Issues to Watch

It’s Not as Easy as It Looks: Why the NCAA Refuses to Pay College Athletes What They Rightfully Deserve


*Liam Edward Rhodes

I.  Plenty of Money to Go Around

To pay, or not to pay, that is the question.  Traditionally, the thought of paying college athletes additional compensation in addition to receiving free cost of attendance was vehemently criticized by those who wanted to protect amateurism and the integrity of college athletics.  Ivan Maisel, Paying Players Might Create Havoc, ESPN (July 15, 2011), http://www.espn.com/college-sports/story/_/id/6768571/legal-issues-arise-paying-student-athletes.  Receiving more than the already large price tag of up to $250,000 in tuition, room and board, school supplies, medical care, physical training, and various educational fees may seem excessive to the ordinary fan.  Id.  However, a mere $250,000, which is only the best-case scenario, pales in comparison to the amount of revenue many top college programs generate from athletics.  See NCAA Finances, USA Today, http://sports.usatoday.com/ncaa/finances/ (last visited Jan. 18, 2019).

Thirty-one National Collegiate Athletic Association (NCAA) institutions generate over $100 million each in revenue from their respective athletic programs per year.  See id.  Of those thirty-one schools, fifteen generate well over $140 million, while two of the thirty-one schools cracked the $200 million mark for total revenue generated from athletics per year.  See id.  After reviewing the total revenue that some of the top NCAA institutions generate from athletics, only offering college athletes cost of attendance seems like pennies on the dollar.  Although it is certainly unfair not to compensate college athletes for filling “six-figure stadiums” and “promot[ing] the brand of the alma matter,” paying college athletes might not be as cut-and-dry as it looks.  Maisel, supra.

II.  Waldrep v. Texas Employers Insurance Association

Texas high school football stand-out Alvis Kent Waldrep, Jr. committed to play football at Texas Christian University (TCU) in 1972.  Waldrep v. Texas Emp’rs Ins. Ass’n, 21 S.W.3d 692, 695 (Tex. App. 2000).  In order to confirm his intention to play football at TCU, Waldrep signed a pre-enrollment form, or Letter of Intent, and a financial aid agreement documenting TCU’s agreement to pay for his cost of attendance.  Id. at 696.  Unfortunately, Waldrep’s playing days were cut short by a horrific spinal cord injury in a 1974 game against the University of Alabama that left him paralyzed from the neck down.  Id.  In 1991, Waldrep brought a worker’s compensation lawsuit against TCU for his injury, alleging that he was an employee of TCU.  Id.  Although he was initially successful, the 200th Civil District Court of Texas later held that Waldrep was not an employee of TCU when he was injured, thus not entitled to workers’ compensation.  Id. at 697.  Waldrep appealed the district court judgment to the Court of Appeals of Texas in Austin.  Id. 

The Court of Appeals had to determine whether someone who receives a scholarship or financial aid from a university “becomes that university’s employee by agreeing in return to participate in a university sponsored program.”  Id. at 697–98.  Waldrep argued that the Letter of Intent and financial aid agreement he signed upon attending TCU constituted express contracts of hire that entailed the terms of his “employment.”  Id. at 698.  However, the Court of Appeals found both Waldrep’s and the Texas Employers Insurance Association’s (TEIA) arguments inconclusive in determining whether the Letter of Intent and financial aid agreement were contracts of hire.  Id. at 699.

In considering all the factors of a contract of hire, the Court of Appeals held that there was no contract of hire between Waldrep and TCU.  See id. at 699­–701.  When Waldrep signed the Letter of Intent and financial aid agreement, it was undisputed that he and TCU understood that the rules of the NCAA would govern his “recruitment and future football career at TCU.”  Id. at 700–01.  Consequently, the NCAA rules at the time Waldrep signed the documents were explicit in indicating that student-athletes were not employees.  Id. at 701.  The NCAA rules strictly prohibit student-athletes from receiving payment for their participation in athletics, but the rules do allow student-athletes to be awarded financial aid.  The Court of Appeals held that financial aid did not constitute as “taking income” because TCU never paid Waldrep a salary, never told him he would receive one, and never withheld taxes from his financial aid.  Id. at 700.  Although the argument that student-athletes are employees of the universities in which they attend ultimately failed in Waldrep, other student-athletes have sought judiciary relief to justify student-athlete compensation in other respects.  Michael McCann, In Denying O’Bannon Case, Supreme Court Leaves Future of Amateurism in Limbo, Sports Illustrated (Oct. 3, 2016), https://www.si.com/college-basketball/2016/10/03/ed-obannon-ncaa-lawsuit-supreme-court.

