SCOTUS Decision in NCAA v. Alston May Open the Door for College Athletes to Receive Minimum Wage

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On June 21, 2021, the United States Supreme Court dealt a blow to the National Collegiate Athletic Association’s (“NCAA”) rules limiting various forms of education-related compensation for student athletes. Specifically, the Court applied the “rule of reason” analysis and held that the NCAA’s restrictions on education-related compensation violated the Sherman Antitrust Act.

The decision appears to be a big win for student athletes.

In his concurring opinion, Justice Brett Kavanaugh offered the strongest judicial rebuke of the NCAA’s pay policies to date: “The NCAA’s business model would be flatly illegal in almost any other industry in America . . . Nowhere 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 . . . The NCAA is not above the law.”

In reality, the decision in Alston is unlikely to directly impact the vast majority of student athletes. While NCAA’s member universities may start offering new education-related benefits in order to compete for top basketball and football talent, most college athletes play sports that are less glamorous and generate little to no revenue for their institutions. Thus, the likely outcome is that a handful of student athletes will be courted with more significant education-related compensation, and the rest will be left behind.

In reality, the decision in Alston is unlikely to directly impact the vast majority of student athletes...

This problem is not just limited to education-related compensation. Proponents of student athlete pay have proposed alternatives, including permitting student athletes to receive third-party benefits for the use of their name, image and likeness (a policy that the NCAA just recently adopted), and paying student athletes market-based salaries. Unfortunately, for the reasons mentioned above, these remedies will not do much for student athletes who are not star basketball or football players.

Enter the Fair Labor Standards Act and analogous state laws (referred to collectively as the “FLSA”). Under the FLSA, the vast majority of employees in the U.S. are entitled to be paid the minimum wage. With few exceptions, the FLSA prevents employers from exploiting their workers and having them toil for free, or for less than the minimum wage. The NCAA, however, does not pay or permit schools to pay any wages to student athletes because, in the opinion of the NCAA and its member schools, student athletes are not employees. This issue has been litigated with mixed results.

In any ordinary case, a determination of whether an individual is an “employee” under the FLSA turns primarily on the alleged employer’s ability to control the means and manner of that person’s work. Courts generally apply fact-intensive, multi-factor tests to make that determination.

However, when the NCAA has been sued for failing to pay student athletes the minimum wage, it has consistently argued that courts should not apply the ordinary tests because of the concept of “amateurism.” According to this argument, there is no need to apply a test because the circumstances of the student athlete are so unique and special that applying a test would not be the best way to understand their relationship with the NCAA and its member schools. Rather, the NCAA has argued, one need only look at the fact that the NCAA treats student athletes as “amateurs” to determine that they cannot possibly be employees.

Importantly, each time the NCAA makes the amateurism argument to avoid the application of the ordinary tests under the FLSA, it points to dicta from the Court’s decision in NCAA v. Board of Regents of Univ. of Okla., 468 U.S. 85, 104 (1984). In Board of Regents, the Court noted that “[t]he NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports. There can be no question but that it needs ample latitude to play that role[.]” The NCAA has twice relied on this argument to prevail on pre-discovery motions to dismiss. See Berger v. Nat’l Collegiate Athletic Ass’n, 843 F.3d 285 (7th Cir. 2016); Dawson v. Nat’l Collegiate Athletic Ass’n, 250 F. Supp. 3d 401, 404 (N.D. Cal. 2017), aff’d, 932 F.3d 905 (9th Cir. 2019).

However, more recently, in the case of Livers v. Nat’l Collegiate Athletic Ass’n, et al., No. 17 Civ. 4271, 2018 WL 3609839 (E.D. Pa. July 26, 2018), the court denied a pre-discovery motion to dismiss made by the NCAA and one of its member schools and held that the allegations in that case “permit[ted] the plausible inferences that Scholarship Athletes . . . fall within employee status under the FLSA, and that Defendants Villanova and the NCAA were aware of this when they chose not to pay them, suggesting reckless disregard of the alleged duty.” The plaintiff in the Livers suit unfortunately had to later withdraw for personal reasons.

The decision in Alston strongly suggests that the Berger and Lawson courts got it wrong, and the Livers court got it right.

Most recently, in Johnson, et al. v. NCAA et. al., No. 19-5230, six plaintiffs sued the NCAA and its member schools for violations of the FLSA, and a pre-discovery motion to dismiss is currently pending. The arguments of the NCAA are the same as those made in Berger, Dawson and Livers, and decision on the motion to dismiss could come down any day.

Let us examine some of the key takeaways from Alston as they relate to the pending motion in the Johnson matter.

First, one of the NCAA’s arguments in Alston was that its rules should not have been subjected to the rule of reason analysis, which is the test ordinarily used to determine whether the Sherman Act has been violated. Instead, it pointed to language in the Board of Regents decision to argue that the Court should not apply any test at all, or, at most, conduct an “abbreviate deferential review” and simply determine that its rules did not violate the law. Essentially, the NCAA argued that its rules relating to compensation should not be subjected to any scrutiny at all because student athletes are amateurs.

The Supreme Court rejected this argument. Specifically, in determining that the rule of reason analysis should be applied, the Court held: “Board of Regents may suggest that courts should take care when assessing the NCAA’s restraints on student-athlete compensation, sensitive to their procompetitive possibilities. But these remarks do not suggest that courts must reflexively reject all challenges to the NCAA’s compensation restrictions.” By this rationale, just as the Court found it appropriate to apply the ordinary multi-factor test in the antitrust context in Alston, so too should courts apply the ordinary multi-factor test in the FLSA context.

Second, Justice Kavanaugh’s concurrence in Alston also suggests that the NCAA’s failure to pay wages to student athletes should be subject to the ordinary level of scrutiny. Justice Kavanaugh wrote: “The Court makes clear that the decades-old ‘stray comments’ about college sports and amateurism made in [Board of Regents], were dicta and have no bearing on whether the NCAA’s current compensation rules are lawful . . . As a result, absent legislation or a negotiated agreement between the NCAA and the student athletes, the NCAA’s remaining compensation rules should be subject to ordinary rule of reason scrutiny.”

The decision in Alston strongly suggests that the Berger and Lawson courts got it wrong, and the Livers court got it right. If so, and the Johnson court sides with the plaintiffs, student athletes will finally have an opportunity to prove that they are employees under the FLSA and deserve, at the very least, the minimum wage.

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Michael J. Willemin, a partner at law firm Wigdor LLP, is a leading plaintiffs’ attorney within the field of employment litigation, having successfully represented clients in numerous high-impact employment matters in federal and state court, as well as in arbitration.

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