By Jennifer L. F. Cohen[1]
The “frayed tradition of amateurism” does not prevent college athletes from being classified as employees under the FLSA. On July 11, 2024, the Third Circuit affirmed in part, denied in part and remandedJohnson v. National Collegiate Athletic Ass’n[2] (hereafter, “Johnson”) to the District Court to use a different test to determine whether college athletes could be considered employees under the Fair Labor Standards Act (FLSA) after the District Court engages in discovery and develops the factual record necessary for this analysis. Additionally, the Third Circuit rejected the argument that the “tradition of amateurism”[3] precluded college athletes from being classified as employees.
Background
In 2019 Ralph “Trey” Johnson, a former Villanova football player, filed a complaint based on the FLSA and state wage laws stating that he was denied a fair wage by his school and the NCAA in return for his participation on the Villanova football team.[4] Additional student-athletes at other NCAA Division 1 schools joined him.[5] The FLSA was created to provide a “fair day’s pay for fair day’s work.”[6] Plaintiffs argued that they are employees of their institutions and the NCAA under the FLSA and are entitled to the federal minimum wage and overtime when they play their sport. The NCAA moved to dismiss their complaint, using the argument that athletes, as amateurs, are not considered employees of their schools or the NCAA; they are primarily students. The District Court denied the NCAA’s motion to dismiss, holding that plaintiffs sufficiently pleaded facts that, under a “multi-factor balancing test,” might allow them to be classified as employees under the FLSA.[7] On appeal, the Third Circuit considered the question: can college athletes be employees under the FLSA solely by their participation in a sport, or are they precluded from the protections provided by the FLSA due to their status as “amateurs” and “students”?
The Third Circuit’s “Economic Realities” Test
The Third Circuit agreed with the District Court that it is possible for student-athletes to be considered employees under the FLSA, but disagreed with the test the District Court proposed to use to determine whether they are employees. The Third Circuit rejected the Glatt[8] test used by the District Court and stated that a four-step “economic realities” test should be used:
“[C]ollege athletes may be employees under the FLSA when they
- perform services for another party,
- [that are] ‘necessarily and primarily for the other party’s benefit,’
- under that party’s control or right of control, and
- in return for ‘express’ or ‘implied’ compensation or ‘in-kind benefits’.”[9]
Relying in part on National Labor Relations Act (NLRA) precedent,[10] as well as the current NLRB general counsel’s memo[11] stating that she would define employees broadly to include “Players at Academic Institutions,”[12] the Third Circuit held that this new test will provide the correct framework to analyze the “economic realities” facing collegiate student-athletes and declared that it would no longer use the “frayed tradition of amateurism to define the economic reality of athletes’ relationships with their schools.”[13] In doing so, the Third Circuit disagreed with prior FLSA precedent from the Seventh Circuit[14] and Ninth Circuit,[15] and relied instead on perceived changed economic realities over the last decade and the evolving view of amateurism since Justice Kavanaugh’s concurrence in Alston v. NCAA.[16]
Time for the NCAA to Argue Based on Economic Realities
While the tradition of amateurism in college sports may be “frayed,” it may not be dead or beyond resuscitation. However, what becomes clear by the Johnson decision is that it is past time for the NCAA to cease relying on amateurism as a rule of law and to develop an economic realities argument. Additionally, universities should start restructuring their athletic departments in order to factually show the academic benefits of being a student-athlete such that they will not be classified as employees. The NCAA can no longer use the circular reasoning dismissed in footnote 54 of the Majority Opinion.[17]
Instead, the concurrence suggested an argument with a more traditional view of college sports for addressing the first two factors of the four-part economic realities test. While stating that the inquiry was too fact-based for the Third Circuit to hear the case in the first place, Judge Porter proffered a series of fact-based issues to consider in the analysis.[18] The questions of what is a “service” and what is “work” versus “play” will drive the factual analysis of different student-athletes at different schools playing different sports. Judge Porter implied that there may be lines drawn, and perhaps not every student-athlete will be an employee.[19] This paves the way for new arguments based on the evolving nature of college athletics.
