Transcript

Host: Hello, and welcome to Prevention and Protection, the United Educators risk management podcast. Today, Amy Piccola, a Partner at Saul Ewing Arnstein & Lehr in Philadelphia, and Melanie Bennett, Senior Risk Management Council at United Educators, will discuss higher education athletics benefits. 

A reminder to listeners that you can find other UE podcasts, as well as UE risk management resources, on our website, www.ue.org. Our podcasts are also available on Apple Podcasts and Spotify. Now, here’s Melanie. 

Melanie Bennett: Thank you. Amy, I’m pleased to have you back for our annual feature on the podcast. Once again, there have been some major developments since we last talked, and I know there may be some new listeners. Can we do a quick recap on what name, image, and likeness are; why we’re talking about athletic benefits generally; and what big changes have happened over the past few years that led us to have these annual conversations? 

Amy Piccola: Absolutely. Thanks so much, Melanie, too. I am delighted to be back with you for our annual update on this front, and a little level-setting is always helpful. 

So when we talk about NIL activity or NIL opportunity in this space, what we’re talking about is activity that involves the use of an individual’s name, image, and/or likeness for commercial or promotional purposes. So think about using a college athlete’s name on a jersey, or an athlete appearing in a commercial or advertisement. One of the hot topics, a computer-generated image of an athlete in video games. 

So all of those things fall within the ambit of NIL activity. And the important piece there is thinking about it as money in the pockets of student-athletes. And so why we spent time talking about this over the past couple of years is really because the changes in the NIL space have represented an about-face in terms of our conception of amateurism as that term has been applied to college athletes. 

So for the first time, essentially in the history of the NCAA, college athletes have been able to make money off of their name, image, and likeness. In other words, those endorsement deals, influencer agreements, paid appearances, all of those things have been on the table for college athletes for the first time since 2021. 

So to turn back the clock a little bit and unpack that again, just to level set for folks who maybe haven’t been in the weeds on these developments, these changes, so this change from an absolute prohibition on collegiate athletes making money in any way, shape or form, including with respect to their NIL. Those changes really started in 2019, when we saw state legislation, first in California and then the proverbial floodgates being opened and unleashed through June 2021, when the NCAA got in the game and issued its interim name, image, and likeness policy. 

So California, and then state after state after state, passed legislation saying student-athletes in our state can make money off of their name, image, and likeness. And the NCAA essentially had no choice but to respond to that, particularly because it got a bit of a slap on the wrist in the Alston decision out of the Supreme Court in June of 2021, no choice but to say, “OK, that’s fine. Collegiate athletes under our auspices can make money off their name, image and likeness.” 

The interim policy, which despite having been put in place in 2021, is still in existence, so it’s interim two-years-plus in, is really skeletal. And it tells us that as long as you, student-athlete, comply with the law of the state in which you are going to school, and you comply with your school and your conference policies around NIL, we’re essentially not going to get involved. 

So that’s sort of the permissive part of the policy. Follow the rules, follow the law. You can make money on your name, image, and likeness, and still be able to compete as an NCAA athlete. The parameters or the limits on that are also pretty simple:   

• No NIL agreements without quid pro quo, meaning you can’t get paid for work that you don’t do. So you’ve actually got to show up at the local car dealership and sign autographs if you’re going to take money from them. 
• Limit two, no NIL compensation that’s made contingent upon enrollment at a particular school. So NIL deals are not supposed to be used for recruiting purposes. 
• Three, student-athletes can’t be directly compensated for athletic participation or achievement. So not being paid to be a student-athlete. Now, the important asterisk or obvious asterisk here is that if I’m really, really, really good at my sport, it’s more likely that people are going to be interested to pay me to endorse their product, or show up at my car dealership and sign autographs. But not the same thing as saying, “If you score X number of points at tonight’s game, you’ll get a bonus in terms of money.” Right? So you can’t be directly compensated for participating in athletics or for athletic achievement. 
• And then the last limit under the NCAA guidelines is that schools can’t provide compensation in exchange for the use of a student’s NIL. In other words, institutions, colleges, and universities should not be entering into NIL deals with their own athletes, with prospective athletes — so high school students — or, of course athletes, at other institutions, although one would question why we would want to do that anyway. 

Just to continue with setting the stage, which is I know a lot, but these changes keep developing and getting layered on. Over the course of 2021, 2022, the start of this year, the Division I and Division II working groups continue to release what they call guidance documents that purport to add a bit more detail around this interim policy. 

In part, I think this guidance was driven by the growth of NIL collectives. Collectives are third-party entities that generate and pool revenue through contributions or donations, whether from boosters, from fans, from commercial vendors who may be interested in supporting athletics at a particular school. 

