Recent Changes to Higher Education Athletics Benefits
Host: Hello, and welcome to Prevention and Protection, the United Educators’ risk management podcast. Today, Amy Piccola, a Partner at Saul Ewing Arnstein and Lehr in Philadelphia, Andrea Brockway, Counsel at Saul Ewing, and Melanie Bennett, Senior Risk Management Counsel at United Educators, will discuss recent changes to higher education athletics benefits. Note that this and all podcast episodes are available on iTunes. Now here’s Melanie.
Melanie Bennett: Thank you. I’m Melanie Bennett. I’m very pleased to have Amy and Andrea from Saul Ewing here with me today. Your recent alerts on the NCAA vs. Alston decision and name, image, and likeness rights provided clarity on a complicated and continuously evolving topic. So let’s talk about these recent changes and what they mean for college athletics. And Amy, we’ll start with you if that’s OK. Can you tell us about the recent U.S. Supreme Court decision in NCAA vs. Alston?
Amy Piccola: Absolutely. Thanks so much, Melanie. So to set the table a bit and provide some context, the plaintiffs in the underlying litigation in Alston were current and former student-athletes in Division 1 football and basketball programs, and the defendants were, of course, the NCAA as well as 11 individual D1 conferences. The district court held a 10-day-long bench trial and had two important holdings that set the stage for us in thinking about what the Supreme Court did and didn’t do. First, the district court concluded that the NCAA’s limits on institution-provided, education-related benefits are unreasonable restraints of trade – so in violation of federal antitrust law – and enjoined the NCAA and its conferences from enforcing those limits as currently drafted. So to pause there and take a step back, education-related benefits, while not a precisely defined universe of benefits, are largely things like computers or science equipment, even post-eligibility scholarships for students’ vocational programs or graduate programs.
All of those things that when you look at them, we can say are related to student-athletes’ educational or academic pursuits. So the district court said, “NCAA, your rules limiting what schools can provide to their students in this universe, that is anti-competitive. It is a violation of antitrust law.” The court declined, however, to hold that the NCAA’s limits on compensation unrelated to education, so compensation related to athletic endeavors, to put it a different way, likewise, violated antitrust laws. That second holding was really a win for the NCAA and its conferences. Nonetheless, the NCAA decided to appeal the district court’s decision, the Ninth Circuit upheld, and we then set the stage for the NCAA taking the issue to the Supreme Court and got the showstopper of an opinion in NCAA vs. Alston. So what happened in the Supreme Court? At core, this is really an antitrust decision tackling the question of whether the NCAA is entitled to the application of a truncated rule of reason analysis, which is in the weeds in antitrust law.
Essentially what the NCAA was asking for was deference to NCAA’s competitive justification, which is this concept of amateurism which we can talk about today for restraining compensations to student-athletes. So the NCAA was saying, “This is the rule of reason application should not apply to us because we have really good reasons for restricting compensations to student-athletes.” And Justice [Neil] Gorsuch’s writing for a unanimous court concluded that the NCAA and the participating athletic conferences, in fact, enjoyed no special immunity from federal antitrust laws with respect to the specific restrictions on education-related benefits. Importantly, good for us to know if we’re working at an institution, the Supreme Court is really clear in the opinion that individual conferences and individual institutions, so not operating in concert, not making any agreements across institutions or across conferences, can continue to make their own decisions about limiting or not limiting education-related benefits. So for institutions, this really means looking at one, their conferences for guidance, and otherwise, it allows institutions to continue to exercise discretion and make decisions about how it wants to treat student-athletes with respect to education-related benefits in particular.
Bennett: Amy, we’ve also heard a lot about recent name, image, and likeness changes in athletics. Is that the same as the Supreme Court decision?
Piccola: Not the same, but closely related, I think, is the best way to think about it. So in Alston, again, the NCAA’s argument for what was essentially a request for deferential treatment under antitrust laws was that amateurism in collegiate sports is vital. It’s beneficial. And in the NCAA’s view [it] is actually pro-competitive. They made some arguments about this is what consumers want. They want student-athletes that are amateurs. And amateurism, of course, is the idea that student-athletes are students first and so, shouldn’t be paid for their athletic endeavors. The NCAA has a host of rules and limits that have been intended to protect this concept of amateurism. So everything from bars on recruiting inducement, so not paying a student-athlete to perform their athletic endeavors at a particular institution; to parameters on acceptable award for athletic performance and, of course, the limits on education-related benefits that were specifically at issue in Alston.
