What follows is an exclusive interview with Morgan Lewis partner David McManus and associate Elizabeth Polido about New York’s new NIL law.
What is the basis of the New York Student Athlete NIL Law?
New York Governor Kathy Hochul recently passed a law that, effective immediately, allows student-athletes at colleges in New York State to receive compensation for using their name, image, and likeness (“NIL”) to endorse products and services, without the risk of losing their scholarships or eligibility to participate in their sports. The law permits student-athletes to obtain compensation for their NIL through camps and clinics, as well as brand partnerships, media appearances, and social media advertisements, among other things. In addition to allowing student athletes to enter into NIL deals, the New York law provides guidance and resources to student-athletes navigating this new landscape, including by allowing them to be professionally represented by an agent or attorney (provided they are otherwise registered under the New York General Business Law or admitted to the New York bar, respectively). The law also requires colleges to offer assistance programs to guide student-athletes on topics related to NIL deals, including financial literacy, career development, and mental health support services.
How is the law different than other NIL state legislation?
In passing the law, which comes on the heels of the NCAA’s recent guidance clarifying colleges’ involvement in students’ NIL deals, New York joins several other states with similar NIL legislation (including California, Pennsylvania, and New Jersey). New York’s NIL law is unlike that of other states in that it does not explicitly prohibit deals endorsing certain categories of products or services (e.g., alcohol, tobacco, and gambling). But there are still a number of restrictions on the NIL deals New York student-athletes may enter into. For example, the law prohibits student-athletes from endorsing products or services that conflict with existing sponsorships or endorsements between their college and third parties. The law also includes a general prohibition on endorsement deals that, from the college’s perspective, “would reasonably be judged to cause financial loss or reputational damage to the college,” providing broad bases to potentially nullify NIL deals.
How will the law impact student athletes?
The impacts of the New York law may be minimal for most student-athletes as NIL deals tend to gravitate towards the most prominent athletes at the largest schools in the most lucrative sports. In that regard, the bill suggests that colleges take additional measures to support all student-athletes by establishing student-athlete assistance programs such as savings plans and funds for financially distressed student-athletes.
How will the law impact businesses?
Businesses interested in signing NIL deals and colleges alike should review the New York law to ensure that potential NIL deals are compliant. Such companies and institutions should also remain cognizant of similar legislation at the state and federal level, as well as the implications of these laws. In particular, NIL laws, which effectively remove certain barriers that prevent student-athletes from earning compensation, potentially create increased risk of claims that these student-athletes should be deemed employees of their respective colleges. For instance, if student-athletes are deemed employees for purposes of the Fair Labor Standards Act—which is the question currently before the Third Circuit in Johnson et al. v. National Collegiate Athletic Association et al.—colleges will be required to comply with federal minimum wage and overtime requirements, and may soon find themselves subject to other labor and employment laws, such as Title VII. The legal landscape is changing quickly and colleges and businesses should ensure that they stay ahead of the game by monitoring NIL and other laws that may impact college sports.