By Robert L. Clayton and Vincent Norwillo, of Gonzalez Saggio & Harlan
On March 26, 2014, in Northwestern University, the NLRB Regional Director for Region 13 issued a Decision that could permanently change major college sports. Specifically, the Regional Director found that football players receiving grant-in-aid scholarships from Northwestern University (Northwestern), who have not exhausted their playing eligibility, are employees under Section 2(3) of the NLRA. The decision also directed that an immediate secret ballot election be held among the eligible employees in the unit to determine whether they should be represented by the College Athletes Players Association (CAPA) in collective bargaining with Northwestern.[1]
The Parties’ Competing Positions
In its petition to the NLRB, CAPA claimed that football players receiving grant-in-aid scholarships (“the players”) performed services for Northwestern “under a contract of hire, subject to Northwestern’s control or right of control, and in return for payment.” Accordingly, the Union argued that these scholarship student-athletes were “employees” within the meaning of the NLRA, and therefore entitled to choose whether or not to be represented for purposes of collective bargaining.
Northwestern maintained that the football players were not employees. Citing the Board’s Brown University decision, Northwestern argued that the overall relationship between the players and the University was primarily educational, rather than economic, and that the players were essentially students engaged in school sponsored activities.[2] In the alternative, Northwestern argued that the players were temporary employees who are not eligible for collective bargaining. Finally, Northwestern asserted that the petitioned-for bargaining unit was arbitrary and not appropriate for bargaining, in part because it excluded student athletes who walked-on to the football team and shared an overwhelming community of interest. The Regional Director rejected each of these arguments.
The Critical Facts — Compensation And Control
The Regional Director supported his Decision by characterizing the value of grant-in-aid scholarships as “compensation to perform football-related services for Northwestern”. Specifically, he noted that the football grant-in-aid scholarships awarded by Northwestern averaged a total of $61,000 to pay for tuition, fees, room, board and books. Northwestern extended these scholarship benefits for up to five years of player eligibility as determined by the rules of the National Collegiate Athletic Association (NCAA).
The Regional Director also viewed the scholarships as well as the associated Letter of Intent (“Tender”) as subjecting the students’ daily activities to Northwestern’s control. The Tender includes the terms and conditions of the scholarship offer, including the caution that the scholarship can be reduced or cancelled if the player: a) becomes ineligible for intercollegiate competition, whether by accepting compensation for football, acquiring an agent or otherwise; b) engages in serious misconduct warranting discipline including criminal activity or an abuse of team rules; or c) voluntarily withdraws from football. The Tender also explains that the scholarship award cannot be reduced based on the player’s athletic ability or injury.
The Regional Director stressed that Northwestern required scholarship players to comply with a series of team and athletic department rules not applicable to students who were not on an athletic scholarship. A number of these rules related exclusively to the students’ football activities, including physical conditioning “penalties” for tardiness and other violations of team rules; game day attire requirements; and travel restrictions before football games.
The Regional Director also noted that the University imposed restrictions on the players that were not only unrelated to football, but also applied year round. For example, the University required grant-in-aid players to live in dormitories as freshmen and sophomores; obtain permission before entering into any outside employment (to ensure they are not receiving additional compensation or benefits based on their reputation or athletic ability); adhere to a stringent social media policy controlling what they may post and prohibiting them from denying their coaches’ friend requests; and prohibited the scholarship players from profiting from their image or reputation, including through the sale of merchandise or photographs.
The Regional Director found it significant that these rules were in addition to the players’ expected commitment to the football program. For example, Northwestern also required the scholarship players to attend a pre-season training camp and devote 40-60 hours per week to practice, conditioning, film study, and other football-related activities both during and after the actual football season. Despite these commitments, the players did not receive academic credit for playing football, could not enroll in classes that conflicted with practices or pre-season training — all while being directed by coaches that were not members of the academic faculty.
The Legal Analysis — Student-Athletes are Common Law Employees
In reaching his Decision, the Regional Director did not simply assess whether the players satisfied the definition of “employee” as expressly contained in the Act. Rather, in a veiled attempt to circumvent existing precedent, the Regional Director cited Supreme Court authorization to consider the common law definition of “employee”[3] when construing Section 2(3) of the Act. Under this common law test, an employee is a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.[4]
Applying this test, the Regional Director concluded that football players who receive grant-in-aid from Northwestern are employees because: the scholarships are a transfer of economic value as compensation to perform football-related services for Northwestern under a contract for hire; the scholarships are contingent upon the players’ football performance, providing incentive for the players to abide by “player only” rules that significantly restrict the payers’ daily lives. The Region also concluded that unlike the scholarship recipients, walk-on players did not meet the common law definition of employee because they did not receive compensation for football services or sign a Tender, and were permitted more flexibility to miss practices if they conflict with their academic schedule. [5]
Brown University Distinguished
In Brown University, the Board found that the graduate students were not “employees” under the Act because the overall relationship between the graduate assistants and their university was primarily an educational one, rather than an economic one. In Northwestern University, the Regional Director found that the scholarship players are not “primarily students”:
“The players spend 50 to 60 hours per week on their football duties during a one-month training camp prior to the start of the academic year and an additional 40 to 50 hours per week on those duties during the three to four month football season. Not only is this more hours than many undisputed full-time employees work at their jobs, it is also many more hours than the players spend on their studies.”
