Amid the blink-and-you'll-miss-them changes being made by the Trump administration, will efforts to grant employment status to student athletes under the Fair Labor Standards Act (FLSA) stall?
As we've previously written, on July 11, 2024, the U.S. Court of Appeals for the Third Circuit (the Third Circuit) ruled that collegiate student athletes could theoretically be considered employees of their respective institutions pursuant to the FLSA.
This opinion is one of several efforts to classify collegiate student athletes as employees under various federal laws and may have a wide-ranging impact on the way in which athletic departments at colleges and universities across the country operate their programs.
In this article we explore the Third Circuit's opinion and its potential impact on university athletic departments and discuss how the incoming president's administration may address student-athlete employment status.
District Court Case Summary
In November 2019, former Villanova football player Ralph "Trey" Johnson and other former and current collegiate athletes sued the National Collegiate Athletic Association (NCAA) and 25 Division I member institutions in the U.S. District Court for the Eastern District of Pennsylvania, claiming that Division I college athletes should be recognized as employees of the institutions they attend under the Fair Labor Standards Act.
Defendants filed a motion to dismiss the complaint, claiming that the former athletes had failed to establish that they were properly classified as employees under the FLSA. The district court denied the NCAA's motion to dismiss, finding that the former athletes had pleaded sufficient facts that might allow them to be classified as employees under the FLSA. The NCAA appealed the District Court's ruling to the Third Circuit Court of Appeals to address whether NCAA Division I athletes can be employees of the colleges and universities they attend for purposes of the FLSA solely by virtue of their participation in interscholastic athletics.
Third Circuit Opinion
On July 11, 2024, the Third Circuit affirmed, in part, the decision of the U.S. District Court for the Eastern District of Pennsylvania denying the NCAA's motion to dismiss. The Third Circuit agreed with the district court that the former student athletes could potentially be classified as employees under the FLSA, but remanded the case and directed the district court to apply the multi-factor economic realities test to determine if the former student athletes were properly classified as employees. This test requires the district court to consider the following factors:
- Whether the athletes perform services for their university
- Whether the services performed are "necessarily and primarily" for the university's benefit
- Whether the university controls (or reserves the right to control) the means by which the athletes provide services and
- Whether the athletes perform services in return for "express" or "implied" compensation or "in-kind benefits"
The Third Circuit also made clear that "the touchstone remains whether the cumulative circumstances of the relationship between the athlete and college or NCAA reveal an economic reality that is that of an employee-employer."
Following the Third Circuit's opinion on the interlocutory appeal, the case was remanded back to the district court for further proceedings. On November 4, 2024, plaintiffs filed a third amended complaint to include allegations that plaintiffs are properly classified under the economic realities test promulgated by the Third Circuit. The NCAA and other co-defendants have until February 7, 2025 to respond to the amended complaint.
Implications for Colleges and Universities
One key takeaway from the Third Circuit's opinion was its emphasis that the economic realities test must be applied on an individualized basis, so it seems unlikely that the Johnson case will result in a bright-line rule applied to all student athletes. In theory, this decision would allow courts within this circuit to distinguish between college athletes who participate in NCAA athletics predominantly for their own benefit from those whose participation primarily benefits the university. Consequently, athletic departments with certain athletics programs that generate significant revenue for the university, such as many of the Division I FBS football programs and certain basketball programs that drive lucrative television deals for their universities, could end up with student athlete employees in those programs, whereas the vast majority of NCAA athletes who play on teams operated at a loss to the university and primarily for love of the sport alone theoretically might not meet the economic realities test.
The consequences of any student athletes being classified as employees under the FLSA cannot be overstated. Beyond the obvious consequence of having to pay competitive wages to student athletes for their athletic services, athletic departments would be required to track athletes' time training, competing, and performing "services" related to their sport to ensure compliance with federal (and, where they exist, state) wage and hour laws.
In addition to wage and hour compliance obligations, employees status for student athletes implicates workers' compensation, immigration issues for international student athletes, OSHA, and the panoply of federal, state, and local anti-discrimination laws, all within the confines of college locker rooms. Employment classification under the FLSA may also cause significant tax implications for student athletes and the universities themselves.
The Possible Future of Student-Athlete Classification in the Trump Presidency
Judge David Porter's concurring opinion in the Third Circuit's decision in Johnson suggested that the potential implications of student athlete employment status may be better resolved through legislation than through litigation. It is possible that President Trump's administration will support such a legislative solution, but past attempts at legislation have stalled. For example, House Bill 8534, Protecting Student Athletes' Economic Freedom Act of 2024, was introduced in the U.S. House of Representatives in May 2024 by Representative Bob Good, and, if passed, would prohibit a "student athlete (or former student athlete)" from being "considered an employee of an institution, a conference, or an association under any Federal or State law or regulation." While HB 8534 has not gained traction in this congressional term, similar legislation may find more support in a Republican-controlled Congress, although the president himself has not taken a public policy position on the topic of college athletes as employees.
Still, the Johnson case is not the only litigation pushing the boundary of student-athlete amateur status. And some of these parallel efforts to professionalize student athletes under the law may push this issue further into the view of the incoming administration. For example, we expect the Trump administration to make appointments that will impact the employment status of student athletes under other federal laws, including the National Labor Relations Act (NLRA). Indeed, unions have already begun to withdraw cases in circumstances where they view their chances of success as diminished by the change of administration. For a more robust discussion of these issues under the NLRA, see our recent article here. As discussed in more detail here, it is highly likely that the president will name a new general counsel of the National Labor Relations Board (NLRB) following his termination of sitting NRLB general counsel Jennifer Abruzzo yesterday, who may reverse the pro-unionization agenda of the current Board. The current patchwork litigation approach to this issue is likely to produce patchwork results in the near term, and colleges, universities, and the NCAA will need to be prepared to navigate such inconsistent results.
We in the Labor and Employment Group here at Venable will be following these cases closely.