UPenn Athletes Lose Wage Bid Against NCAA, Schools

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By Lisa Nagele-Piazza

Feb. 17 — University of Pennsylvania athletes can’t proceed with a proposed collective action against the university, the National Collegiate Athletic Association and more than 120 member schools, alleging they are employees entitled to minimum wage under the Fair Labor Standards Act for their work as student athletes, a federal judge ruled Feb. 16.

Three current and former members of the Penn women’s track and field team didn't establish that they have standing to bring claims against the NCAA or any of the other schools, Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana said, dismissing those claims without prejudice.

Lawrence also ruled that participating in an NCAA athletic team doesn’t make the claimants university employees under the FLSA, and he dismissed the claims against Penn with prejudice.

The FLSA's circular definition of “employee” as “any individual employed by an employer” has fueled the debate about which workers are covered employees under the act. This case examines whether the athletes are employees under the U.S. Court of Appeals for the Seventh Circuit's flexible “economic realities” approach established in Vanskike v. Peters, 974 F.2d 806, 30 WH Cases 1739 (7th Cir. 1992).

The court “correctly recognized that student-athletes benefit from playing sports as part of their overall college education. Because intercollegiate athletics is an essential element of higher education, the NCAA and its members will continue our efforts to defend and strengthen it,” Donald Remy, NCAA chief legal officer, said in a statement e-mailed to Bloomberg BNA Feb. 17.

Counsel for the athletes didn't immediately respond to Bloomberg BNA's request for comment.

No Standing Against Schools Other Than Penn

Gillian Berger, Taylor Hennig and Lauren Anderson alleged that they should have been compensated for the time they spent performing as student athletes, according to their March 2015 amended complaint.

The three Penn track and field team participants sought to represent a class of “[a]ll current and former NCAA Division I student athletes, on NCAA women’s and men’s sports rosters” for the named schools beginning in the 2012-2013 academic year.

The NCAA and the schools argued that the athletes didn't have standing to bring claims against any of the schools except Penn—the school they attended.

Siding with the schools, the court said the athletes failed to assert in their complaint that they were employees for any school other than Penn. Although they argued in a subsequent brief that the NCAA and the other schools were liable under a joint employer theory, they didn't make this allegation in their complaint.

Thus, the court dismissed without prejudice the claims against all named defendants other than Penn for lack of subject matter jurisdiction.

But the athletes' claims against Penn also fail, the court found, noting that it would therefore be futile to allow the claimants to amend the complaint.

Intern Test Doesn't Apply to Athletes

Evaluating the athletes' claims only as they relate to Penn, the court said their participation in an NCAA sports team didn't make them employees under the FLSA.

The court rejected the athletes' argument that their employment status should be evaluated under the Department of Labor's intern fact sheet test, which identifies six factors that for-profit, private sector employers should consider in determining whether interns must be paid .

The factors highlighted in the fact sheet weren't designed to apply to student athletes, and nothing suggests that the DOL intended them to apply outside the internship context, the court said.

The fact sheet addresses internships at for-profit businesses in the private sector, not activities that take place in an educational setting, the court added.

Additionally, appellate courts have declined to use the fact sheet's test and instead have applied more flexible analyses, the court said.

Amateurism Is Part of Economic Reality

Following Seventh Circuit precedent, the district court evaluated the economic reality of the situation and the totality of the circumstances.

The “revered tradition of amateurism in college sports” is “an essential part of the ‘economic reality' of the relationship between the Plaintiffs and Penn,” the court said.

Students who choose to participate in sports at Penn do so because they perceive it as beneficial to them as part of their educational experience, the court added.

Furthermore, the DOL hasn't taken any action to apply the FLSA to student athletes despite thousands of student athletes participating on college teams each year without compensation, it said.

The case isn't the proper forum to resolve the broader societal debate about whether college athletes should be compensated in some way, the court said in a footnote.

P L McDonald Law LLC and Milberg LLP represented the athletes. Littler Mendelson PC represented the NCAA and Penn. Constangy, Brooks, Smith & Prophete LLP also represented the NCAA.

To contact the reporter on this story: Lisa Nagele-Piazza in Washington at lnagele@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com