The Regional Director also emphasized that unlike the Brown University[6] graduate assistants, the Northwestern received no academic credit for their football activities, nor did their football performance satisfy a core element of their educational degree requirements. Moreover, the players’ performance of their football activities were directed and supervised by members of the Northwestern coaching staff, who were not part of the University’s academic faculty. The Regional Director found that this distinction reduced any concern that collective bargaining would have a “deleterious impact on overall educational decisions” by the academic faculty. Finally, the Regional Director found that the scholarship players’ compensation was not financial aid, since the players were required to perform athletic services to receive their scholarships, whereas the graduate assistants’ compensation in Brown University was not tied to the quality of their work.
Scholarship Players Are Not Temporary Employees
The Region also rejected Northwestern’s alternative argument that the players were temporary employees. Under Board law, employees employed for a set duration or have no substantial expectancy of continued employment are generally excluded from voting during a union election as temporaries. [7] However, the Regional Director found that the football players, who generally remained on the team for four to five years, were not temporary employees because the Board has never applied the term “temporary” to employees whose employment, albeit of a finite duration, might last from three to seven or more years. [8]
The Implications
Northwestern is significant because it is the first NLRB determination that student athletes qualify as employees of a university and are permitted to unionize. Even so, it is not binding upon other Regions. Indeed, the University has confirmed its plan to appeal the Decision to the NLRB. Unless the Board approves the Regional Director’s analysis, this Decision is not precedential. Even if the Board adopts the Region’s analysis, the factors relied on for concluding that certain student athletes at Northwestern are employees covered by the NLRA may not apply at academic institutions or even to non-football scholarship athletes at Northwestern. In any event, it will likely be several years before the case runs its full course through the Board and federal judicial appeals. By then, the student athletes presently in the petitioned-for unit will likely have graduated.
In the interim, this Decision may expose other private universities and colleges to a range of unprecedented concerns. At a minimum, “copy cat” petitions may be filed in Regional offices across the country. Likewise, this Decision may trigger test union organizing cases at public universities, subject to any applicable state labor relations laws.
The Decision threatens larger concerns wholly unrelated to union organizing. Specifically, student athletes (or their new lawyers) may be motivated by this Decision to test whether they are covered by other federal statutes, such as the Fair Labor Standards Act. If student-athletes are found to be “employees” under the FLSA, they could be entitled to back wages, which could expose a university to expensive class or collective action litigation.
The Decision also implicates “employee” eligibility issues under state laws. For example, if student-athletes became “employees” subject to state unemployment insurance laws, their “employer” University could be liable for unpaid statutory contributions. Moreover, if student-athletes were regarded as “employees” eligible for workers’ compensation benefits, the cost of maintaining insurance and paying the inevitable claims could force many smaller schools to abandon some varsity sports programs altogether.
Finally, there is the elephant in the room. If student-athletes are ultimately found to be entitled to a minimum or collectively bargained wage, the resulting “compensation for services” would almost certainly compromise their eligibility under the NCAA rules. Such an outcome would threaten the foundation of the entire athletic structure of the NCAA.
Robert Clayton has a diverse management, traditional labor, and university sports compliance practice with a focus on Title IX and NCAA enforcement cases.
Vincent T. Norwillo is Partner at Gonzalez Saggio & Harlan LLP. He represents employers in a complete range of traditional labor as well as employment matters and is a frequent lecturer on these topics.
[1] Northwestern University v. College Athletes Players Association (CAPA), Case 13-RC-121359
[2] Brown University, 342 NLRB 483 (2004).
[3] NLRB v. Town & Country Electric, 516 U.S. 85 (1995)
[4] Brown University, 342 N.L.R.B. 483 (2004)
[5] Specialty Healthcare and Rehabilitation Center of Mobile, 357 N.L.R.B. slip op. 83 (2011)
[6] Brown University, 342 N.L.R.B. 483 (2004)
[7] Marian Medical Center, 339 N.L.R.B. 127 (2003)
[8] Boston Medical Center, 330 N.L.R.B. 152 (1999)
