To be an employee, or not to be an employee: that is the question for student-athletes of revenue producing sports at private universities. To college sports administrators and enthusiasts aghast at and appalled by the idea, the sky may be falling. To labor and employment lawyers, the question presents a unique opportunity to revisit issues of worker reclassification and evaluate the potential ramifications of what could be a complete paradigm shift in intercollegiate athletics.
On March 26, 2014, Peter Sung Ohr, Regional Director of Region 13 of the National Labor Relations Board (“NLRB” or the “Board”), issued a ruling in which he declared Northwestern University students receiving scholarships to play football to be “employees” under Section 2(3) of the National Labor Relations Act (“NLRA” or the “Act”). He also declared the College Athletics Players Association (the actual petitioner in the action) to be a “labor organization” within the purview of Section 2(5) of the Act, found Northwestern University, the “Employer,” to be engaged in commerce within the meaning of the Act, and granted Northwestern football players the right to unionize, which would give them the right to collectively bargain against Northwestern University for better health care coverage, larger scholarship funds and other benefits.
Though experts and pundits alike assume there will be further legal challenges to the NLRB ruling, and while it remains to be seen (as of this blog post) whether the football players covered by the ruling will vote in favor of unionization, the decision nevertheless is groundbreaking.
Summarizing the 24-page ruling, which can be found here, the NLRB determined that football and academics are separate and distinct, at least with respect to scholarship athletes of revenue producing sports at private institutions like Northwestern, thus stripping any meaning from the term “student-athlete,” a term coined by the NCAA precisely to avoid paying workers compensation and other employment-related benefits.
The Board held that the scholarship-receiving football players at Northwestern University have all the dressings of typical employees. First, the Board commented that the University, the “Employer,” is a private, non-profit, non-sectarian, coeducational teaching university, and that its football team generates substantial revenue (millions of dollars annually) in various ways including: (1) ticket sales; (2) television broadcast contracts with various networks; and (3) the sale of football team merchandise. Then, turning to the football players, the Board held as follows:
- The grant-in-aid scholarships provided to football players that pay for their tuition, fees, room, board, and books, as well as the additional funds provided from the “Student Assistance Fund,” is compensation, not financial aid;
- The scholarship offered to a recruit, or “tender,” which must be signed by the football player, is not a scholarship but an employment agreement. It contains all terms and conditions of the offer, including termination “for cause” provisions (i.e., eligibility, criminal charges, misconduct, abuse of team rules), a voluntary resignation provision, and a provision discussing the football players rights of administrative appeal if their scholarships will not be renewed;
- The football players are subject to special rules set forth in a Team Handbook (think, employee handbook), which includes prohibitions against accepting other employment, engaging in social media, speaking to the media, gambling, and profiting off their likeness, and requires the football players to abide by strict drug and alcohol policies;
- The football players are full-time employees, often devoting more than 40-50 hours per week to football-related activities during the regular season; and
- The football players enjoy nine discretionary weeks off, which is properly viewed as vacation time.
In finding that the grant-in-aid scholarship players are identified and recruited because of their football prowess and not because of their academic achievement in high school, the Board held that the scholarship players are compensated not for their performance in the classroom (and hence not as students), but for their services on the field of play (as “employees”).
Based on these factors, among others, the Board concluded that the scholarship-receiving football players at Northwestern are “employees” under the common law definition of the term as “a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.” Brown University, 342 NLRB 483, 490, fn. 27 (2004) (citing NLRB v. Town & Country Electric, 516 U.S. 85, 94 (1995)). The Board found that the scholarship football players performed services for the benefit of their employer for which they receive compensation, and that the employer exercises substantial control over its “employees” in their performance of their duties as football players. Scholarship-receiving football players meet all four prongs of the common-law definition of an employee: (1) they perform work for another, (2) under a contract of hire, (3) under that entity’s control, (4) in return for payment or other compensation. The Board dismissed the notion that the players’ compensation is “financial aid,” expressing that the “employer” never would have offered a scholarship to a prospective student unless they intend to provide an athletic service to the University.
The Board’s ruling that the scholarship football players are “employees” within the meaning of the NLRA does not require grueling mental gymnastics. By severing the athlete from the student, or vice versa (as the NCAA would have it), and by effectively downplaying the GPA and other NCAA, Conference and University eligibility requirements imposed upon the football players, the Board’s ruling is not surprising. Still, the ruling is historic, in that it could mean transformative change in intercollegiate athletics – at least with respect to the revenue producing sports of football and men’s basketball.
More significant, perhaps, is what the Board’s decision could mean in the context of workers compensation, payroll, insurance, wage and hour laws, minimum wage, and other employee benefits, such as health care. What are the potential income and other tax implications? What, indeed, would the ramifications be if the players with scholarships vote to unionize and engage in collective bargaining with Northwestern University? Of course, one twist lies with the NCAA and its regulations, as any additional benefits could render the football players ineligible to participate.
At other private schools, scholarship players could attempt to unionize, citing the Northwestern decision as precedent. Of course, Directors in other regions are not bound by the Northwestern decision. This could lead to inconsistent results nationwide. Meanwhile, the Northwestern decision has no direct impact on state schools, which are not governed by the NLRB.
Only time will tell whether this movement will gain momentum, whether the Northwestern players will vote to unionize and what the consequences could be. In the meantime, the case presents a compelling case-study in worker classification and what is required for a person to constitute an “employee” under the ever-broadening definition of the NLRA.