By Jeff Birren
Recently Sports Litigation Alert reported that the case brought by Lawrence “Poppy” Livers against the NCAA, Villanova where he played football, and several other NCAA member schools, had been dismissed by the U.S. District Court of the Eastern District of Philadelphia. (SLA, “The Electric Seventh Circuit and Its Impact on Sports Law,” Adam Epstein, Volume 15, Issue 14, August 3, 2018).
More precisely, on May 17, 2018 the District Court dismissed with prejudice Livers’ claims against several NCAA-member clubs that he had not attended. The Court further determined that: “Plaintiff had failed to allege facts sufficient to plausibly state a willful FSLA violation by Villanova or the NCAA.” Furthermore, Livers “failed to plead facts sufficient to overcome the impact of the FOH’s (the U.S. Department of Labor’s Filed Operation Handbook) guidance on the reasonableness analysis inherent to a willfulness determination.” (Memorandum Re: Motion To Dismiss Amended Complaint (Livers v. National Collegiate Athletic Association, a/k/a the NCAA & Villanova University, (U. S. D. C. E.D. Penn, Civil Action No. 17-4271, (“Mot. To Dismiss”), July 28, 2018 at 2.)) However, the claims against both the NCAA and Villanova University were dismissed without prejudice and on May 30, 2018 Livers filed an Amended Complaint.
The Amended Complaint
Livers now alleges a single cause of action for violation of the Minimum Wage Provision of the Fair Labor Standards Act (“FSLA”) against the NCAA and Villanova University. Livers was a football scholarship athlete at Villanova during the 2014-2015 season. On September 26, 2017 he sued the NCAA, Villanova and other defendants for refusing to compensate him for his work. The NCAA and Villanova moved to dismiss the case on the grounds that it was time barred. Specifically, Livers played his last game for Villanova on December 13, 2014. The Complaint was filed on September 2017, two years and nine months after Livers had played his last game for Villanova. FSLA claims must generally be brought within two years, and it was on this basis that the Court dismissed the claims.
The Court granted Livers leave to amend his Complaint against the NCAA and Villanova, however, because the statute is extended to three years if the refusal to pay is “willful”(29 U.S.C. § 255(a). Case law has defined “willful” in this context “if the employer knew or showed reckless disregard for the matter of whether its conduct was prohibited by the FSLA.” (Brock v. Richland Shoe Co., 799 F. 2d 80, 81, (3d Cir. 1986). In the Amended Complaint, Livers alleged just that.
Livers added allegations that “most Scholarship Athletes are substantially economically dependent upon athletic scholarships–specifically the non-cash benefits they provide, including tuition, fees, books, and room and board valued at tens of thousands of dollars for each year of eligibility/participation in NCAA sports. (Am. Compl. ¶¶ 89-90.) Plaintiff was personally economically dependent upon his Athletic Scholarship while attending Villanova. (Id. ¶ 92).” (Id.)
He also now claims that “for over a decade a debate as been going on regarding the employee status of Scholarship Athletes. (Id. at ¶ 109.) Throughout this debate, college administrators, athletic directors and coaches have publicly asserted various reasons for the refusal of the NCAA member schools to pay Scholarship Athletes. (Id. at ¶ 110.) Not once during this debate has a college administrator, athletic director, or coach ever professed reliance upon the guidance provided in the Department of Labor’s (“DOL”) Field Operations Handbook (“FOH”) Section 10b03(e) as a reason for the refusal of NCAA member schools to pay Scholarship Athletes. (Id. at ¶ 111.)” (Id.)
That code section states that if the activity is primarily for the benefit of the student as part of the educational opportunity provided by the school, then there is no employer-employee relationship. It gives examples of such activities including glee clubs, choirs, dramatics, intramurals, and interscholastic athletics.
