegiate athletics” has not enjoyed the benefits of bargaining by virtue of his or her status as decreed by the courts and the NCAA.        
 
Dr. Myles Brand, the first college president to be elected as the president of the NCAA, in defense of the “amateurism model” first coined the phrase the “Collegiate Model” in his 2009 “State of the Association” address in response to the massive amount of criticism the association was receiving regarding the increasing commercialization of college athletics while steadfastly refusing to pay student-athletes.   Dr. Brand stated that “student athletes should not be exploited for commercial purposes because they are students not professionals.”
 
The concept of the “Collegiate Model” has been under a constant barrage of scrutiny and criticism for over a decade commencing in 2006 with the White v. NCAA case and most recently culminating with a favorable decision in the Alston v. NCAA case resulting in substantial settlements (i.e. in the aggregate over $400 million dollars) and significant changes in the manner in which student-athletes are being supported financially by their member institutions.  Nevertheless, the concept of the amateur student-athlete persists even after such close examination by the courts as a barrier to pay for play.  The underlying premise of the “Collegiate Model” is essentially codified in the NCAA Bylaws Article 2.9 - The Principle of Amateurism.
 
Student athletes shall be amateurs in intercollegiate sport, and their participation should be motivated primarily by education and by the physical, mental and social benefits to be derived.  Student participation in intercollegiate athletics is an avocation, and student-athletes should be protected from exploitation by professional and commercial enterprises.
 
As previously stated, the NCAA and the courts have historically held that college athletes are students and not employees of member institutions of the NCAA and are eligible to participate in intercollegiate competition based upon their amateur status.  Both the NCAA and the courts have defined college athletes as students and amateurs, despite the value of the Grant-in-Aid awarded to the athlete to attend the University which could represent hundreds of thousands of dollars, to include but not be limited to tuition, room and board, fees, and books and other costs of attendance at the institution which are capped by the NCAA.  Student-athletes have sought redress by various means to include unionization and litigation.
 
In March 2014, the football team at Northwestern University petitioned the Regional National Labor Relations Board to make a determination that the student-athletes receiving grant-in-aid were statutory employees as defined in Section 2(3) of the National Labor Relations Act (“NLRA”) and to direct an election in the unit of grant-in-aid student athletes.  Walk-on student-athletes were not included as they were not recipients of grant-in-aid as a result of their participation in varsity sports and therefore did not meet the requisite requirements to be deemed employees.  The Regional Director of the Chicago regional office found that the grant-in-aid scholarship athletes were employees as contemplated under the NLRA.   In making his ruling, he cited several key factors:
           
  • The student athletes performed services their employer benefitted from.
  • They received compensation (i.e. grant-in-aid).
  • For the compensation the employees were subject to the control of the employer in the performance of their football duties.
  • The employees spend between 50-60 hours per week during  their one month training camp, prior to the academic year, on their football duties
  • The employees spend 40-50 hours per week, during the academic year, during their 4 month season performing their football duties.
 
As a result of the decision by the Regional NLRB office, the 85 scholarship players held an election to determine if they would form a union.  Pending the outcome of a review and decision by the National Labor Relations Board, the ballots were left sealed.  The NLRB failed to uphold the regional office decision on the basis that the decision would only apply to private institutions within the NCAA which played FBS level football, most of which by a wide margin are public institutions and would not be subject to the Board’s jurisdiction.  The NLRB stated that it would not rule as to whether they had jurisdiction under Section 2(3) with regards to Northwestern but rather opted not to assert jurisdiction because Northwestern was the only private school in the Big Ten and therefore by asserting jurisdiction they could not promote stability in labor relations which is the intent of the legislation.  Further, the Board stated that because they could not regulate most FBS teams, asserting jurisdiction would not allow them to promote uniformity and stability.  The ballots for the election were never tallied and the outcome was never determined.  The NLRB stopped short of determining that they did not have jurisdiction and the authority to deem the Northwestern scholarship players as statutory employees.  The issue remains unresolved. 
 
As an alternative, student-athletes beginning with the White case in 2006 have been resorting to anti-trust actions against the NCAA.  The cases have been premised on Section 1 of the Sherman Antitrust Act which makes it unlawful to form a “contract, combination in the form of a trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states.” 15 U.S.C Section 1. 
 
In the White case the student-athletes argued that the grant-in-aid as capped did not represent the actual cost of student-athletes attending member institutions, but because of the limits placed on the composition and therefore by definition the amount of the scholarship, the student athlete was injured as they faced substantial financial distress due to the artificial cap placed on the value of the grant-in-aid the institution could award to an athlete.  After protracted litigation, the parties settled for $218 Million Dollars however, there was no acknowledgement by the NCAA of any antitrust violations under Section 1 of the Sherman Antitrust Act.  The question as to the legality under the federal antitrust laws of the NCAA’s practice of capping grant-in-aid awards to tuition, fees, room and board and course related books as “cost of attendance”, under Bylaw 15, as the principal means of preserving amateurism in Division I athletics was not resolved by the settlement in the case.
 
