More Changes to College Athlete Compensation

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Less than two weeks after the U.S. Supreme Court’s significant decision in NCAA v. Alston, college athletes secured yet another win in their prospects for compensation. The NCAA recently announced a new interim policy allowing student athletes to profit from the use of their name, image and likeness.

On June 30, 2021, the National Collegiate Athletic Association (NCAA) announced a historic shift in its view of “amateurism” and the ability of college athletes to financially benefit from their participation in college sports. This announcement comes less than two weeks after the U.S. Supreme Court’s decision in NCAA v. Alston, described in a previous McGuireWoods update, which signified a potentially drastic shift in the NCAA’s student-compensation rules. As announced by the NCAA, beginning July 1, 2021, NCAA college athletes will have the opportunity to benefit from their name, image and likeness (NIL).

The NCAA’s prior stance had largely prevented college athletes from financially benefiting from the use of their NIL. Thus, college athletes previously were unable to sign endorsement deals with companies, make money from signing autographs, profit from their likeness in video games or TV broadcasts, or monetize their social media accounts to promote certain goods in exchange for pay. Amid growing pressure to shift its stance toward college-athlete compensation, the NCAA’s new uniform interim policy suspends the current NCAA NIL rules for all incoming and current college athletes in all sports across all divisions.

The interim policy makes it clear that college athletes may (i) “engage in NIL activities that are consistent with the law of the state where the school is located” and (ii) “use a professional services provider for NIL activities.” The policy also states that college athletes who attend a school in a state that does not have a NIL law may still engage in this NIL activity without violating NCAA rules. Finally, the policy puts the responsibility on colleges and universities to determine whether NIL activities are consistent with state law.

This radical shift from the NCAA’s prior policies comes amid a trend of new state legislation aimed at allowing student athletes to financially benefit from their schools’ use of a student athlete’s NIL. The interim policy took effect July 1, 2021, the date on which such laws in several states — including Georgia, Florida, Alabama, New Mexico, Texas and Mississippi — became effective. These new laws have opened the door in these states for student athletes to sign deals with third parties to receive compensation for the use of their NIL.

The potential effects of the NCAA’s decision are far-reaching, as they pertain to the NCAA’s product and the meaning of “amateurism” in college sports. For example, because the NCAA’s interim rule now allows college athletes to make money on endorsements, college athletes soon may be signing lucrative brand deals previously available only to professional athletes. College athletes who previously would have forgone the college experience to go straight into professional sports (to make money on their endorsements), instead may spend a few additional years playing at the amateur collegiate level to gain national exposure. There may also be an increase of student-athlete visibility in movies, video games, commercials and social media.

In the midst of these historic developments, university administrators and athletic directors need to recognize two important details:

  • First, all state NIL laws are different. Therefore, it will be important for educational institutions to understand the restrictions and allowances set by the laws in each specific state. For example, some state laws prohibit student athletes from endorsing certain types of products (i.e., alcohol, tobacco and gambling products), or prevent student athletes from using their school’s logo in their endorsements. Schools will need to understand the scope of these laws, as the NCAA policy expressly states that “[c]olleges and universities may be a resource for state law questions.”
  • Second, schools are still prohibited from paying players directly as compensation for their athletic participation (e.g., “pay for play”). The NCAA made it clear that payments may not be made in exchange for either (i) athletic achievements or (ii) recruiting purposes. The policy puts the responsibility squarely on schools to ensure compliance with this continued prohibition, stating that schools are obligated to apply and report potential violations, and if appropriate, to complete due diligence activity on the appropriateness of NIL activities.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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