On July 11, 2024, the U.S. Court of Appeals for the Third Circuit issued its long-awaited decision in Johnson, et al. v. National Collegiate Athletic Association, et al., holding that college athletes may be employees under the Fair Labor Standards Act (FLSA) in some circumstances. The case represents a departure from prior holdings from the Seventh and Ninth Circuits, which concluded that collegiate athletes are not entitled to the protections of the FLSA. The Third Circuit’s decision reflects evolving attitudes about the amateur status of college athletes and signals more changes likely are ahead.
As McGuireWoods shared in February 2022, in Johnson, the plaintiffs allege that Division I student athletes are employees of the NCAA and certain of its member colleges and universities under the FLSA and various state wage and hour laws, similar to students engaged in work study programs. Relying heavily on U.S. Supreme Court Justice Brett Kavanaugh’s concurrence in NCAA v. Alston, on Aug. 25, 2021, the U.S. District Court for the Eastern District of Pennsylvania denied the NCAA’s motion to dismiss the Johnson 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 an interlocutory appeal 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 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 held oral argument on Feb. 15, 2023.
The opening lines of the Third Circuit’s decision on the interlocutory appeal state:
The issue raised by this interlocutory appeal is not whether the athletes before us are actually owed the protections of the [FLSA], but rather, whether college athletes, by nature of their so-called amateur status, are precluded from ever bringing an FLSA claim. Our answer to this question is no.
The Third Circuit affirmed the lower court’s denial of the NCAA’s motion to dismiss, in which the NCAA asserted that college athletes are amateurs and are not employees of their schools or the NCAA. However, the Third Circuit concluded the District Court erred in applying the test from the Second Circuit’s decision in Glatt v. Fox Searchlight Pictures, Inc., in which the Second Circuit considered whether unpaid interns must be deemed employees under the FLSA and compensated for their work. The Third Circuit felt the Glatt test was inappropriate because, among other reasons, “interscholastic athletics are not part of any academic curriculum,” unlike unpaid collegiate internships, which sometimes are part of the curriculum.
The Third Circuit vacated and remanded the decision to the lower court so it could apply the “economic realities” test, which the Third Circuit felt is the more appropriate test. Specifically, the Third Circuit held that college athletes may be employees under the FLSA when they: a) perform services for another party; b) necessarily and primarily for the other party’s benefit; c) under that party’s control or right of control; and d) in return for express or implied compensation or in-kind benefits. The court stated it would not use a “ ‘frayed tradition’ of amateurism with such dubious history to define the economic reality of athletes’ relationships to their schools.”
Interestingly, the Third Circuit explicitly declined to use the term “student athlete” in its opinion, noting the term is a brand name and an “NCAA marketing invention designed to ‘conjure the nobility of amateurism’ . . . and ‘obfuscate the nature of the legal relationship at the heart of a growing commercial enterprise.’ ” Moreover, the Third Circuit noted perceived similarities between graduate students who successfully argued to the National Labor Relations Board that they are employees for purposes of the National Labor Relations Act and collegiate athletes.
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 the protections of the FLSA. In Berger v. NCAA, 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 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.
It seems likely the lower court will again deny the NCAA’s motion to dismiss. Given the lower court’s prior language on the question of whether the plaintiffs may be employees of the NCAA and/or their schools, it also seems likely that the court will continue to issue rulings favorable to the athletes, if the case does not settle. The plaintiffs demanded a jury trial and a final result is probably years away, but the Third Circuit’s opinion is another mark in the win column for college athletes.
For more on the ever-evolving world of collegiate sports, contact the author of this article or your McGuireWoods contact.