The Amended Complaint also alleges that NCAA member schools, including Villanova, publish student-run group directories, and NCAA sports are not only excluded from these directories, but that “NCAA member schools expressly distinguish, in published material on their websites, NCAA sports from student-run groups, such as student-run interscholastic clubs sports. (Id. ¶ 122.) Plaintiff alleges that in light of these considerations–as well as allegations repeated from the original Complaint comparing and contrasting student athletes to students involved in work study programs (Id. ¶¶ 95-101) and students involved in student-run groups (Id. ¶¶ 102-108)–it is clear that NCAA member schools understood that Scholarship Athletes are directly comparable to students employed by NCAA member schools in work study programs. (Id. ¶ 126.)” (Id.)
The Defendants’ Second Motion To Dismiss
Villanova and the NCAA filed a motion to dismiss the Amended Complaint on June 13, 2018. Livers filed his opposition on June 22, 2013 and the defendants replied on June 28, 2018.
The defendants’ motion was based on the fact that the FSLA “clearly establishes the view that student athletes are not covered under the FSLA–and therefore that Defendants were reasonable in believing that they need not compensate students athletes pursuant to the FSLA, and therefore could not have willfully violated the FSLA.” Moreover, they asserted that the plaintiff asserted “a strained interpretation of that guidance that would violate typical principles of statutory construction, in an unavailing effort to undermine this conclusion.” (Id. at 5.)
The defendants also asserted that since no court has ever held student athletes to be employees under FSLA, they were thus reasonable in believing that the student athletes were not covered under FLSA. Finally, they claimed that they did not need to demonstrate “a reasonable basis for their belief that Plaintiff was not covered under the FSLA” but rather it was plaintiff’s burden to “plead facts that, if proven, show that Defendants subjectively believed that the FOH and case law was wrongly decided. This Plaintiff does not do.” (Id. at 5/6.) Thus, the Amended Complaint should be dismissed as time barred.
Livers’ Opposition
Livers responded that in the Third Circuit “it is well settled that the issue of whether an FLSL claim is ‘willful’ is a question of fact that is not appropriate for the Motion to Dismiss stage.” (Id. at 6.) He also alleged that the FOH guidelines: “clearly excludes from FSLA coverage only those student activities conducted primarily for the educational benefit of participants, which does not include NCAA sports. (Id., (emphasis in the original.) This can only be established after discovery.
Livers also asserted that the Amended Complaint “clearly pleads that Defendants willfully violated the FSLA.” (Id.) Furthermore, the Amended Complaint “alleged a factual basis–significant similarities between work study students and NCAA scholarship Athletes–for the allegation that Defendants understood that they had a duty to treat these two groups the same under FSLA, that is, that they had a duty to compensate Scholarship Athletes just as they did work study students.” (Id. at 6/7.)
The Court Speaks
This time around, the Court reached a different conclusion, finding that the Amended Complaint “plausibly states a willful FSLA violation to survive at the Motion to Dismiss Stage.” (Id. at 8.) This was based to a considerable extent on the allegations that Scholarship Athletes are “directly comparable to students employed in work study programs, individuals who are classified as employees under the FSLA.” (Id.)
The Court further stated that the Amended Complaint includes specific factual allegations that compare and contrast Scholarship Athletes and work study students, and that there were also “detailed factual allegations” contrasting the experience of students in “student-run groups” and how those activities are “subject to much less discretionary control by college supervisory staff,” and that they were often “related to educational programming,” “whereas the Scholarship Athlete and work study experience is strictly non-academic in nature. Finally, Villanova’s website, like the websites of many other NCAA member schools excludes NCAA athletics from its directory of student-run groups.” (Id.)
Consequently, the allegations “permit the plausible inference that Scholarship Athletes, like their work student counterparts, fall within the employee status under the FSLA, 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.” (Id.)
The Court also stated that the new facts include allegations that no one at the NCAA or member schools ever professed reliance on the FOH, and this in turn “permit a plausible interference that Defendants did not rely on the FOH guidance in making this decision.” (Id. at 9.) At the motion to dismiss stage, “it remains an open fact question what impact, if any, the FOH guidance had on Defendants’ thought process and reasoning behind the decision to not pay” student athletes. “This Court, cannot say, at this stage, that the existence of the FOH guidance renders Defendants’ decision reasonable, and therefore not a willful violation of the FSLA, as a matter of law.” (Id.) Consequently, “fact discovery on this issue is appropriate.” (Id.)
