Third Circuit to Decide Whether Student Athletes May Be Employees

On Feb. 3, 2022, the U.S. Court of Appeals for the Third Circuit agreed to hear an interlocutory appeal on the question of whether Division I student athletes can be employees of their schools solely by virtue of their participation in interscholastic athletics.

In Johnson et al. v. National Collegiate Athletic Association et al., pending in the U.S. District Court for the Eastern District of Pennsylvania, the plaintiffs allege that Division I student athletes are employees of the NCAA and certain of its member colleges and universities under the Fair Labor Standards Act (FLSA) and various state wage and hour laws, similar to students engaged in work study programs. Relying heavily on Justice Brett Kavanaugh’s concurrence in NCAA v. Alston, on Aug. 25, 2021, the District Court denied a motion to dismiss the complaint, holding that the plaintiffs had plausibly alleged they are employees within the meaning of the FLSA.

The NCAA and defendant schools sought permission from the District Court to file interlocutory appeals of the motion to dismiss, asking the Third Circuit to review whether student athletes can be considered employees. On Dec. 28, 2021, the District Court denied the NCAA’s request for an interlocutory appeal but granted the request from the defendant schools. Specifically, the District Court certified the following question for appeal to the Third Circuit: “Whether NCAA Division I student athletes can be employees of the colleges and universities they attend for purposes of the Fair Labor Standards Act solely by virtue of their participation in interscholastic athletics.” The Third Circuit granted the petition for permission to appeal and will now consider this issue before the case proceeds in the lower court.

Other courts have considered the question of whether student athletes are employees under the FLSA in recent years. Specifically, two federal appellate courts have ruled that student athletes are not “employees” entitled to minimum wage compensation under the FLSA. In Berger v. NCAA, the U.S. Court of Appeals for the Seventh Circuit considered the “economic reality” of the relationship between student athletes and their schools and, relying in part on the now much-criticized “revered tradition of amateurism,” concluded that the Department of Labor did not intend the FLSA to apply to student athletics, which were “extracurricular” and “interscholastic” activities. Similarly, in Dawson v. NCAA, the U.S. Court of Appeals for the Ninth Circuit ruled that student athletes were not employees of the NCAA or their athletic conference because the NCAA is more akin to a regulator than an employer.

Perhaps reflecting the changing times, the U.S. District Court for the Eastern District of Pennsylvania applied the “economic realities standard” used in Berger and Dawson but reached the opposite conclusion — that student athletes can, depending on a totality of the circumstances, be employees within the meaning of the FLSA. The District Court reasoned that relying on the amateur status of student athletes to find they are not employees is “circular reasoning” (meaning, not paying student athletes is what makes them amateurs, but because they are amateurs, they are not entitled to compensation). The District Court’s decision signals that while the Alston decision was itself quite narrow, the opinion reflects changing attitudes about college athletes that are coming to bear in other judicial opinions, legislative action (including laws on name, image and likeness), and recent changes to the NCAA constitution, which take effect in August 2022.

The Third Circuit could consider the Sept. 29, 2021, memorandum from the general counsel of the National Labor Relations Board, which set forth her position that scholarship football players and “similarly situated” players at private universities are employees under the National Labor Relations Act. The memo relies on a common law definition of employee, which includes “a person ‘who perform[s] services for another and [is] subject to the other’s control or right of control,” and notes that payment is “strongly indicative of employee status.” Most courts incorporate the common law “right to control” test into their analysis of the economic realities of the relationship, either viewing the right to control as the most significant factor of the test, or as one part of a two-part analysis in which a court must consider both who has the right to control the worker and the economic realities of the relationship. A shift in how student athletes are treated under the common law “right to control” test could expand the applicability of the FLSA and other labor and employment laws like Title VII and the Age Discrimination in Employment Act to encompass them and would have wide-ranging implications at institutions of higher education.

McGuireWoods lawyers are well-versed in issues related to higher education, college athletics and the FLSA. Sarah Wake previously served as in-house counsel at a private research institution in Division I and worked with athletics, and also served as a member of the NCAA’s Division I Committee on Infractions, which adjudicates NCAA rules violations for member schools. Mike Phillips has spoken frequently to college athletic departments and others about the implications of student athlete employment status. Farnaz Thompson previously served as in-house counsel at a public research institution in Division I and worked with college athletic departments to address complicated issues, including under Title IX.

For further information on this issue, please contact one of the authors or your McGuireWoods contact.