Fair Play or Fair Labor: Courts Continue to Grapple with Student-Athlete Compensation under FLSA



Next time there is a lull at your tailgate, I have a question that I guarantee is going to get every college-sports fan talking: should student athletes be compensated?

Most proponents of compensating student athletes would say it’s only fair – the athletes put in long hours of hard work and even put their health at risk for their sport while bringing in millions in revenues for athletic organizations and their member schools.

On the other hand, some are concerned that compensation for student-athletes would encourage schools and students to increasingly focus on the business of sports to the detriment of education and amateur athletics.

These issues were highlighted in a recent Northern District of California decision reaffirming that student athletes are not entitled to minimum wages or other FLSA protections because they are not employees within the meaning of the act (Dawson v. Nat'l Collegiate Athletic Ass'n, No. 16-cv-05487-RS, 2017 BL 139824 (N.D. Cal. Apr. 25, 2017)).

The court relied on a recent Seventh Circuit opinion (Berger v. National Collegiate Athletic Ass’n, 843 F.3d 285, 27 WH Cases2d 136 (7th Cir. 2016)) that determined that multi-factor “economic reality” tests typically used to determine employee status were not applicable to student-athletes because they do not take into account the tradition of amateurism in college athletics that colors the economic relationship between student athletes and athletics organizations. The court then found that student athletes are not employees because they voluntarily participate in their sports primarily for their own benefit and without expectation of compensation.

The student in Dawson seized on a point made in the Berger concurrence: the students at issue in that case were track-and-field athletes at a school that does not offer athletic scholarships. The concurring judge opined that in the case of a revenue-generating sport, such as NCAA Division I men’s basketball or football, where schools offer scholarships for the cost of attending school, the argument that amateurism defined the relationship was weaker.

The plaintiff in Dawson was exactly that – a lineman for the University of Southern California football team. He argued that Division I Football Subdivision student athletes play primarily for the economic benefit of the NCAA. But the district court found that the distinction ultimately did not affect its determination for two reasons.

First, the court found that the U.S. Department of Labor handbook that guided the opinion in Berger broadly states that extracurricular activities such as “interscholastic athletics” are not work as contemplated by FLSA. The guideline, the district court noted, makes no distinction between athletics that generate revenue and those that do not. The court also reiterated that football programs exist for the benefit of the students rather than schools, making them unlike work-study programs.

Second, the court found no case law supporting the contention that revenue-generation is relevant to the determination of employment status and instead found that courts have typically rejected profitability as a factor in “economic reality” inquiries.

Does this signal that courts in other circuits will follow the Seventh Circuit holding in Berger and preclude any student athlete—revenue-generating or not—from obtaining employee status under FLSA? Will the Ninth Circuit weigh in? We’ll keep you posted on this ever-evolving topic.

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