NCAA, Penn Within Bounds in Not Paying Student-Athletes

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By Jon Steingart

Dec. 6 — College student-athletes lost a bid to be deemed employees who should be paid for their efforts ( Berger v. Nat’l Collegiate Athletic Ass’n , 2016 BL 403507, 7th Cir., No. 16-1558, 12/5/16 ).

“This was the first time that we’re aware of where the allegation is employee status under the Fair Labor Standards Act,” said Paul DeCamp, an attorney who argued the case on behalf of the universities. The Dec. 5 decision by the U.S. Court of Appeals for the Seventh Circuit shows that the “economic reality” of “the relationship is one of school and student, not one of employer and employee,” DeCamp said.

Former University of Pennsylvania athletes Gillian Berger and Taylor Hennig’s participation in the track and field team isn’t “work” that entitles them to wages under the Fair Labor Standards Act because they did it voluntarily for purposes other than compensation, Judge Michael S. Kanne wrote for the court.

The students also named the National Collegiate Athletic Association and 120 member institutions in their lawsuit, but their connection to those bodies “is far too tenuous to be considered an employment relationship,” Kanne said, affirming a lower court’s dismissal.

The ruling follows other unsuccessful efforts to establish employee rights for student-athletes based on labor and antitrust laws. In August 2015, the National Labor Relations Board dismissed a union-backed effort to hold an election to organize football players at Northwestern University without ruling on whether they’re employees. The U.S. Court of Appeals for the Ninth Circuit said in a September 2015 ruling that the NCAA didn’t fix prices when it established limits on stipends colleges may pay athletes to cover attendance costs.

‘Long Tradition of Amateurism.’

“One of the key tests that you look at under the Fair Labor Standards Act to figure out whether there’s employment is whether there’s an expectation of compensation,” DeCamp said. It’s not the only consideration but it makes it harder to consider someone an employee “if this relationship is not in any sense understood to be the provider of somebody’s livelihood,” he said.

Kanne said “the long tradition of amateurism in college sports” shows that students don’t participate in order to produce income.

The NCAA’s chief legal officer, Donald Remy, echoed this sentiment. “Student-athletes spend time practicing and competing to be their best, not as employees, but in the pursuit of their own excellence, to learn leadership through sports, and in the spirit of amateurism,” he said in a statement provided to Bloomberg BNA Dec. 6.

Stephen MacCarthy, Penn’s vice president, university communications, told Bloomberg BNA the same day that questions about the case should be directed to the association because “it’s really an NCAA case.”

The court relied on “an employer-defined amateurism rule” that is “neither defined in the FLSA nor codified in law,” Paul McDonald, the athletes' attorney, told Bloomberg BNA in an e-mail Dec. 6. Employers could wrongly rely on tradition in other contexts, such as unpaid interns, for refusing to pay workers who should be compensated, he said.

The multifactor test the U.S. Court of Appeals for the Second Circuit developed for determining whether interns should be considered employees entitled to pay is better suited for evaluating trainees’ entitlement to pay, Kanne said. The factors that test uses “fail to capture the nature of the relationship between the Plaintiffs, as student athletes, and Penn,” he said, quoting the lower court’s reasoning for turning away from the analysis. Judge Diane S. Sykes joined the opinion.

Similar Case Pending in California

Mark Rifkin, the attorney representing former University of Southern California linebacker Lamar Dawson in a separate FLSA lawsuit, said he’s energized by the ruling’s potential effect on his case. “Women’s track and field at Penn is a very different relationship than men’s football at USC,” Rifkin, a partner at Wolf Haldenstein Adler Freeman & Herz LLP in New York City, told Bloomberg BNA Dec. 6.

“If you look at the economic nature of the relationship for Division I Football Bowl Subdivision players, it’s a business relationship,” Rifkin said. The court majority opinion’s emphasis on the economic reality of the relationship between students and their schools is encouraging, as is Judge David F. Hamilton’s concurring opinion that students who participate in “so-called revenue sports like Division I men’s basketball and FBS football” are likely to have a different economic reality, he said.

Rifkin said he wished the Seventh Circuit had concluded the Penn athletes were entitled to wages. But “Judge Hamilton’s concurring opinion says exactly what we want the court to say in our case,” he told Bloomberg BNA.

McDonald is a partner at P L McDonald Law LLC in Philadelphia. DeCamp is a principal in the Washington, D.C., Region office of Jackson Lewis PC Daniel Volchok, a partner in Wilmer Cutler Pickering Hale and Dorr LLP’s Washington, D.C., office argued for the NCAA.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

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