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Division I football players in California were not ‘employees’ of NCAA or PAC-12

By Lorene D. Park, J.D.

Dismissing a putative class action by a former Division I football player at the University of Southern California, who claimed the NCAA and PAC-12 Conference violated the FLSA and state law by failing to pay players minimum wages and overtime, a federal district court in California agreed with a majority of other courts in finding that the players were not “employees” because athletic play is not “work” and interscholastic athletics are conducted primarily for the benefit of the participants. The court rejected the plaintiff’s argument that this case was different because Division I football players generate “massive revenues” for their universities (Dawson v. National Collegiate Athletic Association, April 25, 2017, Seeborg, R.).

The plaintiff played football for the University of Southern California (USC), a Division I Football Bowl Subdivision member of the PAC-12 Conference, from 2011 to 2015. He filed this putative class action against the NCAA and the PAC-12 alleging violations of the FLSA and the California Labor Code. He claimed that during his time playing football, he was denied full pay for all hours worked, including overtime pay, and was frequently allowed to work without receiving the required minimum wage.

According to the plaintiff, the rules governing the football players were set by the NCAA and adopted by the PAC-12. On this basis, he argued that the NCAA and PAC-12 are joint employers of the student athletes paying Division I football on behalf of member schools.

Article III standing. Moving to dismiss, the defendants argued that the plaintiff lacked standing to bring the FLSA claim because, under the FLSA, injuries are only traceable to and redressable by employers and he was not “employed” by the defendants. The defendants relied heavily on a Seventh Circuit opinion, Berger v. Nat’l Collegiate Athletic Ass’n, in which the appeals court treated the “employer” inquiry for purposes of standing separately from the substantive FLSA employer inquiry. The Seventh Circuit held that student athletes had standing to sue their university despite ultimately concluding that the students were not “employees” under the FLSA.

Noting that Berger is not binding precedent, the court still found the reasoning persuasive. It explained that, in general, FLSA liability is “predicated on the existence of an employer-employee relationship. It seems to follow, thus, that [the plaintiff’s] injuries are only traceable to, and redressable by, those defendants who are deemed by law to have employed him.”

Football players were not FLSA “employees.” Generally, whether there is an employment relationship is tested by the “economic reality” of their relationship considering whether the defendant: (1) had the power to hire and fire the plaintiff; (2) supervised and controlled his work schedules and conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records. This four-fact test, however, isn’t as useful in the student athlete context, noted the court, so the focus would be on the “true nature of the relationship.”

Looking to other decisions, the court pointed out that the Seventh Circuit in Berger found that student athletes participate in their sports for reasons unrelated to immediate compensation and that athletic “play” is not “work” as that term is used in the FLSA. A majority of courts in different contexts also have found that student athletes are not employees. Moreover, the DOL in Section 10b24(a) of its Field Operations Handbook has indicated that student athletes are not employees. In Section 10b03(e), the handbook explains that “interscholastic athletics” are “conducted primarily for the benefit of the participants as a part of the educational opportunities” and “are not work of the kind contemplated by [the FLSA] and do not result in an employer-employee relationship between the student and the school.”

With this in mind, and leaving aside the policy question of whether and how Division I football players should be compensated, the court here found that “there is simply no legal basis for finding them to be ‘employees’ under the FLSA.’”

Revenue generation is not determinative. Though the plaintiff argued that this case did not fit within Section 10b24(a) and was distinguishable from Berger because Division I football players earn “massive revenues” for their schools and athletes play college ball for the economic benefit of the NCAA, the court disagreed. The DOL handbook sections referred broadly to “interscholastic athletics” as not constituting “work” and did not distinguish between sports that generate revenue and those that do not. Nor was the plaintiff’s revenue-generation argument supported by case law. Consequently, his FLSA claim was dismissed.

California Labor Code claim dismissed too. Also dismissing the plaintiff’s state-law claim, the court reviewed state court cases, including a recent line of cases extending to other contexts the policy underlying Section 3352(k), which amended the California Labor Code to exclude student athletes from the term “employees” for purposes of workers’ compensation. In Townsend v. State of California, a state appeals court rejected a similar revenue-generation argument and held that student athletes are not employees of universities for purposes of the Tort Claims Act. And in Shephard v. Loyola Marymount Univ., a California appeals court extended this analysis to claims filed under the state Fair Employment and Housing Act, explaining that “statutes relating to the same subject matter must be harmonized insofar as is possible.” Here, the court found that the same logic applied to the plaintiff’s Labor Code claim.