And then once we have those funds, they use them to create NIL opportunities for students, typically at specific schools. So they’re third-party, or at least they’re intended to be third-party, so they’re not run by the school, but they create a way for engagement by fans, again, commercial opportunities and the like. 

And what the working groups were really focused on, and by extension the NCAA was really focused on, was making sure that collectives remain third-party. That there’s sort of that arm’s length between a school and a collective that purports to pool this money and create NIL opportunities for particular student-athletes. 

And the NCAA in this guidance document reminded us that, hey, if your collective counts as a booster, you’re in the world of the booster rules. Which, in essence, was a reminder that you, institutions, are going to have responsibility for the collective conduct. And if there’s so much intermingling between a collective and a school, that we can essentially say that it’s the school that’s entering into a deal, you’re going to be in violation of our policy. 

So it’s just like a contorted, tangled web of all of these rules saying we’re being progressive, we’re moving forward. But also, remember, you have to fit within the universe of our existing policies and process. 

So the last thing I’ll say on all of this, what’s happened, why we care, is in this shifting landscape, and NCAA, from my perspective at least, clinging to as much of the old world rules as possible, was that, at core, these guidance documents and the interim policy itself really emphasized that existing or preexisting NCAA rules around the institution-athlete relationship haven’t changed. 

Institutions shouldn’t be compensating their student-athletes. Improper inducement, so those recruiting inducements, remain prohibited. And, generally speaking, schools should be pretty hands-off when it comes to NIL deals. Let the students do what they do in a free marketplace, but don’t get involved. Try to remain neutral, and create those boundaries between these commercial transactions and you as the institution. 

Bennett: Thank you for walking us through all of that guidance. 

Let’s go back to one of the prohibitions that you were talking about. Back to the prohibition on schools directly paying athletes. Recently, the NCAA President proposed allowing D1 schools to pay athletes. Does this mean some schools are going to start paying some of their students? And is there any precedent for this? Have schools been allowed to pay students before? 

Piccola: Yeah, Melanie, this actually in some ways states that President Charlie Baker issued this letter to 300-plus institutions because it was so well-timed. We got to include it in our update this year. And more importantly and on-point, it’s a pretty monumental statement by the NCAA, given that historic position that the NCAA is going to guard amateurism at all costs. 

And also its perceived tendency to react only when necessary, I think probably fairly a critique of the NCAA is that it’s not a terribly progressive institution, right? We talked about all of these developments in the NIL space. And when you boil them down, it’s like, because they had to. Right? 

It’s because states took the lead, and then the Supreme Court said, “We have some issues with your definition of amateurism, and we’re not really buying what you’re selling here.” 

And so then the NCAA was like, “Fine. Student-athletes, you can engage in NIL.” 

So with all of that, the fact that Charlie Baker put thoughts into writing that at least seemed pretty progressive in that they would be a monumental shift, it’s pretty huge. So on your questions, Charlie Baker recommended, really, three things. 

First, that D1 schools be allowed to offer what he called enhanced education benefits. Which means being able to decide at an institution level how much money in the form of education benefits student-athletes at that institution should get. This might be funding for study abroad, it might be books, computers, etc. 

The NCAA has allowed education benefits, and this is actually the direct subject of the Alston decision, but has always done so with a cap. So reading between the lines here, what Charlie Baker is saying is sort of like, “Let’s either increase or remove that cap and let schools decide for themselves when it comes to enhanced education benefits.” So that’s one. 

Piece two and three are really where the rubber meets the road for your questions.  

The second part of this proposal or suggestion is that D1 schools be allowed to enter into NIL licensing deals directly with their athletes. So we just talked about how the NCAA has always said, “Don’t get involved, schools. Don’t enter into deals directly. If collectives are becoming too intermingled, that is going to be problematic from our perspective.” And here’s Charlie Baker saying, “We think that D1 schools should be allowed to enter into those deals directly with their athletes.” Would that make athletes, sort of sponsors of the school, drive up, whether it’s picket sales for the particular sport, or maybe even on the admissions and enrollment side? Go for it. You should be able to do that.  

And then the third piece of this proposal or recommendation is that within D1, a subdivision of the institutions who are the best resourced would be created. Schools would opt in. The number that Charlie Baker has sort of thrown around is that he thinks there would be at least 100 schools that would be interested in joining this subdivision. And once they were in this subdivision, they would be required to pay $30,000 per year into a trust for at least half of their athletes. So the institution would one, say, “We’re well-heeled enough to join this subdivision. We want to create more opportunity for our athletes. We’re going to pay into this trust.”  