Both the majority and the concurrence stated that student-athletes are “sui generis”[20] or unique, but that does not mean that the court will fail to use a fact-based legal analysis to determine whether they are employees under the FLSA. If students of a university — who attend class and act as students — voluntarily choose to participate in an extracurricular athletic activity on campus with no expectation of payment, this can be the economic reality of the college athletics experience, without using any “frayed” term to describe it.After all, if college athletes want to “work” by playing their sport, they are free to turn down their acceptance to a university and play as a professional athlete.[21]
The Court’s Bias
The Third Circuit revealed its bias against college athletics as a whole and especially overpaid college coaches. This bias was revealed in the majority opinion’s “brief history” of college athletics which began with the first athletic competition between Harvard and Yale student rowers in “The Race” and led to a discussion about college football and basketball coaches being overpaid and universities benefiting from the success of their football teams in increased applications from prospective students and increased donations from alumni.[22] The herald of the decision to come, however, was the majority’s refusal to use the term “student-athlete” stating that “like ‘band-aid’ or ‘laundromat,’ ‘student-athlete’ is essentially a brand name that has become synonymous with a product.”[23] The court noted that the term “is an NCAA marketing invention[24] designed to ‘conjure the nobility of amateurism’ … and ‘obfuscate the nature of the legal relationship at the heart of a growing commercial enterprise.’”[25]
Judge Porter did not mince words in his concurrence: “[t]he majority’s historical and sociological survey is inappropriate.”[26] Courts may only consider “the allegations contained in the complaint, exhibits attached to the complaint and matters of public record.”[27] “Although this entire section is dicta, I find it objectionable.”[28]
As the factual record is developed on remand, the District Court should undertake its factual analysis without the bias which is becoming pervasive in litigation against the NCAA and without the NCAA’s circular argument on amateurism.[29] Without the clouds of these two starting points, the District Court may be able to provide clarity based on the facts themselves.
Drawing Lines: Revenue v. Non-Revenue Sports and Power Conferences v. Everyone Else
Judge Porter’s concurrence was based on the legal principle that the Third Circuit should not have accepted the NCAA’s appeal in the first place because it required the court to answer questions of fact or mixed questions of law and fact.[30] “Indeed, almost no question is as fact-intensive as determining employee status under FLSA.”[31] The concurrence noted that a myriad of factual differences may exist between student-athletes[32] at different schools and participating in different sports. “The economic relationship between the quarterback of a Power Four conference football team and his university is presumably different than the relationship between, say, a Conference USA school and a member of its bowling team.”[33]
This implies that the court might draw lines about which student-athletes are employees based on whether they participate in revenue-generating sports or what have been known as non-revenue[34] sports.[35] However, revenue or profit generation is not part of the economic realities test to determine whether someone is an employee under the FLSA.[36] Otherwise, all failed business would be found not to owe wages to their employees. Despite this fact, underlying much of the majority and the concurrence is the idea that different sports may have different “economic realities” than others.[37] This determination may draw a line in what constitutes a service in the first part of the test: “the distinction between revenue and non revenue sports may help to separate — as a matter of economic reality — those student-athletes who ‘work’ for the tangible benefit of their university from those whose ‘play’ confers no comparable benefit.”[38]
Additionally, the economic realities of certain universities may differ from others. Under the second factor of the test — who benefits from the service — many university athletics departments do not benefit greatly from offering some of their sports. As Judge Porter notes, “[d]oes a college benefit from revenue-negative athletic programs?”[39]
Ladies and Gentlemen, Start Your Fact-Based Analysis
So now that the Third Circuit has proposed a test that is unique to student-athletes and does not compare them to prison labor, unpaid interns or volunteers who receive in-kind benefits, how should the analysis proceed?
Fact-based disputes mean a lot of discovery and expensive litigation. It also means that different results may ensue from different reasonable judges ruling on the different circumstances of the student-athletes filing suit. There will also be different determinations of employee status between states, as state wage law is not uniform (even if the federal courts can come to a consensus on how to determine this under the FLSA).
Two of the main questions will be: what is the “service” under the first factor and who “necessarily and primarily” benefits under the second factor.
