Name, Image, & Likeness Creates Challenges for Compliance Departments

Jun 4, 2021 | NCAA

By Jason Re – The George Washington University Law School

The next era of college sports is nearly upon us. In just months, college athletes in certain states will be allowed to profit from the use of their name, image, and likeness (NIL). In several states, NIL legislation has been introduced or formal law has been passed, including Georgia, Florida, Alabama, New Mexico, and Mississippi, with more states, (such as Louisiana, Arkansas, and Texas), looking to join the group. These states’ NIL laws will come into effect on July 1st of 2021, a date that is as momentous as it is uncertain for current and future student-athletes, athletic departments, and compliance offices across the country.

Student-athletes will soon under these laws be allowed to use their NIL to promote athletically and non-athletically related business activities. Athletes would be allowed to mention their involvement in their collegiate sport and the name of the school they attend to represent in their respective sport, giving the athletes greater control of their NIL in order to advertise or promote the sale or use of a commercial product or service. The new guidelines would open up numerous opportunities for student-athletes, including, but not limited to, making money for signing autographs, providing instructional lessons, or hosting for-profit training camps, selling their own memorabilia, accepting sponsorship for products, and more. Taken together, this is also sometimes referred to as the “right of publicity.”

There is no set methodology to estimate how much a student-athlete would be able to earn through endorsement, business opportunities, and other NIL usages, but one would assume that it would be somewhat proportional to popularity. The combinations of opportunity and earning are nearly endless, and there are countless moving parts and mitigating circumstances that will shape NIL individually for each student-athlete.

One part of a university’s athletic department must be particularly on top of NIL bills, programs, and processes – compliance offices. The compliance office of an athletic department is tasked with educating, monitoring, verifying, and ensuring that the student-athlete and athletic department as a whole are in compliance with any and all pertinent NCAA (and conference) rules from top to bottom, and team to team. It is the mission of the office of athletic compliance to provide student-athletes, coaches, and staff with the knowledge needed to be successful within the guidelines provided by state, NCAA, and conference legislation. Thus, while it will be a group effort, much of the ensuring that the university and student-athlete follow these new NIL rules will fall upon the shoulders of compliance offices around the country, requiring them to be uniquely educated and prepared to take on NIL programs as July approaches.

In a recent webinar, hosted by Spry (a technology company that “creates a way for institutions and student-athletes to embrace the NIL”) and the National Association of Collegiate Directors of Athletics (NACDA), a panel of collegiate athletics professionals discussed how NIL opportunities and payments may affect need-based aid. Todd Hairston, former Senior AD of Compliance with over 20 years of experience, led the discussion. He was joined by Maura Smith, Associate Commissioner, Governance & Compliance of the Sun Belt Conference; Tim Duncan, Vice President of Athletics and Recreation of the University of New Orleans; and Brad Hunt, Head Coach of the Princeton University Women’s Cross Country Team.

What follows is a summary of their opinions.

One point of interest in the discussion of NIL was the impact it may have on need-based aid and Federal Pell Grant award. They suggested compliance offices should strive to be aware of how NIL can alter awards such as these, and thus if NIL is worth it to the student-athlete. Calculating need-based aid is already a complicated process with various moving parts and mingling elements, and NIL earning will undoubtedly factor in. In many cases it is likely that a student-athlete will earn less in need-based aid if there is an NIL earning agreement in place for them, as this prospective and actual earning will factor into aid calculation.

Similarly, an interesting issue for the student-athletes may arise when their NIL earning puts their family outside of the qualifying range for a Federal Pell Grant. The United States government awards these Pell Grants to individuals, often student-athletes, who display a particularly extreme financial need for assistance to pay tuition. These grants are the single largest source of federally funded grants and are awarded solely on the basis of financial need. Thus, in a situation such as this, a student-athlete would in essence be replacing passive “free money” with active merit-based NIL earning. This may potentially lead to discontent in student-athletes and/or their families, as many will feel that NIL programs are hard-earned money that should not cut into grant money. Nevertheless, compliance offices and student-athletes alike should be educated on the risks and benefits of NIL programs such as this.

On the other hand, state NIL bills generally provide that athletic scholarship may not be reduced or revoked when a student-athlete earns money through NIL programs. Thus, a student-athlete on a full academic or athletic scholarship need not worry that any NIL earning will have negative implications on financial award. Even so, it is crucial to note that many NIL earning arrangements may not be in the best interest of the student-athlete. Some NIL related opportunities may incur substantial fees and expenses – such as paying agents, lawyers, facilities, marketing representatives, taxes on earnings, etc. – which can add up to a significant deduction of earning, or even leave the student-athlete in the red. As noted, prospective NIL earning will likely be proportional with relative popularity and success of the sport, school, and student-athlete. NIL earning programs may be lucrative endeavors for those at the top of a popular sport, but they may be inadvisable to those in less popular sports or historically less successful universities. Thus, athletic departments and compliance offices have a duty not only to ensure that state, NCAA, and NIL rules are followed, but also that the student-athletes’ best interests are being looked out for.

