The U.S. Court of Appeals for the Third Circuit Thursday affirmed the dismissal of the NCAA’s motion to dismiss Johnson v. NCAA, a case where college athletes argue they are employees of their schools and the NCAA within the meaning of the Fair Labor Standards Act (FLSA) and state laws.
In doing so, the Third Circuit rejected the NCAA’s longstanding position that college athletes cannot be employees and athletes at the same time—an edict with major consequences for college sports in America.
At the same time, the Third Circuit ordered the district court to apply a different test to assess the athletes’ employment.
If the players are deemed to be FLSA employees, they’d be owed at least minimum wage for their labor and would be eligible for overtime pay. Johnson could lead to the NCAA and colleges being ordered to pay many millions of dollars in unpaid wages and forced to amend amateurism rules to recognize an employee-employer relationship.
The case is led by former Villanova football player Ralph “Trey” Johnson and other current and former athletes representing more than a dozen Division I schools including Duke, Oregon, Arizona and Purdue. They maintain they meet the applicable legal test for employment, given their work for the school is separate from their studies and given the control schools have over their time and labor.
The NCAA as a joint employer is based on the idea that colleges follow workplace rules set by the NCAA, which also enforces those rules. The players contend they should be compensated at least akin to how work study classmates are compensated—some of whom work at concession stands and ticket gates at games where the athletes aren’t paid. As a joint employer, the NCAA would be responsible to pay the athletes if the colleges do not do so. The plaintiffs’ attorney, Paul McDonald, elaborated on these points in a recent Sportico video interview.
In February 2023, Third Circuit Judges Theodore McKee, David Porter and L. Felipe Restrepo held a hearing in which attorneys for Johnson and the NCAA offered competing arguments. The judges unpacked the significant amount of control colleges place on athletes compared to other students; because of athletic obligations, athletes’ ability to select courses and pursue majors is more constrained than for their classmates. Athletes also face restrictions on things including hiring agents than their classmates who are music, drama or arts professionals. College athletes are denied chances to lawfully bet on sports.
Thursday’s ruling does not make the athletes employees of their colleges but is a substantial step in that direction. The case now returns to U.S. District Judge John Padova, who in 2021 denied the NCAA’s motion to dismiss, to apply a different employment test. Padova applied the “primary beneficiaries” multifactor test, which was established in Glatt v. Fox Searchlight Pictures, an FLSA case concerning unpaid student interns. Glatt focused on the economic relationship between employer and intern/worker.
The Third Circuit concluded that Glatt is not appropriate since, among other reasons, an internship is part of an educational program, whereas “interscholastic athletics are not part of any academic curriculum.”
In fact, as the plaintiffs argue, athletic performance can prove detrimental to academics given that sports can preclude athletes from taking certain courses or pursuing difficult majors. Further, the court explained, interns expect to receive “educational or vocational benefits” that are not necessarily apparent in employment.
The Third Circuit instead instructed Judge Padova to apply an economic realities analysis of the issue that grounded in common-law (case precedent) agency principles. To that end, Padova should find that college athletes are employees if they (a) perform services for another party, (b) necessarily and primarily for the college’s benefit, (c) under the college’s control or right of control and (d) in return for “express” or “implied” compensation or “in-kind benefits.”
Given Padova’s findings in earlier rulings, it appears extremely likely he will conclude the athletes are employees. The NCAA could once again appeal, but if denied, the case would then move to pretrial discovery.
That would be a momentous development. FLSA discovery tends to be public-facing, a factor that might incentivize the NCAA—which is in the process of settling House v. NCAA and other antitrust litigations—to try to cut a deal.
To that point, FLSA discovery means college officials, coaches and staff will need to share numerous materials—such as time sheets, practice schedules and on-field activities notes—related to athlete work and answer questions under oath about those topics. While many key pieces of evidence, including TV and licensing contracts, have been redacted in antitrust litigation against the NCAA, FLSA cases are more about ordinary aspects of work, not confidential.
Complicating matters further for colleges, they will face notice obligations under the Family Education Rights and Privacy Act (FERPA). Colleges will likely be required to notify current and former students who played sports they are potential members of a proposed class action.
Johnson v. NCAA could take years to play out. The Third Circuit only reviewed the case at an early stage with the NCAA in December 2021 being granted an interlocutory appeal, meaning an appeal of a case before it is decided (usually appellate courts only review cases after final judgment at the trial court level). The plaintiffs demand a jury trial, the verdict for which could be appealed back to the Third Circuit. Still, the returns thus far for the NCAA are not promising.
To that point, Padova has thus far found the NCAA’s legal arguments unpersuasive. The judge has stressed that the term “employer” ought to be construed broadly under the law and that players appear to function as employees of their school under the “primary beneficiaries” multi-factor test in the Glatt student intern case. Padova has noted, among other employment-like characteristics, that players submit timesheets like their work-study classmates and perform labor for a multibillion-dollar industry.
The Third Circuit’s ruling is in contrast to decisions in two other circuits. The Seventh Circuit (Berger v. NCAA, 2016) and Ninth Circuit (Dawson v. NCAA, 2019) rejected claims college athletes were FLSA employees. The conflict between these circuits is problematic for the NCAA given that it seeks uniform rules across the country. The conflict could eventually convince the U.S. Supreme Court to consider the issue, especially given that hundreds of thousands of former and current college athletes have a stake in the outcome.
The Third Circuit acknowledged the Berger and Dawson holdings, but was not persuaded by them. For one, the court disagreed with the Seventh Circuit’s “comparison of college athletes to prisoners and refuse to equate a prisoner’s involuntary servitude.”
The Third Circuit also stressed that times—and legal precedent—have changed since the 2010s. The court highlighted the Supreme Court’s ruling in NCAA v. Alston, where colleges conspiring to limit education-related expenses to athletes was found to violate antitrust law, for the proposition that “circular arguments” against college athlete employment “no longer hold the weight they once did.” The Third Circuit also stressed the National Labor Relations Board has, “for the first time,” taken “the position that college athletes are employees of purposes of the National Labor Relations Act (NLRA).”
Michael Willemin, a partner at Wigdor and attorney for the players, issued a statement saying his side is “pleased that today’s decision affirmed the core tenet of the lower court’s determination; namely, that the NCAA is not above the law and student athletes may be employees entitled to the protections of the FLSA.”
He added they “look forward to continuing to prosecute the action and ultimately proving that student athletes are in fact employees.”
Johnson is one of several efforts to see college athletes recognized as employees. Earlier this year, a NLRB regional director found Dartmouth College men’s basketball players are employees within the meaning of the NLRA. Those players then unionized (the school is pursuing an appeal). Meanwhile, an administrative law judge in Los Angeles is considering whether USC football and men’s and women’s basketball players are employees within the meaning of the NLRA.
(This article has been updated with a statement from Michael Willemin, an attorney for the players.)