Work Versus Play
It has been argued that college sports constitute “work” and not “play” because professional athletes get paid to play the same sport.[40] The mere existence of a professional league means that the sport can be compensable work. However, just because professional tennis exists, does not mean that playing tennis is “work.” The game of tennis itself is not work. It is a game.[41] It could be argued that the existence of professional tennis means that collegiate tennis is less likely to be “work,” because the athlete has the option of going pro and “working” on the pro circuit if they choose to receive money for playing tennis. In a different example, just because the profession of babysitter exists, does not mean a person engages in “work” when they spend time with their children even if they perform all the same tasks a babysitter would.
Plaintiffs’ counsel Paul McDonald draws a distinction between NCAA-level sports and club sports. He admits that university club sports are “quite clearly play.”[42] But because the university invests money in NCAA-level sports and monetizes NCAA-level sports, he argues that they are “work.”[43] This is a distinctive admission because, under this reasoning, it isn’t the actual participation in the sport that is “work,” but the level of investment by the university to make the games of the sport more of an event. But that isn’t the “service” offered by the athlete. The service offered by the athlete is their participation in the sport. That is the same for club sports and NCAA sports. Some club athletes play at a particularly high level (for example, Florida State University’s club lacrosse team which is being elevated to NCAA status[44] due to their ability to compete at an NCAA level and University of Oregon’s women’s rowing club team which is suing for elevation to NCAA status due to their history of success[45]). If plaintiffs’ counsel admits that the act of playing the sport itself is not the service, the amount of investment by the university cannot switch something that is play into something that is work.[46] If a student-athlete plays lacrosse on a club level, but then the university invests in it and builds a field, hires a coach, and pays for the team to travel to away games, has it changed anything in the nature of the student-athlete’s service? Does it matter if we call it club or Division 1 lacrosse?
Who “Necessarily and Primarily” Benefits?
The majority emphasizes how much Power Four universities benefit monetarily from their football and basketball programs. However, the concurrence points out that “Division I student-athletes play or provide athletic ‘services’ for the benefit of their team just as Division II, Division III and high school athletes play or provide athletic ‘services’ for the benefit of their respective teams. But something more is required to convert the majority’s university-as-beneficiary factor into a useful indicia of employment.”[47] The concurrence stated that the fact-finder would have to “decide whether a university’s sports team is (a) economically comparable to …profit-seeking businesses, or (b) essentially an extra-curricular activity creating at best indirect and attenuated economic benefit for the university.”[48]
The Supreme Court has acknowledged that the FLSA would not cover a person who “without promise or expectation of compensation, but solely for his personal purpose or pleasure” participated in an activity.[49] The Department of Labor also makes an employee exception for college students participating in interscholastic athletics primarily for their own benefit.[50] It is also not clear how to measure the numerous non-monetary benefits of participating in college sports.
What’s Next?
Apart from the desire to plug every activity in which one engages into the new economic realities four-part test,[51] the Johnson case raises a need for more in-depth discussion of the relationship between a university, its athletics department, its students[52] and its student-athletes. Nonprofit exceptions to tax law have been provided to athletic departments because athletics was considered part of the academic mission of the school. Will these be taken away if a court finds that athletics is not educational in nature primarily benefitting participating students? Will Title IX gender-equity concerns mean higher wages for underrepresented female athletes on campus (even though male athletic scholarships have been historically underfunded on campuses)? Or will athletes be compensated based on the amount of revenue they bring in, creating a potential Title IX disparity? How will NIL payments count towards a student-athlete’s compensation? Will they be considered “bonuses”?
As the Johnson case goes back to the District Court, college athletics departments will have time to analyze the economic realities specific to their campuses. But as the stack of pronouncements that student-athletes may be considered employees grows larger, they may not have long…
[1] Jennifer L. F. Cohen is a graduate of Duke University and Vanderbilt University School of Law.
[2] Johnson v. Nat’l Collegiate Athletic Ass’n, No. 22-1223, 2024 WL 3367646 (3d Cir. July 11, 2024), slip op. majority opinion (hereafter “Maj. Op.”).
[3] Id. at 40.
[4] Johnson v. Nat’l Collegiate Athletic Ass’n, 556 F. Supp. 3d 491, 495 (E.D. Pa. 2021).