The strict control over when and how student-athletes can profit from their name, image, and likeness has historically been a part of this suite of rules and limits intended to protect amateurism. So we saw, with few exceptions, the NCAA saying, “You, individual students, can’t engage in endorsement deals or promotional activities,” again, with limited exceptions and with institution and NCAA preapproval. So this specific component of amateurism that was at issue in Alston is different from name, image, and likeness or NIL. But the bottom line is that the Alston opinion, while limited in many regards, was still a blow to the current or now recently passed NCAA model of amateurism. And this, hand in hand with the developments, Melanie, that you referenced on the NIL front, really change how we’re thinking about how institutions can and must interact with student-athletes.
Bennett: Thank you, Amy. And I’m aware that there are some name, image, and likeness state laws out there. Andrea, can you tell us about those laws and what they mean for colleges in those states?
Andrea Brockway: Absolutely. Taking the first part of your question first, while there are variations across the various state laws, generally speaking, NIL laws do two things. Number one, they allow collegiate athletes to profit from their name, image, and likeness; and conversely, number two, they prohibit post-secondary institutions, athletic associations, and conferences from preventing athletes from earning compensation stemming from the use of their NIL. About half our states now have NIL laws passed and a number of those states went into effect on July 1, 2021. This means that student-athletes are now permitted to enter into endorsement deals and otherwise profit from their use of their NIL in a number of states per state law. So with this context in mind about the lay of the land for NIL legislation, I think it’s helpful to take a step back and discuss the timeline of how we got where we are today.
For decades, under the NCAA’s amateurism rules and principles, student-athletes were not permitted compensation beyond a fully paid education. Under these rules, student-athletes were precluded from pursuing promotional opportunities that are generally available to other college students. So rather than seeking to effect change by way of an NCAA rule modification, the state of California was the first to lead the charge on state legislation on the NIL front. So in September of 2019, California passed legislation that will prohibit schools from punishing athletes who accept endorsement deals while in college. When this bill was first introduced, the NCAA saw this legislation as, to a certain extent, an existential threat to college amateur sports. So we’re going to fast forward to June of 2020 and Florida passed an NIL law with a scheduled effective date of July 1, 2021, which was far sooner than California’s then effective date of January 2023. So Florida significantly changed and expedited the shot clock, so to speak, for those of us watching from home for either needing the NCAA to act or for Congress to pass a uniform legislation.
Following the passing of Florida’s NIL law, other states raced to pass legislation hoping to hop on the NIL bandwagon. And during this period, the NCAA had empaneled an NIL working group which put out a report and recommendation that the NCAA’s divisional rules would be “modernized” to account for the new media and promotional landscape available to college students. In January of 2021 however, the NCAA Division 1 council decided to delay the vote on an NIL rule change citing concerns prompted by a letter from the antitrust division of the DOJ, which had raised possible antitrust implications to an NCAA rule change. So that’s the background context of how we got to where we are and just switching over to the second part of your question about what NIL laws mean for colleges, I know a bit later in the podcast, we’re going to be talking about practical tips for institutions and issue spotting, but I will say now that in states with NIL laws, student-athletes must comply with the law of the state where their college is located in addition to any institutional and conference policies.
So this is a very jurisdiction-specific issue and colleges and universities should be checking their NIL laws per state.
Bennett: Because so many states have been creating this type of legislation, should we expect federal legislation on college athletics benefits?
Brockway: For now, the states have the power on the NIL front, as you just mentioned. There are and have been a number of federal bills introduced by both Republicans and Democrats, and in some instances, even on a bipartisan basis. And while there has been initial media attention when the bills were first introduced, they haven’t seem to gain much traction beyond that. There was two hearings held in June by the Senate committee on Commerce, Science, and Transportation relating to the federal legislative proposals for NIL. And other issues touched upon during the hearings were efforts to improve health and safety standards for student athletes, enhancing scholarship protections and academic outcomes, increasing equity in the student-athlete experience. and looking at how NIL legislation may affect smaller institutions compared to those with larger revenue streams. And at the conclusion of the hearings, it became clear, at least to Amy and I, that there is a general consensus and an appetite among Congress, the NCAA, educational institutes, and student-athletes for a federal law so that there’s a uniform standard that allows student-athletes to earn compensation from their NIL while also keeping a level playing field across state lines.
