NCAA and Multiple Member Schools Seek Instant Replay Review by Third Circuit

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In Johnson v. National Collegiate Athletic Association, (E.D. Pa. Case No. 19-cv-05230), five colleges and universities, along with the NCAA, are now seeking certification for interlocutory appeal over denials of their motions to dismiss—denials which some have hailed as a step toward recognizing college athletes as employees. By denying the motions to dismiss, the court allowed a proposed class action of college athletes to proceed on the basis that they were employees and thus entitled to minimum wages from various colleges, universities and the NCAA. The potential appeals are just one of the latest issues the NCAA and its members are facing after the U.S. Supreme Court’s ruling in NCAA v. Alston, which held that the NCAA could not enforce certain rules limiting the education-related benefits that its member schools could offer athletes.

A former Villanova University football player initially commenced the class action matter in November 2019, and was later joined by other former and current college athletes who attended Cornell University, Fordham University, Lafayette College and Sacred Heart University (the attended schools). The core of the plaintiffs’ claims is that as college athletes they were employees of their respective institutions and that the NCAA was their joint employer. As such, plaintiffs argue they were owed, but not paid, a required minimum wage pursuant to the Fair Labor Standards Act (FLSA).

On Aug. 25, Judge John Padova denied the motion to dismiss of the attended schools—rejecting several arguments and finding that the plaintiffs plausibly pleaded that they were employees under the FLSA. Most notably, the court rejected the argument that because college athletes are amateurs, they could not be considered employees, a requisite under the FLSA. The attended schools argued this traditional notion of amateurism was accepted in the Supreme Court case of NCAA v. Board of Regents, in which the Supreme Court commented on the NCAA’s critical role in maintaining the tradition of amateurism in college sports. The attended schools also argued that such a position was adopted by the U.S. Court of Appeals for the Seventh Circuit in Berger v. NCAA, 843 F.3d 285 (7th Cir. 2016), which dismissed a case also involving college athletes seeking wages under the FLSA. In dispelling the attended schools’ reliance on these cases, the court noted how the Supreme Court recently recognized in NCAA v. Alston, 141 S. Ct. 2141 (2021) that challenges to the NCAA’s restraint on college athlete compensation were not foreclosed by “passing comments” made in Board of Regents. In particular, the court echoed the concurring opinion of Justice Brett Kavanaugh in Alston, finding that “the argument ‘that colleges may decline to pay student athletes because the defining feature of college sports … is that the student athletes are not paid … is circular and unpersuasive.’”

The court then determined that the relationship between the college athletes and their respective institutions could be determined by applying the “primary beneficiary” test, a test used to determine the “economic reality” of a given relationship. The primary beneficiary test has been used to determine when interns should be considered employees, where “the proper question is whether the intern or the employer is the primary beneficiary of the relationship.” In evaluating the seven factors considered under the primary beneficiary test, the court ultimately concluded that these factors supported finding that the plaintiffs plausibly pleaded an employment relationship between themselves and the attended colleges.

On Sept. 22, about a month after denying the motion to dismiss of the attended schools, Padova also denied the motion to dismiss of the NCAA, which asserted that it was not a joint-employer of the college athlete plaintiffs. To support its position, the NCAA relied on Dawson v. NCAA, 932 F.3d 905 (9th Cir. 2019), in which the U.S. Court of Appeals for the Ninth Circuit held that college football players were not FLSA employees of the NCAA. The Ninth Circuit in Dawson concluded that the college athletes in that matter lacked an expectation of compensation and determined that the NCAA functioned as a regulator of college athletics and not as an employer of those who competed in the various sports. But the court gave little weight to Dawson, noting that it was distinguishable on the facts and arguments from the matter before him.

The court subsequently applied a four-factor test announced by the Third Circuit in In re Enterprise Rent-A-Car, 683 F.3d 462 (3d Cir. 2012) in assessing the NCAA’s motion to dismiss. The Enterprise test, which courts are to use when determining whether two entities are joint employers of the same individual(s), asks: if an alleged employer can hire and fire the relevant employees; if it has the authority to promulgate work rules and assignments and to set the employees’ conditions of employment; is involved in day-to-day employee supervision and discipline; and (4) has actual control of employee records, including payroll. Regarding the first factor (i.e., the ability to both hire and fire), the court found allegations in the complaint concerning the ability of the NCAA to impose penalties for rules violations, including the firing of college athletes, satisfied the first factor. Regarding the second factor (i.e., authority to set work rules and assignments as conditions of employment), the court found this factor was satisfied as plaintiffs alleged that the NCAA has rules which prohibit payments to college athletes as well as how much time college athletes can spend in connection with their NCAA athletic activities. As to the third factor (i.e., day-to-day supervision), the court found that the plaintiffs satisfactorily alleged that the NCAA issues rules disciplining college athletes, has some involvement in the discipline of college athletes, and has some control over what discipline is ultimately issued to college athletes. Finally, the court found the fourth factor (i.e., actual control of an employee’s records) satisfied by plaintiffs’ allegations that the NCAA’s Eligibly Center retains, inter alia, records on an athlete’s eligibility status, injuries, and medical treatment. Finding all four factors of the primary beneficiary test satisfied, the court denied the NCAA’s motion to dismiss.

At the time of this article, both the attended schools and the NCAA motioned for Padova to certify his orders denying their respective motions for interlocutory appeal to the Third Circuit. Padova has yet to rule on the motions for certification.

Notably, these attempts to appeal come at a time when other policy shifts concerning the relationship between the NCAA, its members' schools, and college athletes are taking place. For example, because of various new state laws and NCAA rule changes that took effect this past July, member schools are trying to navigate a world in which college athletes may make money by selling their name, image, and likeness rights to varying degrees. Moreover, Jennifer Abruzzo, general counsel for the National Labor Relations Board (NLRB) recently released a memorandum setting forth her position that college athletes of private institutions qualify as employees under the National Labor Relations Act (NLRA). As general counsel to the NLRB, Abruzzo can influence and determine the investigation of charges as well as the issuance of complaints—though her opinion does not in and of itself make college athletes at private institutions employees. The latest development should be of particular concern to private institutions, over whom the NRLB has jurisdiction, as this signals the potential ability of college athletes at these institutions to unionize.

Because of various potential changes and challenges to the status of college athletes, public and private colleges and universities must pay close attention to all of these developments if they are to successfully navigate the new landscape of college athletics as well as prepare for the future.

Chris Lucca is a partner at Conrad O’Brien where he focuses on commercial litigation and employment disputes. He can be contacted via email at clucca@conradobrien.com.

David Singh is an associate at the firm where he represents commercial businesses, private individuals, and educational institutions in a wide variety of commercial litigation, including contract, employment, real estate, and construction disputes. He can be contacted via email at dsingh@conradobrien.com.