[5] These plaintiffs brought additional state wage claims in addition to joining the FLSA claim. For example, Claudia Ruiz (tennis, Sacred Heart University) brought state claims under Connecticut law, while Stephanie Kerkeles (swimming, Fordham University), Nicholas Labella (baseball, Fordham University) and Jacob Willebeek-Lemair (soccer, Cornell University) brought state claims under New York law. Alexa Cooke (tennis, Lafayette University) joined Johnson’s claims under Pennsylvania law.
[6] Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage, U.S. Dept. of Labor, https://www.dol.gov/general/aboutdol/history/flsa1938 (quoting President Franklin Delano Roosevelt).
[7] Johnson, 556 F. Supp. 3d at 495.
[8] Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016) (the Second Circuit used a seven-factor test to determine whether unpaid interns were employees under the FLSA).
[9] Maj. Op. at 35.
[10] The Third Circuit majority recognized that “the NLRA and FLSA have distinct policy goals, but their shared history often inspires courts to draw interchangeably from each statute’s caselaw to answer fundamental questions related to the equitable regulation of the American workplace.” Id. at 32; see also id. at 22.
[11] See Office of the NLRB General Counsel Memo of September 29, 2021, Statutory Rights of Players at Academic Institutions (Student-Athletes) Under the National Labor Relations Act. See https://www.nlrb.gov/news-outreach/news-story/nlrb-general-counsel-jennifer-abruzzo-issues-memo-on-employee-status-of for link.
[12] Id. at 9 (stating “it is my position that the scholarship football players at issue in Northwestern University, and similarly situated Players at Academic Institutions, are employees under the [NLRA]. I fully expect that this memo will notify the public, especially Players at Academic Institutions, colleges and universities, athletic conferences, and the NCAA, that I will be taking that legal position in future investigations and litigation under the Act”).
[13] Maj. Op.at 36-40.
[14] See Berger v. Nat’l Collegiate Athletics Ass’n, 843 F.3d 285 (7th Cir. 2016) (holding that student-athletes were not employees and therefore not covered by the FLSA).
[15] See Dawson v. Nat’l Collegiate Athletics Ass’n, 932 F.3d 905 (9th Cir. 2019) (holding that a Division 1 football player was not an employee of the NCAA or Pac-12 under the FLSA).
[16] See Alston v. Nat’l Collegiate Athletics Ass’n, 594 U.S. 69 (2021).
[17] Maj. Op. at 21-22, fn 54 (quoting NCAA former president Myles Brand’s statement in a 2010 Sports Illustrated article that college athletes can’t be paid because they are amateurs, and they are amateurs “[b]ecause we don’t pay them”).
[18] Johnson v. Nat’l Collegiate Athletic Ass’n, No. 22-1223, 2024 WL 3367646 (3d Cir. July 11, 2024), slip op. concurring opinion (hereafter “Concurrence”) at 4.
[19] Id. at 20-21.
[20] Maj. Op. at 29 and Concurrence at 14, fn 9.
[21] Many examples abound of high school athletes participating in professional sports from skiers to hockey, tennis and basketball players. There are no professional sports leagues that technically require an athlete to have attended college. However, the NFL eligibility rule practically requires it, stating that a prospective player “must have been out of high school for at least three years and must have used up their college eligibility before the start of the next college football season.” However, players who have not used all their college eligibility “may request the league’s approval to enter the draft early.” See The Rules of the Draft, https://operations.nfl.com/journey-to-the-nfl/the-nfl-draft/the-rules-of-the-draft/#:~:text=Player%20Eligibility,the%20next%20college%20football%20season.
[22] Maj. Op. at 6-11.
[23] The court cited Mark Abode’s article on generic terms which does not list “student-athlete” as a generic term. The closest related term listed is “zamboni.”
This shows a gross misunderstanding of genericism in trademark law. In fact “student-athlete” is not a brand name at all. It is a descriptive term to describe one who is both a college student and a college athlete, much like the term “singer-songwriter” describing one who both sings and writes their own songs.
[24] The NCAA touts that the majority of student-athletes “go pro in something other than sports” in its marketing campaign in order to show that a college education and the determination taught through intercollegiate athletics can lead to success in life beyond the playing field. https://www.youtube.com/watch?v=6ltaRIJ0N2o
[25] Maj. Op. at 16.