Opinions diverge, however, on the appropriate scope of that law. So, of course, the devil is going to be in the details and the NCAA, once federal legislation, it’s going to continue to lobby Congress for a uniform federal bill and for safe harbors in that federal law antitrust safe harbors. So I guess in some, we don’t have a crystal ball, but I will say all this recent activity by states and the NCAA and even the courts has ... We suspect that the timeline for the passage of a federal bill looks different now and that the urgency isn’t perhaps there now that other actors have stepped into the fray.
Bennett: Andrea, you mentioned NCAA activities. I know they recently updated their NIL policy. Can you talk about the updated policy and why it changed?
Brockway: All three divisions adopted a uniform interim policy on June 30, 2021, of this year with an effective date of July 1, 2021, to coincide with the several state NIL laws that I touched upon earlier that were set to go into effect that same day, July 1. The interim policy is pretty bare bones, it reads more like a statement, but the general thrust of it is that it suspends the NCAA-NIL rules for all incoming and current student-athletes in all sports so that NIL activities that are consistent with state law are now permitted, if that makes sense. College athletes can make money for endorsements and sponsorships while retaining their eligibility. College athletes who attend a school in a state without an NIL law can engage in NIL activity without violating the NCAA rules related to NIL which have now been suspended by the interim policy. The interim policy allows for the use of a professional service provider for NIL activities and NCAA guidance provides a non-exhaustive list of what they mean by a professional service provider. Think a third party such as a tax advisor, a marketing consultant, a brand management company, etc.
So just quickly while the NIL interim policy now allows for NIL activity, it still prohibits a number of activities. And this is subject to state law. So what exactly is prohibited under the new policy? Number one, the interim policy does not allow NIL compensation for work not performed. That’s a pretty obvious one. Number two, the interim policy does not allow institutions of higher education to provide compensation in exchange for the use of a student-athlete’s name, image, or likeness. So this prohibition keeps the line between student-athlete and employee, and it helps us avoid the pay-for-play scenarios that would take the amateur out of the amateur bucket and put him or her in closer to a professional status.
Number three, the interim policy does not allow NIL compensation contingent upon enrollment at a particular school. So stated another way, the same prohibition is that NIL opportunities may not be used as a recruiting inducement. And finally, the interim policy does not allow compensation for athletic participation or achievement. And a good way to think about this is that athletic performance or the caliber of the athletic achievement will necessarily enhance a student-athlete’s NIL value, but that athletic performance may not be the “consideration” for the NIL compensation. And NCAA has said that the interim policy will remain in place until either federal legislation is passed on this topic or there is an NCAA new rule adopted.
Bennett: That’s helpful to know. So at some point it may change, but for now this is the new policy.
Bennett: And Amy, I know all of us have been asking ourselves what repercussions could come from these athletics benefits changes and I want to bring perhaps the biggest question to you. How will these athletics benefits changes impact Title IX requirements?
Piccola: Excellent question, Melanie, and you’re absolutely right. There has been a lot of chatter about how changes to amateurism writ large might impact men and women student-athletes differently. Everything from concerns that differences in the marketability of a women’s team in a small sport vs. a Division 1 basketball program at certain institutions, how there may be trickle down effects and impacts related to, in at least the view of some, the opening of the flood gates allowing students to engage differently with the public around these topics. So when we think about Title IX in particular, the starting point is really, of course, that the mandate of Title IX that we not discriminate on the basis of sex and in the context of athletics in particular, that we provide equitable opportunity, proportionate scholarships, and equal provision of benefits to our men and women student-athletes remains the same, right?
