[co-author: Katie Hancin]*

Q: Are student athletes considered employees under the Fair Labor Standards Act (FLSA)?

A: Not under current law, but it is widely suspected that before long, courts will deem at least some types of student athletes to be employees under the FLSA. Courts determine whether an employment relationship exists under the FLSA by looking at whether the “economic realities” of the relationship are consistent with employment (although there is no agreement among the circuit courts of which test best determines these economic realities). In the 2021 decision NCAA v. Alston, the Supreme Court characterized student athletes as participants in a labor market for purposes of federal antitrust laws. The Alston opinion left little reason to doubt that the Court would arrive at the same conclusion when considering the “economic reality” of student athletes as employees under the FLSA. The bigger question is where the Court will ultimately draw a line to separate student athlete-employees from truly amateur sports. The Third Circuit is currently considering an appeal that raises this very question, which may be the vehicle by which this appears before the Supreme Court.

Pre-Alston

Before Alston, most courts held that student athletes were not employees of the schools they attended. For example, the Seventh Circuit in Berger v. NCAA held that, since play is not work and student athletes are amateurs who voluntarily play without expecting any income, they do not qualify as employees under the FLSA. The appellants, a group of former track and field athletes, argued that the court should use a multifactor test created by the Second Circuit in Glatt v. Fox Searchlight Pictures to determine whether unpaid interns are employees under the FLSA. The Seventh Circuit held, however, that the Glatt test did not capture the “tradition of amateurism” that exists in college athletics, and instead relied upon the U.S. Department of Labor’s Field Operations Handbook, which expressed the agency’s opinion that student athletes generally are not employees of their educational institutions for purposes of the FLSA.

Not long after Berger was decided, in Dawson v. NCAA, the Ninth Circuit also held that student athletes were not employees of the NCAA. In that case, the school that the student athlete attended — which would have been the most likely candidate deemed to be an “employer” under the FLSA — was not named as a defendant. Like Berger, the Dawson court declined to use the multifactor Glatt test and instead focused on whether the NCAA had the authority to hire and fire, supervise, and compensate student athletes. Since the NCAA (1) did not admit the athletes to their schools, (2) could not admit or remove athletes from their teams, (3) did not supervise the athletes’ schedules, and (4) did not determine whether athletes receive scholarships from their schools, the court held that the athletes were not employees of the NCAA. Thus, while there was no uniformity in the tests applied by the courts, there was nevertheless a general consensus pre-Alston that student athletes were not employees as far as the FLSA was concerned.

The Alston Decision

By referring to student athletes as participants in a labor market, the Alston decision appears to have already determined the “economic reality” of at least some segment of student athletes. Alston involved a group of student athletes who sued the NCAA, alleging that the NCAA’s restrictions on education-related benefits like scholarships violated federal antitrust laws. The Court ultimately agreed with the athletes, recognizing that the NCAA is a commercial enterprise subject to antitrust laws. The Court explicitly characterized student athletics as a labor market through which the NCAA had the market power to reduce “wages” and restrict student athlete “labor.” Although the Court did not explicitly hold that student athletes were employees of their institutions, the Court’s characterization of the “economic reality” of student athletes strongly suggested how they would rule on such a question. Indeed, in a concurring opinion, Justice Kavanaugh explicitly opined that the “tradition of amateurism” argument is unpersuasive, and bluntly stated that, “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate.”

New FLSA Challenge Post-Alston

A case in the U.S. District Court for the Eastern District of Pennsylvania called Johnson v. NCAA became the first case after Alston to challenge student athlete compensation. There, the student athletes sued the NCAA and 25 other Division I member schools for unpaid wages under the FLSA. The NCAA moved to dismiss the complaint for failure to state a claim, relying upon the arguments of amateurism, which had persuaded the Seventh Circuit in Berger. The court denied the motion, citing Justice Kavanaugh’s concurrence in Alston that the amateurism argument was circular and unpersuasive. Instead, the court applied the Glatt test, which had been rejected by the Seventh and Ninth Circuits, concluding that the student athletes had plausibly stated a claim that they were employees under the FLSA. An interlocutory appeal was taken to the Third Circuit, where it awaits decision.

If the student athletes’ appeal succeeds, it will have a profound impact on athletic departments of higher education institutions nationwide. Institutional athletic programs likely will face an increase in costs, which could lead to the elimination of certain athletic programs that do not generate revenue, keeping in mind Title IX’s requirements that schools which accept federal funding must provide a proportional amount of educational opportunities to both male and female athletes. A likely result will be sex-conscious downsizing of certain athletic programs (i.e., cutting certain male athletic programs so that female athletic programs are substantially proportional). However, if student athletes are employees for purposes of the FLSA, it is likely that they would also be employees for purposes of Title VII of the Civil Rights Act of 1964, a law which generally prohibits “employment” decisions on the basis of a protected class (here, the cutting of a male athletic program). It is not obvious how Congress and/or the courts will resolve these seemingly conflicting legal obligations.

Key Takeaways

• While courts have yet to hold that student athletes are employees under the FLSA, this is likely to change in the aftermath of the Supreme Court’s holding in Alston characterizing student athletes as labor market participants.
• In Johnson, the Third Circuit appears poised to become the first appellate court to hold that student athletes are employees under the FLSA, which may result in further review by the Supreme Court.
• A holding that student athletes are employees will have far-reaching implications, including an increase in the cost of student athletic programs, which may lead to the elimination of certain nonrevenue-generating athletic programs. In turn, this may create further challenges for schools to comply with Title IX and likely also Title VII, among other statutes.

*Summer Associate