Since last year’s monumental Supreme Court decision in Alston curtailing the National Collegiate Athletic Association’s (NCAA) ability to limit student athlete compensation, the landscape continues to shift in unprecedented ways. In September 2021, the National Labor Relations Board (NLRB) announced its position that certain student athletes at private institutions should be considered employees for purposes of organizing and other National Labor Relations Act (NLRA) protections. Now, the U.S. 3rd Circuit Court of Appeals (which covers employers in Delaware, New Jersey, and Pennsylvania) will decide whether student athletes can be classified as employees under the Fair Labor Standards Act (FLSA), the federal law mandating minimum wage and overtime compensation.

Amateurs or Employees?

In the case pending before the 3rd Circuit, a group of Division 1 student athletes from several states filed a lawsuit in the U.S. District Court in the Eastern District of Pennsylvania alleging that student athletes who engage in interscholastic athletic activity for their schools are “employees” and should be paid minimum wage and overtime for the time spent participating in those activities. The NCAA asked the court to dismiss the lawsuit.

First, the NCAA relied on a “revered tradition of amateurism” in college sports. In sum, it argued that the schools’ history of not paying student athletes is “precisely what makes them amateurs.” The district court rejected this argument, finding it unpersuasive and cyclical to maintain that student athletes are amateurs simply because the schools have established a tradition of not paying them.

Second, the NCAA argued that it acted in good faith by relying on the Department of Labor’s (DOL) Field Operations Handbook (FOH), which says student participation in “extracurricular activities” doesn’t create an employment relationship. The district court considered whether interscholastic athletics are conducted for the benefit of the student athletes, in which case they would be considered “extracurricular activities” under the FOH. The court acknowledged collegiate athletic obligations interfere with the students’ ability to participate in and get the maximum benefit from the academic opportunities schools provide. Taken together with the millions of dollars in revenue generated from the athletic programs, the court held that any benefit belonged to the schools, not the students.

Finally, the court applied the long-standing “economic realities test” and reviewed multiple factors typically applied to situations involving student interns. The court held that some relevant factors (such as whether the program is related to the student’s formal education, whether the program accommodates the student’s academic commitments, and whether the student complements rather than displaces the work of paid employees) weighed in favor of finding the students to be employees. In view of the facts, the district court determined that the students had stated a plausible claim that they are employees and denied the NCAA’s request to dismiss. Johnson, et al., v. the NCAA, et al.

Takeaways

The 3rd Circuit will take up the question of whether student athletes can be classified as employees under the FLSA. If the appellate court answers the question in the affirmative, the floodgates may open for further litigation and possible expansion of other employment law protections to student athletes. This case represents one of several recent developments in collegiate sports that could usher in changes on an extraordinary scale.

Shelby Hicks-Merinar is an attorney with Steptoe & Johnson PLLC in Morgantown, West Virginia. Shelby has advised clients and defended them in matters involving sexual harassment, wrongful discharge, disability, and age discrimination, as well as day-to-day human resources management. You can reach her at shelby.hicks-merinar@steptoe-johnson.com.