Cash Is King: New Law Permits Student-Athlete Compensation
The National Collegiate Athletic Association (NCAA) system faces a fresh challenge in the form of California Senate Bill 206. The bill, commonly called the Fair Pay to Play Act, strives to pierce the veil of amateurism and allow student-athletes to contract endorsements and sponsorships. To facilitate such deals, student-athletes will be permitted to hire state-licensed agents. CA S.B. 206, which was recently unanimously passed by the California State Assembly and signed into law by Gov. Gavin Newsom, provides athletes without a future in professional sports an opportunity to reap financial rewards for their names, images, and likenesses at the collegiate level.
The battle for financial compensation has persisted for years for college athletes. Debate often focused on whether universities should pay its student-athletes. Former student-athletes at the University of Pennsylvania sued to be classified as employees under the Fair Labor Standards Act (FLSA) in order to gain rights to minimum wage pay for interscholastic athletics. In Berger v. National Collegiate Athletic Association, the 7th Circuit Court of Appeals held,
“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. We therefore hold, as a matter of law, that student athletes are not employees and are not entitled to a minimum wage under the FLSA.”
Berger was not the first significant lawsuit filed on behalf of student-athletes.
In 2009, former UCLA basketball star Ed O’Bannon served as a lead plaintiff in a class action filed against the NCAA and Collegiate Licensing Company. The suit sought damages for former and current student-athletes whose “images had been licensed or sold by Defendants, their co-conspirators [including Electronic Arts, Inc. (EA)], or their licensees.” In describing how entities circumvented NCAA regulations, plaintiffs cited Legal Affairs magazine, which reported,
“QB #11 is the digitized analogue of [then USC quarterback] Leinart; he resembles the living version right down to the mop of dark hair on his head. So why doesn’t the game from Electronic Arts use Leinart’s name? National Collegiate Athletic Association regulations prohibit companies from profiting off a student-athlete’s likeness, so EA does this two-step – with the NCAA’s blessing. In exchange for a cut of revenues from the video game, the association has granted the software company the right to reproduce the stadiums, uniforms, and mascots of schools that are members of the NCAA, and the game-makers do so with almost photographic accuracy.”
“NCAA Football 06 [italics added] has pinpoint-accurate rosters for all 117 Division 1-A football programs (which engage in the highest level of collegiate competition), not to mention graphics so advanced that you can see the stadium reflected in a quarterback’s helmet, the face paint on a cheerleader’s cheeks, the Nike swoosh on a tailback’s cleats, and the haze around the lights during a night game at the University of Florida’s stadium, the Swamp. For all these reasons, the omission of players’ names seems little more than a formality, done with a wink and a nudge in order to keep the NCAA satisfied.”
In September 2013, EA announced it would terminate production of its college football game the following year. Further, a settlement was reached to compensate former college football players numbering in the hundreds of thousands whose likenesses were used.
Under the Act, student-athlete compensation would not be sourced by court settlements but by the market value of each athlete’s name, likeness and image as determined by prospective sponsors. The NCAA and at least two university athletic directors, Ohio State’s Gene Smith and TCU’s Jeremiah Donati, have expressed opposition to California’s law. Opposition revolves around fear of an inability to regulate how student-athletes market themselves and earn money, and concern that allowing payments to student-athletes will ultimately create an unlevel playing field. Consequently, NCAA president Mark Emmert remarked that California schools would be ineligible to play for national championships. Notwithstanding, seven states—South Carolina, New York, Florida, Nevada, Pennsylvania, Minnesota, and Illinois—are proposing similar legislation.
The Fair Pay to Play Act is effective January 1, 2023.
This post was written by Stanley Rule, senior attorney editor with Thomson Reuters.