Give NCAA president Charlie Baker his due.
After nearly 15 years of the NCAA futilely defending unpopular positions—college athletes who clearly appear in video games shouldn’t be paid (O’Bannon); college athletes shouldn’t be able to use a legal right they already have as Americans to sign endorsement deals (NIL); and colleges shouldn’t be able to pay college athletes more for their educational costs (Alston)—Baker proposed a reality-based model.
The model essentially throws out traditional notions of amateurism. It involves Division I colleges being able to pay its athletes for their NIL and the creation of a new subdivision where participating colleges can pay athletes at least $30,000 per year via an “enhanced educational trust fund.”
Schools must still comply with Title IX–and all other federal, state and municipal laws–in whatever arrangement they select.
As with any innovative and disruptive proposal, Baker’s will face questions. A big one is the integration of direct NIL and “enhanced educational trust fund” payments.
As one attorney for a DI school told Sportico, schools that use NIL payments to supplement enhanced educational trust fund payments for star athletes would invite a host of legal problems.
Imagine a school pays its male and female athletes $30,000 and complies with Title IX. Now imagine this school also pays the star quarterback $2.5 million and the future NBA lottery pick point guard $1.5 million in what the school labels “NIL” and doesn’t pay offsetting “NIL” amounts to athletes on women’s teams.
Would that arrangement comply with Title IX? When NIL is paid by a third party, such as a company that pays the athlete to influence or endorse, Title IX is not at issue. The direct involvement of the university is a complicating factor, however, especially since an NIL payment that is massively larger than an enhanced educational trust payment would raise obvious equity issues. This is the type of question that could spark litigation.
The arrangement is also potentially problematic under wage, hour, tax, worker’s compensation and immigration laws. NIL is supposed to reflect pay for the commercial use of an athlete’s identity—not for their labor or an inducement to attend or remain at a college.
One of the main concerns about NIL collectives is that some seem to use NIL as pay-for-play. That same concern would surface if the school simply acted as a collective.
This college could run into legal problems since the National Labor Relations Board, a state labor agency or a court could find a payment cloaked as “NIL” is in fact a wage. Such a finding could facilitate the player claiming they are employees and potentially able to form a union.
Employers must also pay payroll taxes and almost all states require that employers pay for workers’ compensation insurance; calling a wage “NIL” doesn’t mean it’s not a wage.
Many private and some public colleges also benefit from federal tax-exemption under the education requirements of 501(c)(3) of the Internal Revenue Code while other public ones have been deemed not subject to income tax under Section 115 of this code. Expect colleges paying athletes to trigger review by the I.R.S and states’ departments of revenues.
A college athlete from another country might also want to meet with an immigration attorney to ensure their university’s arrangement doesn’t trigger problems with their visa—and lead to their deportation.
Even if those thorny issues could be satisfactorily resolved, Baker’s plan is only about what’s next. It doesn’t extinguish current and potentially future lawsuits over athlete compensation or additional efforts to convince the NLRB and state labor agencies that college athletes are employees.
Johnson v. NCAA, In Re College Athlete NIL Litigation and the newly filed Carter v. NCAA collectively involve tens of thousands of college athletes who demand pay for their labor, NIL and television appearances during the past, current and future. The cases rely on a combination of antitrust and labor laws to depict the NCAA, the Power Five conferences and their members as unlawfully conspiring through amateurism rules to deny pay. The cases are led by highly skilled litigators—who eye their own cut of massive civil judgments or court settlements—and demand billions of dollars in damages and back pay.
Not only are these cases not going away, but they’ve also advanced in court. Of particular concern to the NCAA, judges of varying judicial ideologies have bluntly rejected the association’s legal arguments.
Baker could move to settle the litigations, but he and NCAA members must be prepared to pay. There’s no indication the NCAA and member conferences and schools–and their respective insurance companies–have substantively discussed how litigation settlements would work, what each school would have to pay, and whether each conference and school would pay the same amount or varying amounts. Complicating things further, public universities face heightened fiduciary responsibilities given their use of taxpayers’ dollars.
Baker’s plan also arrives as the NLRB considers whether USC football, men’s basketball and women’s basketball players, as well as Dartmouth men’s basketball players, are employees under the National Labor Relations Act, whether their colleges, conference and the NCAA are joint employers and whether they can form unions. Ironically, it might help the NCAA if college athletes are deemed employees who form unions. NCAA rules impacting players’ wages, hours and other conditions could then be collectively bargained and, per the non-statutory labor exemption, immune from antitrust scrutiny.
Regardless, Baker’s plan doesn’t attempt to solve these issues. Baker has lobbied Congress to pass a law that says college athletes are not employees and the NCAA should have an antitrust exemption, but there’s no indication Congress, especially heading into a presidential election year, will take any action. Remember, the NCAA has lobbied Congress for a half decade to pass an NIL bill–a much simpler and less controversial topic than employment recognition or antitrust scrutiny–and not one bill has advanced out of committee.
None of this is to say Baker’s plan isn’t a good start. It’s a plan, after all, and will no doubt undergo multiple revisions.
Whether and when the plan becomes a reality is a mystery. The NCAA is famously bureaucratic and slow-moving, with multiple checkpoints for members to object. Recall the NCAA took years to craft a plan for NIL, including through the involvement of former U.S. Secretary of State Condoleezza Rice and other high-profile figures, only to see it go nowhere. States wrestled NIL as a topic from the NCAA’s control and passed NIL statutes, thereby forcing the NCAA’s hands.
But Baker, the former Massachusetts governor who took over from Mark Emmert in March, is at least willing to propose change. That’s step one in a long walk, but sometimes the first step is the hardest.