Conceding its decades-long battle against directly compensating college athletes, NCAA president Charlie Baker sent a letter to members Tuesday morning proposing the creation of a new subdivision for the wealthiest athletic departments to pay their athletes through an “enhanced educational trust fund.”
The new subdivision, Baker outlined, would allow its members to provide at least $30,000 per year to an equal number of their male and female athletes, so as to comply with federal Title IX gender equity requirements. The proposal is designed to pay athletes without them being classified as employees of their schools. (As if there was any confusion, Baker’s letter uses the term “student-athlete” 34 times.)
Baker said the “forward-looking framework” being proposed by the NCAA is meant to address the “growing financial gap” between the “highest-resourced” Division I schools and their counterparts.
“[I]t gives other schools in Division I the ability to do whatever might make sense for them and for their student-athletes within a more permissive, more supportive framework for student-athletes than the one they operate in now,” Baker wrote. “Colleges and universities need to be more flexible, and the NCAA needs to be more flexible, too.”
There are five big legal takeaways.
1) The NCAA might save the non-elite schools by separating them from the top.
While the Power Five schools operate what many regard as quasi-pro teams, there are numerous Division I schools that still run programs where the athletes are not prospects for pro leagues and do not generate sizable revenues for their schools, and where the coaches aren’t earning millions of dollars a year. In fact, the vast majority of Division I athletic programs report net losses.
By separating the top from the rest, the NCAA can better defend the lesser programs from legal arguments that their players are employees or are owed more money. If the schools are all grouped together—as they are in some of the legal controversies—it disadvantages non-elite schools, which might convert varsity teams into club or intramural sports if they are required to pay the players.
To be sure, even schools that report losses might still “profit” from their teams in harder-to-measure ways, such as through boosting fundraising and admissions. But there are a set of “haves” and “have-nots” in college sports, and the “have-nots” are better off not being at risk to cases focused on the “haves.”
(For more on this topic, read New Amateurism.)
2) The plan does not end ongoing litigation and NLRB petitions regarding paying college athletes a share of TV money and for lost NIL opportunities, and for recognizing them as employees.
The NCAA lacks the unilateral power to terminate ongoing legal matters. The NCAA and its members can negotiate settlements with plaintiffs and petitioners, such as agreeing to pay players in the Power Five a share of broadcast money or voicing support for the recognition of college athletes as employees under the National Labor Relations Act or the Fair Labor Standards Act, but that takes cooperation from the other side. At the end of the day, the NCAA and its members merely comprise a private membership organization subject to the laws of the land.
A new policy will have impacts going forward, but won’t resolve past issues being litigated now. Both In Re College Athlete NIL Litigation and Johnson v. NCAA demand payment for past harms, namely money that could have been paid to current and former athletes for their NIL and labor. Those cases will continue to demand payment.
3) The plan does not provide the NCAA with a legislative solution to its problems.
Over the last five years, the NCAA has aggressively lobbied Congress to pass a law that, in the NCAA’s ideal world, would declare college athletes are not employees, furnish the NCAA with an antitrust exemption to regulate athlete compensation, immunize the NCAA from ongoing legal challenges and craft a federal NIL standard. To date, the NCAA has had no luck, with not one bill even making it to the floor. Nothing has changed on that front.
Last week, as CNN reported, the commissioners from four power conferences (Big Ten, Big 12, ACC and SEC) were in Washington to meet Senate GOP Leader Mitch McConnell and House Democratic Leader Hakeem Jeffries, lobbying Congress to pass a federal NIL law, specifically a piece of bipartisan legislation proposed by Sens. Ted Cruz (R-Texas) and Cory Booker (D-N.J.). The legislation would explicitly declare that college athletes are not employees.
Meanwhile, there’s a revenue-sharing bill in California—the College Athlete Protection Act—that the state assembly has already passed. If approved by the state Senate, it could be signed into law as soon as this summer.
4) The NCAA can credibly defend its plan under antitrust law.
Much has been made of the NCAA losing the O’Bannon and Alston antitrust cases, with some suggesting the collegiate governing body is doomed in antitrust litigation. The reality is quite different.
The NCAA lost O’Bannon and Alston because its rules were inflexible and denied any payment. Athletes featured in video games were not allowed compensation, and athletes who sought compensation for education-related expenses were told no.
Those were bright-line standards. That’s not a good approach under antitrust law.
Antitrust law tends to disfavor absolute restraints on competition, with the competition here being member conferences and schools being denied the chance to offer additional payments to athletes they recruited.
With Baker’s plan, however, the NCAA is taking a nuanced and flexible approach. Here’s why that matters: If an athlete challenges the plan as still placing barriers on compensation, the NCAA can point to case law indicating that reasonable approaches withstand antitrust scrutiny.
In fact, as antitrust scholar Maurice Stucke has written, “the empirical evidence reflects that most rule-of-reason claims never reach juries; rather, most are decided on motions to dismiss or summary judgment, and most (and in some surveys nearly all) antitrust plaintiffs lose.” Stucke, a professor at the University of Tennessee College of Law, has noted that according to one study, defendants in antitrust cases won 97% of the time.
While the NCAA would rather avoid being sued, and litigating antitrust cases tends to be very expensive, the reality is it is poised to win in court when it uses rules that are reasonable.
To that point, recall what Justice Neil Gorsuch wrote in NCAA v. Alston. Although the Court sided against the NCAA, he wrote a “no Lamborghini rule” would be a reasonable restraint on athlete compensation, since it is logical and would advance the larger educational goals of colleges.
5) But the NCAA is also implicitly signaling its current system is problematic.
A massive shake-up or modernization of amateurism is arguably what the NCAA needs and what it wanted when it hired Baker, who as governor of Massachusetts built a reputation as pragmatic and solutions-oriented.
But by signaling its current set of rules are problematic, the NCAA might unwittingly provide material for attorneys suing the NCAA and schools to argue the NCAA is all but admitting its system is flawed. Expect to see Baker’s memo cited in future court filings. The NCAA will argue that under the rules of evidence, subsequent remedial measures are not supposed to be used against defendants, but that probably won’t stop the players’ lawyers from mentioning them.
As a preview of that line of critique, Ramogi Huma, the executive director of the National College Players Association, told Sportico on Tuesday the development is “historic” in that it is “the first time the NCAA has publicly conceded that it’s possible and practical to pay players. Up until now, that has not been the case. That is a line they’ve crossed that cannot be uncrossed. I think it is also important to highlight the environment in which this proposal is being floated, one in which the NCAA is losing in all avenues.”
In addition, Huma said: “They know they are poised to lose in the House v. NCAA antitrust case. The Supreme Court already made clear in Alston that restricting athlete compensation violates antitrust law. We have our bill in California that is halfway through the legislature and has good momentum. They are losing ground in [terms of state legislature involvement]; we have already proven that states can reform NCAA sports.”