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Johnson v. NCAA: Third Circuit Concludes College Athletes are Not Precluded from Bringing FLSA Claims


The dispute at issue began in 2019 when college athletes at several National Collegiate Athletic Association (“NCAA”) Division I (“D1”) member institutions filed a complaint asserting violations of the Fair Labor Standards Act (“FLSA”) and various state wage laws seeking relief in the form of unpaid wages, an equal amount in liquidated damages, and attorneys’ fees. The plaintiffs argued that they were entitled to federal minimum wage compensation for the time they spent representing their schools. The NCAA and member schools moved to dismiss pursuant to Federal Rule of Civil Procedure Rule 12(b)(6), asserting that the college athletes—as “amateurs”—are not, and historically have never been, considered employees of their respective schools or the NCAA. The District Court determined that the athletes had sufficiently pleaded facts that, under a multifactor balancing test, might allow them to be classified as employees under the FLSA and denied the motion to dismiss. The NCAA and member schools appealed.

 

The plaintiffs alleged that although the NCAA and its member schools profit from their efforts, the NCAA’s bylaws prohibit member schools from offering wages and forbid students from accepting them. To enforce these rules, the plaintiffs alleged the bylaws prescribe sanctions for violating schools and students, including suspension or termination of colligation athletes, suspension of coaching staff, and disqualification of teams from competitions. The NCAA and member schools argued that, although athletes do not earn wages, the benefits of participation include payment in other forms, such as increased discipline, a stronger work ethic, improved strategic thinking, time management, leadership, and goal setting skills, and a greater ability to work collaboratively.

 

The college athletes alleged that the soft skills the NCAA and member schools point to are inadequate compensation for their services and that they were subject to extensive training and performance requirements that regularly interfered with their learning. As one example, the plaintiffs alleged that they were forced to schedule classes around their athletic commitments, limiting their range of learning options. These commitments locked college athletes out of hundreds of available classes, including prerequisites for certain academic degrees. Additionally, the college athletes argued that NCAA requirements frequently prevent college athletes from pursuing their preferred majors.

 

On August 25, 2021, the District Court rejected the arguments set forth by the defendants and denied their motions to dismiss. In the absence of controlling authority providing a specific multifactor test to evaluate whether athletes can be considered “employees” under the FLSA, the District Court applied the Court of Appeals for the Second Circuit’s multifactor test. The District Court determined that the Second Circuit test required it to assess the “economic reality” of the relationship by identifying whether the college athletes or the NCAA and schools were the primary beneficiary of the relationship. After balancing and considering the seven factors, the District Court concluded that the college athletes had plausibly pleaded that they may be employees and denied the motion to dismiss. Subsequently, the District Court granted the Appellants’ motion under 28 U.S.C. § 1292(b) to certify an interlocutory appeal from the denial of their motion to dismiss. The question certified for appeal was: “Whether NCAA Division [I 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 issue raised by the interlocutory appeal is not whether the athletes before the Third Circuit 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. The Third Circuit answered this question “no”.

 

In looking to “the economic realities of the relationship” between college athletes and their schools or the NCAA, the Third Circuit began by noting that athletes in the collegiate context are sui generis. After all, merely playing sports, even at the college level, cannot always be considered commercial work integral to the employer’s business in the same way that the activities performed by independent contractors or interns are assumed to be in previously mentioned multifactor tests. The Supreme Court has acknowledged this possibility, explaining that the FLSA does not cover a person who, “without promise or expectation of compensation, but solely for his personal purpose or pleasure” performs “activities carried on by other persons either for their pleasure or profit.” The Department of Labor (“DOL”) makes the same distinction.  But just as intuitively, with professional athletes as the clearest indicators, playing sports can certainly constitute compensable work. Any test to determine college athlete employee status under the FLSA must therefore be able to identify athletes whose play is also work.  The FLSA does not expressly define the term “work”.  Ultimately, the touchstone remains whether the cumulative circumstances of the relationship between the athlete and college or NCAA reveal an economic reality that is that of an employee-employer.

 

Appellants argued that the history and tradition of amateurism is sufficient not only to remove college athletes from the general population of people whose FLSA employment status is routinely determined through the application of multifactor tests, but also compels dismissal of this suit. The Third Circuit disagreed. Although the Supreme Court remarked in Board of Regents dicta that “[t]he NCAA plays a critical role in the maintenance of a revered tradition of amateurism in college sports,” it has since unanimously clarified that Board of Regents did not expressly approve of every NCAA limit on athlete compensation or foreclose “any meaningful review of those limits today” as noted by Justice Kavanaugh in his concurrence in Alston v. NCAA. The NCAA’s athlete compensation rules, after all, were not even at issue in Board of Regents. That case instead concerned the NCAA’s attempt to exercise monopoly control over television broadcast agreements.

 

Responding to an argument like the one that the Appellants make here, the Supreme Court in Alston noted that the NCAA had “not adopted any consistent definition” of amateurism and acknowledged that the organization’s “rules and restrictions on compensation have shifted markedly over time,” which further undermined the NCAA’s reliance on the concept. The Supreme Court’s disapproval of amateurism as a legal defense was only strengthened by a point made by Justice Kavanaugh in concurrence that the Third Circuit adopted: 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, unpersuasive, and increasingly untrue.

 

In sum, for the purposes of the FLSA, the Third Circuit stated it “will not use a ‘frayed tradition’ of amateurism with such dubious history to define the economic reality of athletes’ relationships to their schools.” Instead, the Third Circuit asserted that the use of amateurism highlights the need for an economic realities framework that distinguishes college athletes who “play” their sports for predominantly recreational or noncommercial reasons from those whose play crosses the legal line into work protected by the FLSA. Accordingly, the Third Circuit held that college athletes cannot be barred as a matter of law from asserting FLSA claims simply by virtue of a “revered tradition of amateurism” in D1 athletics.


For any questions, contact Christian Dennie at cdennie@denniefirm.com.

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