And they would have to commit to a floor of $30,000 per year, and then they would have to pick at least half of their athletes to make this money. So this is not only, enter into a commercial transaction, that licensing deal that Baker has said he would be interested in. But this is direct payment, right? This is, we are putting money in a trust. And based on this letter alone, which would of course need to be developed more if it were to be put into action, it’s directly paying student-athletes for not much more than being a student-athlete. 

That would be the, “We are paying you because you are an athlete on our team.” That sounds like being paid for your participation. So really interesting, really different. 

I would just caution all of us to not get too excited about the opportunities here. Because one, Baker allegedly, they didn’t float this idea with institutions. So NCAA schools didn’t have much conversation before releasing these thoughts. 

And the timing, while convenient for us, is also convenient because there are meetings later in December 2023, and then the big NCAA conference in January 2024 that we would expect, fairly, that this proposal be the hot topic. What would this look like? What does this mean for the NCAA going forward?  

So this is not something that schools and athletes can take advantage of right now. It is not a rule, it’s a suggestion. It’s a stake in the ground. Let’s move forward. This is going to be my position as President of the NCAA, is that we’re not going to be this reactionary old-school institution anymore. We want to move things forward. 

So it would be the first time that institutions could pay their athletes not tied to educational resources, but it’s not the rule yet. It may never be the rule. And if it does become reality, there would need to be fleshed-out details of what this would mean, how all of this would work. But still, opportunity, really interesting to see Baker come out with these suggestions. 

So, the cynic in me must point out the politics and the legal angles of all this. On the politics, it is quite possible that Baker has not just been reading the tea leaves but is pretty attuned to all of the conference shifts and all of the drama within collegiate athletics over the past year, 18 months. 

And there’s some suggestion that he comes out with this concept, particularly the concept of a subdivision of well-resourced schools within D1. Because these rich athletic programs have threatened, talked about, these well-heeled schools would be interested in breaking away from the NCAA. We don’t need you. We function on our own. Our programs are attractive to the consumers out there. And they’re certainly attractive to student-athletes, so we don’t really need you anymore. 

And so again, politically, there’s some thought that Baker, being aware of this, is trying to make it more enticing for the schools to stay within the NCAA. And of course, there’s the reality that three college athletes on behalf of a class that was just certified earlier this fall, pending in the Northern District of California, have brought suit against the NCAA, saying, “The fact that you historically prohibited paying athletes is a violation of antitrust law.” And so some of the former athletes in this class would be looking to recoup the opportunity that they lost because of NCAA rules. And current athletes, it’s sort of the parameters, the limits you’ve put on, I would be looking to recoup those monies, make up that delta. 

But the fact that the NCAA is embroiled in an antitrust litigation around NIL would suggest, again, that Baker is not making decisions in a vacuum, but is aware that the NCAA is going to need to make some changes. And just the footnote to all of this is that that class action, this NIL class action that’s pending California is pending in front of the same judge that ruled against the NCAA in the Alston litigation that eventually made its way to the Supreme Court. 

So, really interesting. Again, the cynic in me would suggest that Charlie Baker is not just out here making statements for the good of student-athletes, but it’s really to protect the NCAA going forward.  As a real footnote, because it’s not relevant to NIL, but just to emphasize sort of the pressures on the NCAA, seven states just filed a lawsuit in West Virginia, in federal court, challenging the NCAA’s transfer rules. 

So the NCAA is getting it from every direction right now. And so Charlie Baker’s smart as a leader, to be thinking about ways that he might push the enterprise forward to potentially mitigate some of this risk going forward. 

Bennett: Thank you for that great overview of the NCAA’s proposals and where they may be coming from. 

Now let’s move to state athletics benefits laws, which are evolving quickly. I used the Saul Ewing legislation tracker to watch the ever-changing landscape, and I’m going to link it on our podcast page so other people can use it as well. Are there any states that are considered in the forefront on athletics benefits? 

Piccola: Yeah, it’s a great question. So I think California certainly set the tone, right? They were the first out of the gate saying, “NCAA, this cannot stand. We’re passing our own legislation.” And so you always think of California as the gold standard in that way. 

New Jersey and New York have had some really interesting proposals, although they’ve not come to fruition. But proposals around expanding benefits, not just NIL, but sort of tangential benefits to student-athletes out of recognition that, at least to some, they look like they are doing something closer to work or labor than they are just engaging in an extracurricular. 

But I think New Mexico rightly got a lot of hype for its NIL legislation. That, unfortunately for student- athletes, they ended up changing earlier in 2023. But it’s worth talking about, because they really broke the mold. They said that schools could not prohibit student-athletes from wearing the footwear of their choice, so long as their choice wasn’t dangerous or a risk to the health of others because it had light or reflective fabric, or whatever. 

They could wear this footwear of their choice during athletic competition. This meant that student-athletes in New Mexico could get sneaker deals, which is huge. 