So our Title IX starting point is equally applicable today as it was six months ago or even six weeks ago. So when we talk about those education-related benefits that were at issue in Alston, those things like an institution providing student-athletes with laptop computers for their classes or science equipment so that they can participate in particular lab. We’re, of course, talking then about benefits that we, as a college or university, are giving to our student-athletes. So Title IX immediately comes to the fore here, right? We need to ensure that when we’re providing those athletes with these benefits, however we’re defining them, we’re doing so in an equitable and nondiscriminatory way. So whatever compliance mechanisms we already have in place at our institution should expand to think about any changes we are undertaking in light of the Alston release of the reigns on what we can do as an institution in terms of providing our student athletes with these benefits.
So there’s a clear intersection between education benefits as provided by an institution and our Title IX mandate, again, to not discriminate and to, broadly speaking, be equitable in our treatment of our athletes. NIL, on the other hand, is a bit different. So as Andrea walked us through in talking about both legislation and NCAA changes, we, as institutions, are simply to not stand in the way of our student-athletes, right? It’s student-athletes, you are free now, as you never were before at least under certain rules, to enter into your promotional or endorsement deals, to earn money off of your name, image, and likeness. And this is really with those limited exceptions that Andrea talked about along the lines of conflicts and benchmarks for athletes in terms of reporting to their institutions what they’re doing on the NIL front. It’s really hands off, right? We’re not involved.
So when we boil that down, really what we’re talking about when we’re talking about NIL, they’re benefits that are provided by third parties, right? They’re not provided by colleges, they’re not provided by our institutions and, in fact, in at least some legislation, it’s crystal clear, and the NCAA has adopted this approach as well, it’s a prohibition, right? We, as institutions, have to remain in a space where we are not taking our student-athletes to be student-athletes. And so, we’re not entering into endorsement deals directly with our student-athletes, again, with some nuance around the fringes, but to speak in broad terms. So because we’re talking about external entities, the third parties providing benefits, Title IX doesn’t have the same intersection with NIL that it does with education benefits. All of that being said, we’ve seen many institutions really embracing these NIL changes and doing things like increasing programming and training to help their student-athletes capitalize on these changes.
So thinking about NIL in the entrepreneurial sense, how can we help our student-athletes get out into the world and make money on their name, image, and likeness? So certainly if we, as an institution, are providing those opportunities for education or training, we need to be thinking about for whom are we doing this, right? Who on our campus can access this programming, is getting this training? Is it only our men’s basketball team or is it open equally to all of our student-athletes? That’s, again, where we need to be thinking about the equity principles of Title IX and making sure that when we were providing really what’s the benefit in the form of training, education, this boost in opportunity, that’s where we need to be doing those internal audits and assessments and making sure that we’re doing so without any favoritism, if you will, to a certain team or a certain program, and of course, compliance with Title IX in terms of equity between the sexes.
Bennett: Thanks, Amy. And Andrea, we’ve been talking a lot about the NCAA and the implications for the NCAA. So let’s talk about some teams that aren’t necessarily associated with the NCAA. Do these changes impact recreational college teams and do they impact colleges with athletic teams that are not part of the NCAA? For instance, colleges that are part of the National Association for Intercollegiate Athletics.
Brockway: Sure. So with regard to the state legislation, the state NIL laws that have been passed, yes. If you are a university or a college in a jurisdiction that has a state law, the short answer is yes, these laws apply to student-athletes at a college or university whether or not you’re a recreational team or an intercollegiate team. However, as you pointed out, the NCAA rules and the Alston decision are specific to the NCAA rules. So these pieces of the puzzle that we were discussing earlier do not directly impact recreational athletes which aren’t intercollegiate. That said, as for athletic teams that are not part of the NCAA, other athletic associations are passing their own legislation. As you mentioned, the National Association of Intercollegiate Athletics was actually the first college sports organization to pass NIL legislation back in October 2020. So you just have to be aware of your state law, also any institutional policies and conference policies and athletic associations that you’re operating under.
Bennett: Thank you, Andrea. And for the final question today, I’ll throw this to Amy, what changes do colleges need to start making now?
Piccola: Yeah. So there’s a lot to be done, right? There’s a lot to be done despite the fact that just a few moments ago I said that, at least from the NIL front, it’s a relatively hands-off approach, right? It’s don’t interfere with our student-athletes. So thinking about NIL first, certainly there are going to be differences between jurisdictions as Andrea has now noted for us a couple of times. Each state has its own nuance, some particulars that you’re certainly going to want to be aware of if you are in one of those states that has legislation. That includes, of course, different timing and timelines in terms of when we, for example, need to have an NIL policy at our institution, when do we need to have that done. That is largely a creature of state legislation. That said, as of July 1 of this year, student-athletes under the NCAA rubric and student-athletes since the fall under the NAIA rubric have NIL rights. So they are able to go out into the world and start engaging with these third parties.
