HR Management & Compliance

Are Student Athletes Also Employees?

The U.S. 3rd Circuit Court of Appeals (which covers Pennsylvania employers) recently announced it will consider the most important question in collegiate sports history: whether students who participate in college athletics are employees.

ncaa athletes employees flsa

The case comes on the heels of the U.S. Supreme Court’s August 25, 2021, decision in NCAA v. Alston, which struck down the organization’s ability to limit student athlete compensation. Aside from a dramatic shift in the power dynamic long held by the NCAA and its partner schools, a departure from the status quo recognizing student athletes as employees raises significant concerns under both federal and state law including their entitlement to the minimum wage and overtime.

Background

In the case headed to the 3rd Circuit, a group of Division I student athletes from New York, Pennsylvania, and Connecticut filed suit in the U.S. District for the Eastern District of Pennsylvania claiming the NCAA and certain member institutions violated the Fair Labor Standards Act (FLSA) and various state wage and hour laws by failing to pay them minimum wage and overtime. Shortly after the complaint was filed, the NCAA predictably asked the court to dismiss it, arguing:

  • The historic relationship between the parties and its “revered tradition of amateurism” create a sphere of insulation preventing the NCAA from being subject to the FLSA and state wage and hour laws; and
  • As part of its “good-faith” defense, the association had relied on the U.S. Department of Labor’s (DOL) field operations handbook (FOH), which says student participation in extracurricular activities doesn’t constitute an employment relationship.

Alternatively, the NCAA urged the district court that if it wasn’t persuaded by the good-faith defense, significant deference should still be given to the FOH to support a finding of nonemployee status for student athletes. In a 30-page opinion issued thereafter, the court denied the request for dismissal and found the athletes had plausibly alleged they are employees.

Amateurism And Good Faith

In addressing the NCAA’s amateurism argument and relying heavily on Supreme Court Justice Brett Kavanaugh’s concurrence in Alston, the district court noted relying on student athletes’ amateur status to find they aren’t employees is both unavailing and cyclical because the organization summarily maintains:

  • The schools “should not be required to pay [student athletes] a minimum wage under the FLSA because [they] are amateurs”; and
  • They “are amateurs because [the schools] and the other NCAA member schools have a long history of not paying student athletes like [them].”

To that end, and guided by reasoning parallel to Alston, the district court gave no credence to the NCAA’s position.

Good-Faith Defense and FOH Deference

As for the NCAA’s second argument, the district court noted “to be insulated from liability under a good-faith exception,” an employer must show it “acted in (1) good faith, (2) conformity with, and (3) reliance on the DOL’s regulations or the Administrator’s opinion letter.” Although the court didn’t completely foreclose the viability of the organization’s FOH defense, it ultimately was unwilling to entertain it at the early stage of the litigation when an undeveloped record didn’t support the above requirements.

Next, the district court evaluated the level of deference, if any, it should afford the FOH in deciding whether an employer/employee relationship exists. To that effect, the court focused on whether interscholastic athletics are conducted primarily for the student athlete’s benefit, in which case participation in sports would fall within the FOH’s “extracurricular activities” definition.

The district court first identified that unlike other extracurricular activities, varsity athletics often hinder academic pursuits when students are required to expend anywhere between 30 and 40 hours each week in athletic programming. Taken with the millions of dollars generated in revenue for schools and the NCAA, the district court determined the benefit generated from interscholastic athletics primarily rests with the organization and its partner institutions.

Armed with the above allegations, the district court determined the student athletes had sufficiently asserted that interscholastic athletics are distinguishable and fall outside the FOH’s contemplated meaning of extracurricular activities that “do not result in an employer-employee relationship between the student and school or institution.”

Economic Realities Test

Finding both the NCAA’s amateurism argument and reliance on the FOH unpersuasive, the district court next applied the economic realities test to determine whether the allegations adequately support a finding of employee status. As an initial matter, the NCAA argued the court should reject the use of any existing multifactor tests because they fail to account for the “revered tradition of amateurism.” Based on its earlier determination about amateurism, the district court rejected the argument.

Instead, at the NCAA’s urging in the alternative, the district court applied the Glatt multifactor test, which, when previously applied in the context of interns and internships, considered:

  • The expected payment for the program;
  • The training being consistent with what students would have learned in an educational environment;
  • The program is for academic credit or is part of formal education;
  • The program period is consistent with an academic calendar;
  • Its duration is for a valuable period;
  • It displaces paid employees through the tasks they perform; and
  • Whether an offer of paid employment is expected following the program.

Under some of the factors, such as whether there was an expectation of compensation or a job, the district court stated the facts indicated student athletes aren’t employees. The court also considered two other factors as neutral: whether the student receives training similar to that in an educational environment and the extent to which the program is limited to the period in which it provides beneficial learning.

The district court went on, however, to conclude other factors weighed in favor of employee status including the extent to which the program is related to a student’s education, a program accommodates the individual’s academic commitments, and the student complements instead of displaces the work of employees. When no one factor in the analysis is dispositive, the court concluded that under Glatt, the student athletes had plausibly alleged they are employees warranting denial of the NCAA’s request to dismiss. Johnson v. National Collegiate Athletic Association.

Appeal

After the district court denied the request, an interlocutory appeal followed in which the sole question before the 3rd Circuit is “whether NCAA Division I student athletes can be employees of the college and universities they attend for purposes of the [FLSA] solely by virtue of their participation in interscholastic athletics.”

Takeaway

Although a determination by the 3rd Circuit consistent with the district court’s holding bodes well for the student athletes’ case, the threshold for overcoming a request for dismissal is lower than succeeding on the merits. To that end, the students will still need to meet their proofs to succeed on the claims.

Moreover, should the students win at the 3rd Circuit, the decision could expand the applicability of the FLSA and other labor and employment laws such Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act (ADEA). The outcome would have wide-ranging implications at institutions of higher education, which already need to prepare for the National Labor Relations Board’s (NLRB) warning it will prosecute student-filed classification disputes under the National Labor Relations Act (NLRA).

While much remains in flux, college sports’ changing societal landscape will inevitably continue to catalyze legal challenges and, with them, give way to significant developments concerning the intersection between collegiate athletics and the law.

Zachary M. Kimmel is an attorney with Saul Ewing Arnstein & Lehr LLP in Philadelphia. You can reach him at zachary.kimmel@saul.com.