An Indiana federal court has dismissed Berger v. NCAA et al, a suit brought under the Fair Labor Standards Act by former student-athletes from the University of Pennsylvania (Penn). More commonly known as Sackos, the case was filed against the National Collegiate Athletic Association (NCAA) and more than one hundred Division I schools by Samantha Sackos, a former women’s soccer player and student-athlete from the University of Houston, on October 14, 2014. The complaint argued that Sackos and other student-athletes were in an employer-employee relationship with their institutions and therefore entitled to payment under the wage and hour provisions of the FLSA. Sackos withdrew as the representative plaintiff and was replaced by Lauren Anderson, Gillian Berger, and Taylor Hennig, three present and former participants in women’s track and field at Penn. According to their amended complaint, the student-athletes’ participation in NCAA-sanctioned sports made them employees entitled to payment under the wage and hour provisions of the FLSA.
In a February 16, 2016 decision, the court disagreed and dismissed all claims against Penn with prejudice after deciding that there were insufficient facts to establish an employer-employee relationship. The court also dismissed the claims against the NCAA and other college and university defendants without prejudice because the complaint, as amended, did not sufficiently allege an employer-employee relationship with any defendant other than Penn for the court to have jurisdiction under the FLSA.
The case began in Indianapolis, where the NCAA’s headquarters is located, with allegations that the NCAA and NCAA Division I member schools “jointly agreed, and conspired, to violate the wage-and-hour provisions of the Fair Labor Standards Act” and “[s]tudent athletes meet the criteria for recognition as temporary employees of NCAA Division I Member Schools under the FLSA,” entitling them to payment of at least the federal minimum wage of $7.25 per hour. According to the suit, the NCAA’s bylaws prohibit recognition of student athletes as temporary employees under the FLSA, as well as payment of modest wages. As a result, the suit argued, NCAA Division I member institutions were “compelled to comply under the threat of competition and financial penalties” and treat their student athletes as “unpaid labor.” The plaintiffs argued that notwithstanding some student athletes’ receipt of scholarship monies, colleges were employers obligated to pay all student athletes at least the federal minimum wage for the work they perform as student athletes. The court was asked to certify the case as a collective action of “[a]ll current and former NCAA Division I student athletes, on NCAA women’s and men’s sports rosters” from academic year 2012–13 to the present.
The complaint had procedural difficulties from the outset. Federal and state higher education institutions were voluntarily dismissed based on Eleventh Amendment immunity. Except for Penn, the remaining institutions challenged jurisdiction and the plaintiffs’ standing under Article III of the Constitution. On February 16, 2016, the court dismissed all schools other than Penn without prejudice for lack of jurisdiction, stating that there was no plausible allegation that any of the remaining plaintiffs had an employment relationship with any institution other than Penn. This left Penn and the NCAA as the last, remaining defendants.
Penn won dismissal with prejudice based on the “totality of circumstances” and the “economic reality of the situation.” The defendants urged, and the plaintiffs opposed, application of the U.S. Department of Labor (DOL) Wage and Hour Division’s (WHD) Field Operations Handbook § 10b03(e) (Oct. 20, 1993), which advised that such programs as
interscholastic athletics …[, which are] primarily for the benefit of the participants as part of the educational opportunities provided to the students by the school or institution, are not ‘work’ [under the FLSA] and do not result in an employee-employer relationship between the student and the school or institution.
The plaintiffs argued that the DOL guidance did not extend to “NCAA regulated sports, which generate billions in revenue”—an obvious reference to revenue sports such as football and basketball. Judge Lawrence disagreed, and emphatically rejected the plaintiffs’ reliance on DOL Wage & Hour Div.’s Fact Sheet # 71, Internship Programs Under The Fair Labor Standards Act (April 2010). That fact sheet covered internship relationships at the facilities of for-profit private employers, but the plaintiffs were not interns.
After a detailed analysis of Walling v. Portland Terminal Co., 330 U.S. 148 (1947), and DOL’s position on the issue, Judge Lawrence concluded:
The economic reality of the situation and the DOL’s position on the issue both point to one conclusion: the fact that the Plaintiffs participate in an NCAA athletic team at Penn does not make them employees of Penn for FLSA purposes.
Judge Lawrence ruled that the amended complaint did not plausibly allege that the NCAA was an employer or joint employer of the athletes under the FLSA, so the NCAA was also dismissed without prejudice. “[J]oint employment is not mentioned in the Amended Complaint, and the only fair reading of the Amended Complaint is that the Plaintiffs are alleging that they are employees of only Penn, not of the other Defendants.” Although this procedural decision arose under the FLSA, it will likely be helpful to the NCAA in other litigation asserting claims by student athletes. It will also be of interest to other institutions in the event that a similar complaint arises.