III.  O’Bannon v. NCAA

Ed O’Bannon, a former basketball star at the University of California, Los Angeles (UCLA), along with a group of current and former collegiate football and basketball players, brought an action against the NCAA for violating antitrust laws under the Sherman Act.  O’Bannon v. Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049, 1055–56 (9th Cir. 2015); McCann, supra.  O’Bannon argued that the NCAA amateurism rules violated Section 1 of the Sherman Act because they deny student-athletes compensation for the use of their name, image, and likeness (NIL).  O’Bannon, 802 F.3d at 1055; 15 U.S.C.A. § 1 (West 2004).  Conversely, the NCAA argued that limitations on student-athlete compensation are “necessary to preserve the amateur tradition and identity of college sports.”  O’Bannon, 802 F.3d at 1058.

Despite the Ninth Circuit subjecting the NCAA to antitrust law, the final decision in O’Bannon did not appease student-athletes.  See McCann, supra.  The Ninth Circuit held that O’Bannon and the other plaintiffs showed that they were “injured in fact” by the NCAA rules that prohibited student-athlete NILs in video games, and thus eliminating the plaintiffs from that economic market.  Id. at 1067.  Additionally, the Ninth Circuit held that the NCAA restrictions on student-athlete compensation beyond grants-in-aid constituted a restrain on commerce, and thus were not exempt from Section 1 of the Sherman Act.  See id. at 1065­–66.  However, the Ninth Circuit stated that the difference between allowing education-related compensation to student-athletes and allowing cash unrelated to educational expenses “is not minor; it is a quantum leap.”  Id. at 1078.  The Ninth Circuit held that the NCAA’s obligations under antitrust law permit schools to offer student-athletes the total cost of attendance, but no additional compensation.  See id. at 1078–79.  Permitting student-athletes to receive additional compensation to the cost of attendance would destroy amateurism, which the Ninth Circuit held to be “integral to the NCAA’s market.”  Id. at 1076.

IV. Will Student-Athletes Ever Receive a Piece of the Pie?

Labeling student-athletes as employees carries its own set of troubles.  See Maisel, supra. Most jurisdictions follow at least a variation of the Restatement (Third) of Agency § 2.04 stating that employers are responsible to third parties for the wrongful acts of their employees.  Restatement (Third) of Agency § 2.04 (Am. Law Inst. 2006).  Therefore, what would happen if a collegiate basketball player punched an opposing player in the face, and that player suffered a serious injury?  Maisel, supra.  Of course, this does not happen often, but it is certainly within the realm of possibility.  Id.  The injured player would be inclined to sue the university instead of the student-athlete because the university has much deeper pockets, and could be viewed as the student-athlete’s employer.  Id. 

Despite the efforts of current and former athletes, additional compensation on top of cost of attendance for student-athletes does not seem to be coming to them in the near future.  See Maisel, supra.  The decision in O’Bannon deeming the NCAA’s rules and regulations subject to antitrust law is certainly positive for student-athletes, but there is a long road ahead towards non-educational compensation.  See McCann, supra.  The United States Supreme Court denied petitions for certiorari by O’Bannon and the NCAA on October 3, 2016, both hoping for a more clearly-defined remedy.  Id.  As the decision stands, the NCAA is able to mitigate its antitrust violations by offering student-athletes the full cost of college attendance.  See O’Bannon, 802 F.3d at 1074–79.  In addition, denial of certiorari by the Supreme Court leaves the decision in O’Bannon as binding authority in the Ninth Circuit’s federal districts, but it is only persuasive, non-binding authority elsewhere.  See McCann, supra.

If the NCAA refuses to pay its players additional compensation to the cost of college attendance in order to protect amateurism, it seems highly unlikely that it would expose itself to large payouts from lawsuits brought by injured third parties.  As such, current legal precedent is a continued win-win for the NCAA and the universities that play within its conferences.

*Liam is a second-year law student at the University of Baltimore School of Law where he serves as a staff editor for Law Review and is a Distinguished Scholar of the Royal Graham Shannonhouse III Honor Society. Liam also serves as the Marshall for Phi Alpha Delta — Labrum Chapter and is a member of the Entertainment and Sports Law Society. He spent this past summer working as a summer law clerk for Bodie, Dolina, Hobbs, Friddell & Grenzer, P.C. This past fall, Liam was a Teaching Assistant for an Introduction to Lawyering Skills Course coupled with Civil Procedure I taught by Professor John Bessler. This spring, Liam is externing at the Maryland Court of Special Appeals for the Honorable Kevin F. Arthur. This summer, Liam will serve as a summer associate at Whiteford, Taylor & Preston, LLP.

 

 

 

 

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