So what are we doing? We are going to need to think about who on our campus is going to review our institutional contract to determine whether there are exclusivity provisions, whether there are contracts that would be in conflict with a student-athlete’s NIL endeavors. So an example might be a particular athletic wear provider has an exclusivity agreement with institution that all athletes on the softball team will be outfitted in our gear. Member of the softball team enters into an individual NIL agreement with a competitor athleticwear company. Who on our campus is going to hold up that student-athlete’s contract and the softball team’s contract and determine whether or not there’s a conflict, right? That’s going to require some assessment and unfortunately, while we should be doing the work in the short term to identify the universe of contracts, and I would just put a note here, a verbal footnote to say that it’s not just athletic contracts, institutions may be institution-wide in a deal with a particular soft drink company and/or individuals going to be able to enter into contracts themselves that are in conflict with it.
So who’s going to be doing the assessment at the institution level to determine one, what contracts are there; and then two, as students come to us and say, “Oh, I’ve got this great deal” who’s going to be doing the assessment to determine whether or not there’s any direct interference, so to speak, between what the student wants to do and what the institution has already committed to. We should also be thinking about engaging our internal constituents early and often to make sure that they understand these developments and the real impacts that may not be at the front of minds as students go off and enter into these endorsement deals. But do our financial aid folks understand that these rule changes are in play? Do our visa and immigration offices understand that these rules are out there and in play?
We, as institutions, may feel an obligation to provide information to our students that when they engage in NIL activities in particular, there might be impacts on their financial aid awards, their eligibility for financial aid, there may be impacts on visa status depending on what the NIL deal looks like. And, of course, they’re going to be fact-specific nuances there. But do these offices on our campus understand that these changes exist and then our students may be engaging in activities that put at risk their status, whether it be in the financial aid or immigration universe? So get out there, start talking to people, making sure that we have systems in place to engage with constituents across the campus. Other things that we should be thinking about are sort of that internal checklist or audit of other policies and processes that apply to other students on campus that we may need to fold into any NIL policy we have on campus going forward. So what does that mean? Many institutions have rules and policies around things like a student’s use of institution’s logos, marks, team colors, and the like for their individual pursuit.
How is that policy going to intersect with the NIL policy? Do we need to do some work tying those things together? Do we allow students to use space on campus for their individual pursuits or do we charge rental fees? Do we need to make sure that our student-athletes, if they’re going to be filming a commercial – good for them, let’s hope that student-athletes have these opportunities – do they need to be aware that these generally applicable policies in terms of access and use of campus facilities apply in this context too? Do we need to import rules making clear that while a student athlete is free, of course, to engage in NIL pursuits that those pursuits can’t interfere with our expectations around team time. It’s do it on your own time, not during team time, can’t interfere, of course, with their studies and their educational pursuit.
So this is all sort of a long way of saying regardless of whether there is a legislative mandate to jump into action here, student-athletes are out there, they are engaging with third parties, they are entering into endorsement deals, they’re making this money and we need to be prepared to assess those deals making sure they’re within the confines, as loose as they are of NCAA and NAIA restrictions. And certainly, of course, to the extent you are in a state with a law in place within the parameters of that law. We need to tie in other institutional policies making sure that there’s no loophole out there that we bring all of this together and provide some clarity for our students. And also, think about what type of education we want to be providing when it comes to those things that may present some risks or concerns for student-athletes that while they’re very focused on the opportunity, they just aren’t thinking about.
So, as I said, it’s time to jump into action, to think about the real impact, to be helping our students, but to also put some mechanisms in place to help us sort through these things in an organized of a fashion as possible.
Bennett: And that’s it for today’s podcast. I’d like to thank Amy and Andrea for joining us today.
Brockway: Thank you. Happy to be here.
Piccola: Thank you.
Host: From United Educators Insurance, this is the Prevention and Protection Podcast.