This post was co-authored by Bruce D. Bagley, a Member in McNees Wallace & Nurick LLC’s Labor & Employment Practice Group in Harrisburg, Pennsylvania.
As Americans across the country anxiously stare at their National Collegiate Athletic Association (NCAA) Division I Men’s Basketball brackets, the Northwestern University Wildcats are dominating the headlines in both the sports and labor law communities. In what many sports and legal commentators are calling a game-changing decision (pun intended), on Wednesday, March 26, the Regional Director for the Chicago Regional Office of the National Labor Relations Board (NLRB) ruled that certain players on the Northwestern University football team could seek to form a union. Perhaps more importantly, the Decision is quite expansive in its interpretation of the term "employee."
At the center of his Decision, the Regional Director found that scholarship recipients are actually "employees" of the University, as the term "employee" is defined in the National Labor Relations Act (NLRA). According to the Decision, "an employee is a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment." The Regional Director reasoned that Northwestern’s scholarship football players are employees because they sign a "tender" before each scholarship period, are granted scholarships (payment) in exchange for their services (playing football), are under the strict control of the University’s athletic department, and perform valuable services because they generated over $235 million for the school’s football program over a ten year period. The Director further argued that these scholarship football players are "paid" over $76,000 per year, in the form of tuition, fees, room, board, and books – and that this scholarship payment is directly tied to their performance "at work" on the football field. Notably, the Director concluded that non-scholarship and "walk-on" players do not meet the definition of "employee," because they receive no compensation for the services they perform.
So what happens next? Northwestern has indicated its intention to file a Request for Review of the Regional Director’s Decision with the full NLRB in Washington, D.C. If the Board grants the Request for Review, it will consider further briefings by the parties, and possibly oral argument. If the Regional Director’s Decision is upheld, the NLRB’s Chicago Office will conduct a secret ballot election in a voting unit consisting of "all football players receiving football grant-in-aid scholarships and not having exhausted playing eligibility" employed by Northwestern University.
If the Northwestern football players do eventually vote to form a union, this will give them the right to collectively bargain with their "employer", Northwestern University. There is no guarantee that they will receive additional payment or benefits at all – they could even conceivably find themselves with fewer benefits depending on the terms of an eventual collective bargaining agreement. And there are a number of potential downsides for the players – if the money they receive in scholarships is "income", the IRS could very well demand that players pay an income tax on the scholarship funds deemed payment for their athletic services. Note that, according to various press accounts, the players do not claim they wish to receive any additional compensation (at this point). As of now, they have indicated their primary concern is securing the coverage of medical expenses for current and former athletes with sports-related injuries.
The Regional Director’s Decision directly impacts only Northwestern University, although certainly players at other schools may be pursuing similar actions. Remember that the NLRB does not have jurisdiction over public universities such as Penn State, Ohio State, etc. Such state-related institutions would be under the jurisdiction of state labor relations boards. Remember, too, that the Northwestern Decision is fact-specific, and that other Division I football programs could be treated differently by the NLRB.
As expected, the NCAA and many of the major college sports conferences strongly disagree with the Decision. In a statement released shortly after the Decision was issued, the NCAA stated "We frequently hear from student-athletes, across all sports, that they participate to enhance their overall college experience and for the love of their sport, not to be paid." The NLRB concluded that scholarship football players were not "primarily students" because they spend most of their time participating in athletic endeavors. This is certainly an expansive reading of the statutory term "employee." Only time will tell if the federal appellate courts, including eventually the U.S. Supreme Court, will agree that federal labor law was intended to grant collective bargaining rights to student athletes, albeit ones that receive scholarships and whose college activities may indeed be tightly controlled by their coaches.