Happy Labor Day. The Monday after the Aztecs’ home opener seems a good time to address a recent ruling by the U.S. Court of Appeals for the 9th Circuit that scholarship college football players are not employees of the National Collegiate Athletic Association or the conference in which they play.
The court’s bottom line was that the NCAA and PAC-12 are regulatory bodies, not employers of the student athletes. The student athletes “are participating in highly regulated extra-curricular activities.”
The case was brought by former University of Southern California linebacker Lamar Dawson. Dawson did not claim that he was USC’s employee and the court expressly declined to address that issue.
Under the federal Fair Labor Standards Act, employees of covered employers are entitled to the federal minimum wage and overtime. Courts have identified the ultimate test of employment under the FLSA as whether the “economic reality” of the relationship is one of employer-employee.
To determine the economic reality of the relationship, courts consider whether: (1) compensation was paid or expected; (2) the would-be employer had the power to hire and fire; and (3) the arrangement was conceived or carried out to dodge obligations under the FLSA.
The 9th Circuit ruled that the players’ receipt of scholarships from their schools — even were scholarships a form of compensation – could trigger no expectation of compensation from the NCAA or PAC-12. Any such expectation could not be grounded on the NCAA’s prohibition on student athletes accepting compensation beyond scholarships limited to the cost of attendance.
Second, said the court, the NCAA and PAC-12 lack the power to hire and fire student athletes. Yes, the NCAA and PAC-12 indirectly exercise some control over student athletes by regulating such things as the players’ living arrangements, athletic eligibility, permissible compensation, and allowable behavior. But that is not the kind of control that matters under the FLSA. It is the schools that select, supervise, and discharge players. The power to make rules that member schools enforce is not equivalent to the power to hire and fire the players ultimately subject to those rules.
Third, the court concluded the arrangement between the NCAA/PAC-12 and the student athletes could not have been either conceived or carried out to dodge the mandates of the FLSA because the NCAA rules were first issued in the 1920s — over a decade before Congress enacted the FLSA in 1938. The court acknowledged that the “economic reality” of college sports is much different today than it was a hundred years ago, but, by itself, the substantial revenue the student athletes generate for the NCAA/PAC-12 could not resolve whether there was an employment relationship.
The 9th Circuit also rejected the student athletes’ claim that they were employees under the state of California’s wage laws. The court rested its conclusion on a provision of the state’s workers compensation law that excludes student athletes from coverage as employees of the schools for which they play.
California courts have extended that exclusion beyond workers compensation to such other areas as the state’s employment discrimination law. Because California law does not classify the schools as the student athletes’ employers, the NCAA and PAC-12 cannot be classified as the student athletes’ employer either.
In 2016, the Chicago-based 7th Circuit Court of Appeals also ruled that the NCAA did not employ student athletes for purposes of the FLSA. The case was brought by two former University of Pennsylvania student athletes against both the NCAA and Penn. The 7th Circuit did not focus on why the relationship between the NCAA and the student athletes precluded employment, as the 9th Circuit did. That court’s focus was on why the very nature of college athletics is incompatible with student athletes being paid as employees for their participation by anyone:
“[T]he long tradition of amateurism in college sports, by definition, shows that student athletes — like all amateur athletes — participate in their sports for reasons wholly unrelated to immediate compensation. Although we do not doubt that student athletes spend a tremendous amount of time playing for their respective schools, they do so — and have done so for over a hundred years under the NCAA — without any real expectation of earning an income. Simply put, student athletic ‘play’ is not ‘work,’ at least as the term is used in the FLSA.”
In rejecting the student athletes’ challenge to the NCAA’s call that student athletes are not their employees, the two courts reviewed the relationship between the NCAA and student athletes from different sides of the ball. The 9th Circuit focused on the longstanding nature of the NCAA’s relationship with student athletes. The 7th Circuit focused on the student athletes’ longstanding motivation for playing their sports. The ruling on the field that the NCAA need not pay student athletes as employees was, in both cases, confirmed.
Dan Eaton is a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. He also is an instructor at the San Diego State University Fowler College of Business where he teaches classes in business ethics and employment law. He may be reached at [email protected]. His Twitter handle is @DanEatonlaw.
