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NCAA, PAC-12 not joint employers of student athletes under FLSA

By Kathleen Kapusta, J.D.

The economic reality of the relationship between the NCAA/PAC-12 and student-athletes does not reflect an employment relationship, the Ninth Circuit determined.

The NCAA and Pac-12 were regulatory bodies, not employers of student-athletes under the FLSA, the Ninth Circuit ruled, affirming dismissal of a Division I college football player’s putative class action seeking minimum wages and overtime. The lower court also correctly dismissed the plaintiff’s California law claims relying on the state legislature’s decision to except student athletes from workers compensation benefits and state appellate court decisions interpreting that exception (Dawson v. National Collegiate Athletic Association, August 12, 2019, Thomas, S.).

The plaintiff played football for the University of Southern California (USC), a Division I Football Bowl Subdivision member of the PAC-12 Conference. Alleging violations of the FLSA and the California Labor Code, he filed a putative class action against the NCAA and the PAC-12. According to the plaintiff, the rules governing the football players were set by the NCAA and adopted by the PAC-12. The NCAA and PAC 12, he alleged, acted as a joint employer of the class members “by prescribing the terms and conditions under which student athletes perform services,” and as joint employers, they failed to pay wages and overtime to the class members in violation of federal and state law (he did not allege he was employed by USC).

Dismissed. Dismissing his lawsuit, the district court, 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.

Economic reality. “The FLSA definition of employee is ‘exceedingly broad,’ but ‘does have its limits,’” the Ninth Circuit observed, noting that ultimately, the test of employment under the FLSA is one of “economic reality.” Applying the factors deemed relevant by the Supreme Court in Walling v. Portland Terminal Co.—expectation of compensation, power to hire and fire, and evidence that an arrangement was “conceived or carried out” to evade the law—the federal appeals court found the economic reality of the relationship between the NCAA/PAC-12 and student-athletes did not reflect an employment relationship.

Expectation of compensation. The court first found it did not need to address whether the plaintiff’s scholarship engendered an “expectation of compensation” or amounted to compensation because he did not receive the scholarship from the NCAA or the PAC-12. Rather, the court observed, the member schools themselves award and distribute the financial aid he claimed constituted expected compensation. And while he argued that NCAA regulations prohibit student-athletes from accepting compensation beyond scholarships limited to cost of attendance, the limitation on scholarships does not, as a matter of law, create any expectation of compensation from the NCAA/PAC-12, the court reasoned, finding that neither the NCAA nor PAC-12 provided him with a scholarship or any expectation of a scholarship.

Hire/fire. Nor could he show that the NCAA or PAC-12 had the power to fire or hire him. While he claimed that they assert complete control over the lives of student-athletes on and off campus and control and regulate student-athletes’ “training and game schedules, academic schedules, and other collegiate activities,” he did not allege that they “hire and fire,” or exercise any other analogous control, over student-athletes. Nor was there any allegation or evidence that the NCAA and PAC-12 choose the players on any Division I football team or engage in the actual supervision of the players’ performance. Rather, the allegations showed that the NCAA functions as a regulator, and the NCAA member schools, for whom the student-athletes allegedly render services, enforce regulations.

Evade law. Finally, the court determined, the plaintiff failed to show that the NCAA rules, which were first promulgated before the 1938 enactment of the FLSA, were “conceived or carried out” to evade the law.

Revenue. And while the plaintiff also argued that the labor of student-athletes generates substantial revenue for the NCAA and PAC-12, and that this “economic reality” alters the analysis, the court explained that revenue does not automatically engender or foreclose the existence of an employment relationship under the FLSA and here, “the revenue generated by college sports does not unilaterally convert the relationship between student-athletes and the NCAA into an employment relationship.”

Bonnette. Also rejected was the plaintiff’s assertion that Bonnette v. California Health and Welfare Agency—in which the Ninth Circuit applied a four-factor test to probe the economic reality of the relationship between state agencies and chore workers hired to perform in-home care for disabled public service recipients—compelled a different result. The Bonnette factors, observed the court, ask “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.”

Under this test, said the court, the NCAA and PAC-12 are clearly not the plaintiff’s employer as they do not admit him to the school or pick him for the team; cannot remove him from the team; do not supervise his schedules or activities in practices or games; do not maintain his scholastic records; and, although they put caps on what he may receive as a scholarship, do not determine whether he gets a scholarship or in what amount.

Regulatory bodies. Thus, the court concluded, within the analytical framework established by the Supreme Court, the NCAA and PAC-12 are regulatory bodies, not employers of student-athletes under the FLSA.

State-law claims. Finally, the court found that in dismissing the plaintiff’s state-law claims, the district court properly relied on a 1965 legislative exception for student-athletes from workers’ compensation benefits and California appellate courts’ interpretation of this exception beyond the Workmen’s Compensation Act. Further, said the court, other actions of the California Legislature support that the student-athlete falls outside of California labor law.

Affirming the district court’s dismissal of the plaintiff’s FLSA and California claims against the NCAA and PAC-12, the court explicitly stated that it did not reach any other issue urged by the parties or express an opinion about student-athletes’ employment status in any other context.