[26] Concurrence at 7.
[27] Id. (citing Doe v. Univ. of Sciences, 961 F.3d 203, 208 (3d Cir. 2020)).
[28] Id.
[29] Simply: They aren’t employees because we don’t pay them. We don’t pay them because they aren’t employees. Amateurism exists so we don’t pay them. We don’t pay them because they are amateurs.
[30] Concurrence at 1-2.
[31] Id. at 3.
[32] Judge Porter still uses the term student-athlete.
[33] Id. at 5.
[34] Although a misnomer, it has become common use in describing college sports to use “revenue” interchangeably with “profit.” The court does not list specific “revenue” sports; however, much attention is paid to football, men’s and women’s basketball and the “profits” they theoretically create for their non-profit educational institutions. Maj. Op. at 11-12.
[35] Concurrence at 20-22 (agreeing with “Judge Hamilton’s intuition [in the Berger case] that the economic-reality question probably shakes out differently for FBS football players and March Madness-level men’s basketball players than it does for other student-athletes”). See also Judge Hamilton’s concurrence in Berger v. Nat’l Collegiate Athletic Ass’n, 843 F.3d 285, 294 (7th Cir. 2016).
[36] See Dawson, 932 F.3d at 910 (stating that “precedent demonstrates that revenue does not automatically engender or foreclose the existence of an employment relationship under the FLSA” in holding that the “revenue generated by college sports does not unilaterally convert the relationship between student-athletes and the NCAA into an employment relationship”).
[37] Berger, 843 F.3d at 294.
[38] Concurrence at 21, fn 14.
[39] Id. at 21.
[40] Maj. Op. at 30 (stating “with professional athletes as the clearest indicators, playing sports can certainly constitute compensable work”).
[41] According to Merriam-Webster, tennis is “an indoor or outdoor game played with rackets and a light, elastic ball by two players or pairs of players on a level court (as of clay or grass) divided by a low net.”
[42] SportsWise podcast with Gabe Feldman, Episode 66 at approximately 33 minutes (emphasis added).
[43] Id.
[44] FSU Women’s Lacrosse Optimistic About Division 1 Transition, Michele Csontos, https://www.fsunews.com/story/sports/2024/02/11/fsu-womens-lacrosse-optimistic-about-division-1-transition/72559728007/ (Feb. 11, 2024).
[45] Why Women Student Athletes Allege Title IX Violations at U. of Oregon, Forbes, Susan M. Shaw, https://www.forbes.com/sites/susanmshaw/2024/01/15/why-women-student-athletes-allege-title-ix-violations-at-u-of-oregon/ (January 17, 2024).
[46] The “investment” by the NCAA or university is not part of the economic realities test, but rather it is the “control” of the NCAA and universities. See Majority Opinion at 35.
[47] Concurrence at 16.
[48] Id. (citing Alamo Found’n v. Sec’y of Labor, 471 U.S. 290, 299 (1985)).
[49] See Walling v. Portman Terminal Co., 330 U.S. 148, 152 (1947).
[50] Maj. Op. at 30 (quoting U.S. Dept. of Labor, Field Operations Manual, sec. 10b03(e) (2016)).
[51] Do children owe their parents back wages? Because many parents may be their employees under this test (depending on how liberally we view the fourth factor’s definition of “compensation.” Are coupon books for hugs and handmade art projects in-kind benefits?).
[52] As an aside, the concurrence quoted Walling, 330 U.S. at 152, for the insight that if the court were to use a broad common law test for determining whether a “person who, without promise or expectation of compensation, but solely for his purpose or pleasure, work[s] in activities carried on by other persons either for their pleasure or profit” could not be an employee; “[o]therwise all students would be employees of the school or college they attended.” Concurrence at 19.
After Johnson, it must be asked, are all students employees of their school?
Take a typical college student with no scholarship: she has to attend classes and complete course requirements, complete departmental requirements to graduate, and she benefits the college by paying full tuition and fees (indeed the money that keeps the university running) in return for the in-kind benefit of a degree which will get her a job with higher pay or more prestige than other jobs. Can it be that all college students are employees engaging in work (showing up for class, writing papers, taking tests)? Are they all owed a fair wage?