The principle of amateurism would come under further assault again in 2014 in O’Bannon v the NCAA.  Ed O’Bannon a former UCLA standout player filed a lawsuit against the NCAA alleging that the NCAA was engaged in agreements with EA Sports which permitted the use of his name image and likeness and that he had not granted authorization  to the NCAA or EA Sports to use his likeness without compensation.  O’Bannon v NCAA challenged the legality of the NCAA barring student athletes from being able to leverage their name, image and likeness for personal compensation under the guise of amateurism and an athlete’s eligibility (i.e. Bylaw 12). Under NCAA Bylaw 12 an athlete if receiving compensation from third parties based upon their athletic skills and abilities would be deemed to be ineligible for future competition.  O’Bannon’s focus was on Football Bowl Subdivision (“FBS”) and the elite Division I Basketball Schools.  Judge Wilkens, of the U.S. District Court, the N. D. Court of California, ruled that the NCAA rules prohibiting student-athletes from being paid for the use of their names, likeness and image unreasonably restrained trade in violation of Section 1 of the Sherman Act.  The judgement in favor of the plaintiffs permanently enjoined the NCAA from prohibiting its member schools from (1) compensating FBS football and Division I men’s basketball players for use of their name, images and likeness by awarding grant-in-aid up to the “full” cost of attendance at their respective schools through the use of stipends, or (2) paying up to $5,000 per year in deferred compensation to FBS football and Division I men’s basketball players for the use of their Names, image and likeness, through trust funds to be paid after graduation” The district court decision also noted that the NCAA and conferences could cap the amount of the stipends to be paid through the “full” cost of attendance.  The district court did not deem the amateurism model to be a violation of the Sherman Act, per se, but rather under the rule of reason analysis determined that there were some procompetitive benefits of the NCAA system with regards to the viability of intercollegiate athletics for both competitive and business purposes.   The decision stated that the preservation of “amateurism” in college sports and the integration of academics and athletics were prime differentiators from professional sports organizations.  On appeal the Ninth Circuit Court of Appeals overturned the district court’s position with regards to the payment of deferred compensation to student-athletes and their right to receive remuneration for their name, image and likeness stating that such a payment would be deemed non-educationally related compensation and therefore would be contrary to the concept of amateurism.   The key takeaways from O’Bannon are:
 
  • The NCAA’s rules regarding compensation of student-athletes are subject to antitrust laws.
  • The Plaintiffs were able to establish antitrust violations as a result of the application of the compensation rules. 
  • The application of the “rule of reason” analysis established anticompetitive purposes in terms of the application of the compensation rules with regards to the entitlement of athletes to benefit from their name, image and likeness.
  • The ruling permits member institutions to pay stipends to student-athletes up to the full coat of attendance without fear of retribution from the NCAA or its member conference.
  • The injunctions granted by Judge Wilkens do not require additional payment of cost of attendance by member institutions but permits them at their discretion to make such payments while maintaining the right of the NCAA to cap the cost of attendance.
 
Alston v NCAA was considered by many legal observers as a continuation of the White v NCAA case in that it directly addressed the issue of caps on athletics scholarships and the prohibition of forms of compensation not related directly to education.  The O’Bannon case set the stage with regards to antitrust challenges to the grant-in-aid system of compensation.  The court cited in its decision the changes in forms of compensation which have been permitted by the NCAA and the Conferences since the decision in O’Bannon.  As a result of the O’Bannon decision schools have been permitted to provide access to funds for disability policies, health care after an athlete completes their matriculation and certain performance base forms of compensation over and above the grant-in-aid as a result of changes in NCAA and conference legislation.  The plaintiffs in Alston sought to completely remove the cap on grant-in-aid to allow institutions to compete based upon the relative value of a recruit to the institution.  The court ultimately held that the NCAA could maintain the cap on full grant-in-aid scholarships, but it was enjoined from limiting the value of educationally related benefits which could be received by a student athlete in return for their matriculation to an institution.  The court also stated that NCAA could determine what the definition of “educational benefits” as it deemed appropriate but could not cap such compensation.  The court did however, reject the payment of performance based non-educationally related compensation deemed “pay for play”.  Thus preserving the principle of amateurism.
 
What is particularly interesting in both the Alston and O’Bannon cases is that the courts are very critical of the malleable nature of the definition of amateurism.  Judge Wilkens in the decision in the O’Bannon case mocked the idea that amateurism was a core principle of the NCAA as opposed to a mechanism by which to operate a successful business enterprise.
 
On reflection while the NLRB’s decision not to recognize the Northwestern football players as statutory employees, as defined by the NLRA, the irony of the determination is that as unions and employers, through the Collective Bargaining process, many of the anticompetitive practices of the NCAA, which are under significant scrutiny, would potentially be permissible under a labor exemption to the Sherman Act.  The greatest risk to the NCAA in the future, as it continues to promote the concept or ideal of amateurism is the growing commercialization of college sports and the proliferation of sports betting which will continue to drive more revenue into the FBS and Division I Basketball coffers.  As the Power Five institutions and the NCAA continue derive substantial amounts of revenue by leveraging the athletic abilities of student-athletes, many of whom will never play professionally, public sentiment and the sentiment of the courts may potentially shift as the institutions invest massive amounts of funding into facilities, dormitories, and salaries for coaches and administrators to the exclusion of the student-athlete.