I mean, that is an opportunity that, on the professional side, you always ask that question. What is the sneaker deal? Who has relationships with different companies? I know as a Philadelphian right now, everyone is atwitter because Joel Embiid looks to be moving on from Under Armour to Sketchers, for example. And so the fact that in New Mexico college athletes could get in this game was huge. 

It also really marked a difference, because state legislation follows a fairly similar pattern across the country. And generally, as it relates to things like apparel deals, they say that a student NIL deal couldn’t conflict with an institution or team contract. 

So if I have a basketball team who has a contract, or my institution has a contract with Nike, for example, I could say to my student-athletes, “You can’t enter into a deal with Adidas for your game shoes. You need to wear the Nike, that’s it.” 

And so New Mexico, again, I think, deservedly got a lot of hype for breaking that mold and saying, “When it comes to footwear, students get to choose.” Again, unfortunately, despite all of the hype and the goodwill it generated, they did change that law. So they’ve sort of fallen back into line with the other states. 

But still worth calling it out. Because this creative, and also very attuned to what opportunities may best serve students, was pretty noteworthy for the time period. It was in effect. 

Bennett: That’s really interesting about New Mexico. And the story about the shoes makes me think that some of the state laws might come in conflict with NCAA guidelines or federal law. Has that happened at this point? 

Piccola: So New Mexico was really different in that it explicitly and expressly took this path of, yeah, footwear is a huge deal, and so we are going to allow students to choose. If this is the opportunity that they’re presented with, we don’t want to cut off funding. 

Otherwise, when we sort of look at these conflicts, I think there was more opportunity for conflicts than really what materialized. And certainly, in that late 2019 through 2020 and then the first half of 2021, basically everything was in conflict, right? 

I mean, the NCAA was hard and fast, amateurism means no money for student-athletes. And then you had states that said, “No, it is against the law in our state for any school or for the NCAA or conference to tell us different.”   

And since then, since the NCAA has basically taken the approach of just follow the law, they’ve created a lot of space for the states to do what they want to do. And then the states have followed that mold of pretty much falling into line following each other. 

So NCAA’s skeletal policy, do what you need to do under the law and your school’s rules, has really eliminated a lot of that opportunity for conflict. I think, rather than framing it in terms of conflict, what I would suggest has become clear is that, students not withstanding this follow the law, but otherwise do what you need to do, students might not be able to take full advantage of opportunities because of other NCAA rules or elements of the law.   

So that sneaker example is a great example. The state law in Texas might be, student-athletes are able to enter into NIL deals. OK, great. The NCAA says, “Follow state law.” State law says, “You can do this.” You’re all square.   

But if Texas law, as many, if not most of the state legislation, takes that next step and says, “Your NIL deal can’t conflict with what your school is doing, or what your team is doing,” that eliminates or reduces opportunity, right?   

It would say that I can’t be a name brand soda to a student-athlete if my institution has a deal with name brand soda number two. You can’t conflict.   

I don’t think there’s as much conflict as was possible, because the NCAA has decided not to internally legislate too much. It’s almost the specter of opportunity that really has a pretty hard ceiling. Or to put another way, some pretty firm guardrails that maybe has stymied the opportunity of student-athletes to really get into the marketplace in an unfettered way. The way that, frankly, another student who’s not an athlete might be able to do.   

If I am appealing just being Amy hanging out at college to a company, whether it’s because I have a huge social media following or otherwise, I’m not worried about the Nike vs. Adidas questions. But my compatriots on the football team have to be. So those types of things, I think it’s more about stymied opportunities than it is about legal conflict at this point. 

Bennett: And to finish today, what advice do you have for colleges and universities that are navigating NIL and athletics benefits changes? 

Piccola: Keep an eye on your Title IX compliance. Right now, if the landscape doesn’t change further, ask about what education or training opportunities you’re providing. Are you doing that on an equitable basis? What about the internal marketing and PR support you provide to your teams and your individual athletes? Have you thought about how that may boost or hinder equitable opportunity for female vs. male athletes at your institution? 

The current setup of having institutions removed from NIL deals is pretty good for risk mitigation, right? Our collective third parties who are entering in these commercial deals with student-athletes guards against a lot of the big red flags for Title IX. So it’s more about how we’re supporting student-athletes, making sure we’re doing so equitably. 

However, if we do move into Charlie Baker’s new world of direct deals, Title IX is going to become even more significant and will definitely need to remain at the forefront of our minds as we move forward in this, what I think, is an exciting space. 

Bennett: That’s it for today’s podcast. Thank you for joining me today, Amy. 

Piccola: Thanks so much for having me, Melanie. 

Host: From United Educators insurance, this is the Prevention and Protection Podcast.