NCAA To Examine Allowing College Athletes To Receive Compensation For Use of Name, Image and Likeness

NCAA To Examine Allowing College Athletes To Receive Compensation For Use of Name, Image and Likeness

The NCAA announced yesterday that it has formed a working group to examine issues related to college athletes receiving benefits for the use of their name, image and likeness (“NIL”).  The formation of the working group was prompted by recent federal and state legislative proposals that would allow college athletes to receive payment for their NIL rights.  State level bills have been introduced this year in the Washington, California, and North Carolina state legislatures and a federal bill has been introduced in the US House by Rep. Mark Walker of North Carolina.  A Colorado state senator has also drafted a bill he plans to introduce, and 2020 presidential candidate Andrew Yang’s platform includes a plan calling for certain Division I football and men’s basketball players to be paid.  Each of these plans would allow college athletes to be paid directly by third parties for the use of their NIL rights.

In addition to bringing hope to video game players eager for the return of EA Sports’ NCAA Football and Basketball games, the news that the NCAA has decided to examine the issue of NIL benefits has created speculation on what type of compensation plan the working group may propose.  In its release announcing the formation of the working group, the NCAA made it clear that “the group’s work will not result in paying student as employees” and that any rule modifications will be “tethered to education.”  But what does this mean and what types of rules could fit into this description?

To understand what rules the group might propose, you first must understand where the phrase “tethered to education” comes from.  In the Ed O’Bannon v. NCAA trial court decision, Judge Wilken held that the NCAA’s bylaws that restricted college athletes from receiving compensation for the use of their NIL rights violated antitrust law and ordered two remedies: (1) schools must be allowed to award athletic scholarships that cover an athlete’s full cost of attendance (previously they could only cover room and board, tuition and fees, and books); and (2) schools must be allowed to award athletes NIL payments of up to $5,000 per year, with the funds being put in trust funds and athletes being able to access these funds after either graduating or otherwise leaving school.  The NCAA appealed this decision to the Ninth Circuit.  The appellate decision affirmed the finding of an antitrust violation and the cost of attendance portion of the remedy.  But it overruled the portion of the remedy allowing the trust fund payments, holding that cash sums that are “untethered to educational expenses” crossed the line between amateur and professional athletics.

More recently, Judge Wilken was again tasked with assessing the legality of the NCAA’s athlete compensation limits in the Alston case.  In her decision in that case, Judge Wilken held that the NCAA’s rule which limits athlete compensation to the full cost of attendance also violates antitrust law.  But Judge Wilken was mindful of the Ninth Circuit’s O’Bannon ruling in crafting her remedy:  she held that schools must be allowed to award more compensation to athletes as long as that compensation is “tethered to educational expenses.”

By using the term “tethered to education” in its release, it’s clear that any NIL rules proposed by the NCAA will attempt to fit within the Ninth Circuit’s O’Bannon decision.  As a result, it’s highly unlikely that the NCAA will propose a plan where athletes can be paid directly by third parties (such as for appearing in a commercial or signing autographs) or are automatically entitled to cash payments that they can access after they leave school.  Doing so would contradict the O’Bannon appellate decision and put its precedential value at risk.  More likely is a plan where athletes may engage in activities where they are paid for the use of their NIL, but any money earned is put into a fund that can be accessed as a result of meeting specified academic benchmarks, such as maintaining a certain GPA, meeting yearly academic progress requirements, or graduating.  It’s also possible that an NCAA plan would avoid direct cash payments altogether and instead mandate that all NIL payments are put into a pooled fund whose assets must be spent on the educational expenses identified by Judge Wilken in her Alston decision (computers, non-cash awards for graduation and academic performance, tuition for grad school, and study abroad programs).  This type of plan may more easily avoid a conflict with the Ninth Circuit’s O’Bannon decision.

With the goal of adhering to the Ninth Circuit’s decision on one side and fending off the proposed legislation on the other, the working group has a hard task in front of it.  Regardless of what is proposed and potentially enacted, it is unlikely to end the debate and litigation regarding compensating college athletes.

Mit Winter – Attorney
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