NCAA Student-Athletes May Be Employees Under the FLSA

The debate over whether college athletes should be paid has grown commonplace and contentious over the past decade as the business of college sports has thrived amid billion dollar television contracts and while coaches are receiving similarly high-price salaries. The legal argument in favor of such compensation for athletes gained traction as the U.S. Court of Appeals for the Third Circuit was not persuaded by the National Collegiate Athletic Association’s (NCAA) argument that college athletes are amateur athletes and cannot be paid as employees.

On July 11, 2024, the court denied the NCAA’s motion to dismiss Johnson v. NCAA. The case is brought by college athletes arguing they are employees within the meaning of the Fair Labor Standards Act (FLSA) and state wage and hour laws, with both the NCAA and their schools serving as employers. 

If deemed FLSA employees, college athletes would be owed minimum wage and eligible for overtime pay, a decision that would reshape college athletics as we know it. The court’s opinion included instruction to the district court to apply a different test in determining college athletes’ employment status. The prescribed economic realities test stipulates that college athletes may be employees under the FLSA when they (a) perform services for another party, (b) “necessarily and primarily for the other party’s benefit,” (c) under that party’s control or right of control, and (d) in return for “express” or “implied” compensation or “in-kind benefits.” (citations omitted). In a summary of the analysis, the court noted that “[u]ltimately, the touchstone remains whether the cumulative circumstances of the relationship between the athlete and college or NCAA reveal an economic reality that is of an employee-employer.” 

The opinion included historical context, including reiterating the September 29, 2021 memorandum by the National Labor Relations Board in which general counsel provided updated guidance stating that student-athletes are employees under the National Labor Relations Act, and, as such, are afforded all statutory protections. It also reiterated Justice Kavanaugh’s concurrence in Alston v. NCAA, decided June 21, 2021, in which he raised antitrust concerns amid the failure to pay athletes a fair market rate. The latest decision in Johnson comes as the NCAA is still in the process of settling a trio of federal antitrust lawsuits against it. A multi-billion dollar settlement agreement is pending approval by U.S. District Judge Claudia Wilken. 

As the Johnson case progresses, the next operative steps could prove to be burdensome and costly. Notice requirements may oblige schools to inform current and former athletes that they are potential members of a class action lawsuit. Additionally, discovery may include review and disclosure of documents such as required athletic activity time sheets, practice schedules, travel agendas, coaches’ notes, team rulebooks, and other athletic-related materials for various teams at different universities. Considering the many athletes on each team and at each university, such documents would likely be voluminous.  

The amorphous term “student athlete,” which has been synonymous with college athletics for decades, may be no more if plaintiffs succeed in their argument. Instead, such individuals could be defined precisely as “employees.” However, the Third Circuit’s decision rejecting the NCAA’s argument is not conclusive in making the ultimate determination of student athletes’ employment status. As such, the future landscape of college athletics remains uncertain. As college athletics permeate campuses around the country, colleges and universities should remain informed of the status of pending litigation and be prepared to respond to any changes impacting the industry and their students, whether those students are deemed student-athletes or employees. 

This article originally appeared on Freeman Mathis & Gary, LLP.

About the Author: 

Noël Couch is an associate at Freeman Mathis & Gary, LLP. noel.couch@fmglaw.com