The Court then turned to the FSLA claim. It restated the Defendants’ contention that Livers “has not added allegations” to the Amended Complaint “sufficient to establish that the Livers’ ‘economic reality’ with either Villanova or the NCAA is one of employee to employer.” (Id.) The defendants further alleged that Livers “voluntarily participated, initially without receiving a scholarship in return. (Id. at 10.)
The defendants further stated that NCAA football had “a long tradition of amateurism,” that there was no “single test for evaluating the ‘economic reality’ standard,” and none of the previous tests used by courts, including Glatt v. Fox Searchlight Pictures, 811 F. 3d 528 (2d 2016) “capture the ‘tradition of amateurism.” Consequently, “the Court should conclude” as did the Seventh Circuit in Berger v. NCAA, 843 F. 3d 285 (7th Cir. 2016), “that student athletes are not employees under the FSLA, as a matter of law.” (Id.)
Livers responded by stating his position that the Glatt test is the appropriate test, and that the Amended Complaint “alleges facts sufficient to state a claim that all Scholarship Athletes are entitled to FSLA coverage pursuant to such an evaluation. He further asserted that the Amended Complaint alleged sufficient facts to plead both his “economic dependence on his scholarship benefits,” and “economic coercion” under a prior Supreme Court decision, and thus he had stated a claim under FSLA. He also pointed out that there was no “amateurism” exception in FLSA, despite “Defendants’’ self-serving assertion” that their self-imposed “tradition” “precludes a finding that Plaintiff is covered by FSLA is unpersuasive and must give way to searching factual analysis through discovery.” (Id. at 10-11.)
This time, the Court agreed with Livers. “In light of additional factual allegations include in the Amended Complaint, we now find that Plaintiff has plausibly stated an FSLA violation, and Defendants’ Motion to Dismiss will be denied.” (Id. at 11.)
It noted that the test for employment is based on “economic reality” and the Amended Complaint includes additional facts regarding the economic reality of the relationship between Plaintiff, in his capacity as a Scholarship Athlete with the Villanova football team, and Villanova and the NCAA.” (Id.) This included additional facts related to his reliance on the financial benefits that he received as a Scholarship Athlete. The Amended Complaint also pleaded “a more precise FSLA claim against the remaining Defendants” and one that was “plausible on its face.” (Id. at 12.)
The Court declined “at this stage to take a position on what type of multi-factor test, if any, would be appropriate in this context.” (Id. at 11, Fn 2.)
The Court also stated that there was no controlling authority, as the cases cited by the NCAA “are not controlling on this Court, and in any case, both proceed on slightly different facts and theories than those at issue here.” (Id., Fn 3 at 12.)
Consequently, “Plaintiff’s FSLA claim remains viable” and “it will be subject to fact discovery.” (Id.) It ended by stating that the parties “will be ordered to engage in discovery limited to the issue of willfulness, and will have 60 days to do so.” (Id.)
So Livers’ claim lives, at least for now.
Author’s editorial note: this case does not seem to be the best one to bring the FSLA claim. For one thing, Livers missed the two-year statute of limitations, and thus can only prevail if the trier of fact concludes that the NCAA and it members engaged in a “willful” violation of FSLA. That may be difficult to do. Moreover, Livers did not enter Villanova as a recruited “Scholarship Athlete.” If anything, getting the scholarship may well have improved his “economic reality” rather than impair it. Thus, the FSLA claim may prove to be far more difficult for Livers than it could be for a former scholarship athlete who meets the two-year statute and who was recruited as a scholarship athlete right out of high school. However, Livers can now get discovery that may yet lead to a recovery in this case. This author, however, will not be holding his breath.
Birren is an adjunct professor at Southwestern University School of Law and former general counsel of the Oakland Raiders.