An important element in the smooth transition to NIL earning in these states with related bills is early and constant education. While some state NIL bills will require universities to provide student-athletes with education programs held by athletic department compliance offices, these processes are vital even when not explicitly mandated and should be extensive and informative. As with other new initiatives, education of the ins-and-outs of NIL is irreplaceable and should be the focus of athletic departments in NIL earning states. Compliance offices should take an active role in this education process – ensuring that student-athletes – and those university staff that he or she comes into contact with – are fully equipped to take on NIL questions, concerns, and earning.

This education on NIL can take many forms. Some suggestions include one-on-one meetings between student-athlete and compliance office representatives, team-wide education programs, inter-team discussion groups, and more. One popular suggestion for each team to meet weekly with the compliance office on a set time and date to discuss NIL and other financial considerations, as financial literacy generally is a valuable skill beyond NIL. Similarly, open forums of communication between teams themselves may be useful in acting as a sounding board for understanding, utilizing, and discussing the NIL earning process beyond a student-athlete’s own team. It is important to not only keep student-athletes in conversation, but also ensure that each singular student-athlete is getting individualized attention on NIL, as it can be difficult to navigate alone, and can vary wildly from person to person.

Further, this NIL education should be a constant conversation throughout the student-athlete’s time with the university – from recruitment to graduation. The NIL conversation is not just one single consideration, nor is it made in a vacuum – shifting circumstances in a student-athlete’s life may impact their proclivity towards NIL programs, and thus NIL discussions will be sustained and personalized for the student-athlete’s time at the university. As noted, one potential option is a weekly meeting with the student-athletes, be it one-on-one, team wide, or otherwise, as an open forum for NIL discussion and learning programs. NIL is a new program, subject to shifting and changing of guidelines, so constant updates will be key. The education system on NIL should be a living process, not just a singular meeting upon arrival on a respective campus.

Ultimately, the implementation of NIL earning programs will be a learning process for student-athletes, their families, athletic departments, compliance offices, and all other parties involved in the process as a whole. Whether legislatively mandatory or not, education for these groups will be vital in the smooth implementation and functioning of NIL programs as these practices go into effect. Compliance offices should not only be acutely aware of any statutory provisions in their state’s NIL bill which would require education of some kind, but also aid in this education process as much as possible to ensure adherence to the various new opportunities, rules, and restrictions in the NIL sphere.

As of now, there is no federal NIL bill imminent in the legislative pipeline. State NIL bills will inevitably differ in various ways, leading to grey areas for compliance offices in how the rollout and implementation of these programs will operate. It may take years to see where exactly the gaps are in the coming NIL legislation and flesh out any problems that will arise. All parties will take part in a learning experience from the very start. It is important to remember that all parties involved are working towards clarity in understanding and practice as questions and issues inevitably arise. It seems inevitable that a university’s legal department will play a role in the implementation and functioning NIL earning in conjunction with compliance offices.

Ignoring the impact that NIL bills will inevitably have on state-vs-state recruiting for the time being, one question that will become clearer in the coming months is the role of the conference offices. Conference offices will likely play a key role in the introduction and solidification of the NIL process – acting as a forum for discussion and consideration of best practices, a think-tank of NIL compliance to educate and better the entire process. On the other hand, conference offices pose a unique problem, as athletic conferences often span several states, and these states may have different (or non-existent) NIL rules and guidelines. In this way, conference coordination can only go so far until a federal NIL bill is passed into law.

Another prospective point of contention that athletic departments are concerned about is compliance with recruiting rules in terms of discussing NIL earning with prospective student-athletes in the recruiting process. It is unclear as of now what may or may not be said or promised in this regard. Again, as there is no federal NIL bill, and states may vary, this could cause friction as guidelines will differ by state. Compliance offices should take a close look at their respective states NIL bill and related provisions to ensure the university is adhering to any recruiting-related NIL rules.

Taxation on NIL earnings, and the tax process more generally, will become another potential problem that will have to be overcome, or passed on to another party. Athletic departments and compliance offices are not legally tax advisers, but student-athletes will naturally have questions about taxes and the tax considerations on their NIL earnings. Thus, a question arises as to who will provide the student-athlete with guidance on the subject. Again, compliance offices will have to look to the text of their state’s NIL bills with a fine-toothed comb in order to comply with statutory provisions. It is entirely likely that an outside agency will have to be hired to help answer, and handle, these NIL earning taxation questions and processes.

With all of the uncertainty surrounding NIL legislation and implementation, and unanswered questions as to the earning process itself, student-athletes, athletic departments, compliance offices, and any other parties involved in the NIL process must be constantly vigilant. Compliance offices in particular must stay on their proverbial toes in the coming months as NIL legislation will be passed, implemented, practiced, and become clearer as it takes more substantial shape. A careful reading of their state’s respective NIL bill, constant education, and continuous discussion on the topic are all key in the smooth operation of such programs under adherence to the law.

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