Paving the way to professionalism for college athletes - A review California’s Fair Pay for Play Act

Published 20 September 2019 By: John Wolohan

College Football

Tick, tock, tick, tock …. the State of California has made its move; now the National Collegiate Athletic Association (NCAA) is on the clock. On September 11, 2019, the California State Senate voted 39 – 0 to enact California Senate Bill 206 (SB 206), the Fair Pay to Play Act (the Act). 1 In support of the bill, the California Senate made clear that student-athletes should be treated like any other student on campus with a marketable skill, and should have no limits on what they could earn for their efforts, other than what others were willing to pay. 2

The Act is the latest attack on the NCAA’s amateurism model. Over the last five years or so, the NCAA has faced a number of legal challenges to its amateurism rules and prohibitions on the payment of college athletes. Although the majority of these legal challenges have failed to overturn the NCAA model, they have whittled away at it at the margins.3 The NCAA has recently been forced4 to allow colleges and universities to grant athletes a cost of attendance stipend in addition to their scholarships, to relax its rules on students transferring schools and meal options for athletes.5

If, as expected, the Act is signed into law by California Governor Gavin Newsom, the Act would directly challenge the NCAA’s model of amateurism by allowing college athletes in California to make money off their name, image or likeness. 6 This article provides a primer on the Act and its potential impact on the NCAA, member schools, athletes, and the future of amateurism in U.S. college sports.

The California Fair Pay to Play Law (SB 2016)

Pursuant to the Act:

a postsecondary educational institution [in California] shall not uphold any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness. Earning compensation from the use of a student’s name, image, or likeness shall not affect the student’s scholarship eligibility.” (Section 2 (a)(1))7

The Act, however, does place some limitations on the use of an athlete’s name, image, or likeness . For example, Section 2. (e)(1) of the Act states that athletes are not allowed to sign deals that would conflict with a school contract. Therefore, an athlete at a Nike-sponsored school would be barred from signing an endorsement deal with Adidas.8

As for the NCAA, the Act states that:

an athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the NCAA, shall not prevent a student of a postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.” (Section 2.(2))9

The Act also addresses college athletes’ ability to secure agent representation without adverse impact on eligibility. It makes it illegal for any “postsecondary educational institution, athletic association, conference, or other group or organization” to “prevent a California student participating in intercollegiate athletics from obtaining professional representation in relation to contracts or legal matters, including, but not limited to, representation provided by athlete agents or legal representation provided by attorneys.” 10 Although the Act allows athletes to obtain professional representation, Section 2 (c)(2) of the Act mandates that anyone providing such services must be licensed by the state “pursuant to Chapter 2.5 of Division 8 of the Business and Professions Code. Legal representation of student athletes shall be by attorneys licensed pursuant to Article 1 of Chapter 4 of Division 3 of the Business and Professions Code”.11

While the NCAA, conference commissioners and college coaches have voiced strong opposition to the Act,12 it is important to note that even if signed by the Governor today, the Act would not become law until January 1, 2023 ( Section 2(h)) .13 The long delay will allow the California legislature “to monitor the NCAA working group created in May 2019 to examine issues relating to the use of a student’s name, image, and likeness and revisit this issue to implement significant findings and recommendations of the NCAA working group in furtherance of the statutory changes proposed by this act.14 Besides allowing California to monitor the NCAA, the delay also gives the NCAA and its working group time to review its policy and make any changes they find necessary.

Impact on the NCAA

Historically, the NCAA has contended that college athletes are students first and athletes second. As such, the NCAA argues that athletes cannot be considered employees of the university and should not be paid to play. Based on this policy, t wo days after the California Senate vote, the NCAA Board of Governor s sent a letter15 to California Governor Gavin Newsom urging him not to sign the bill into law. In particular, the NCAA urged “the state of California to reconsider this harmful and, we believe, unconstitutional bill and hope the state will be a constructive partner in our efforts to develop a fair name, image and likeness approach for all 50 states.16

The NCAA went on to argue that if California Senate Bill 206 becomes law it would upend the competitive balance of college sports. In particular, the NCAA argues that California’s new law would give its universities and colleges an unfair recruiting advantage since they would be able to lure athletes with the possibility of cashing in on anything from jersey sales to sponsorship deals . In addition, the NCAA argued that allowing athletes at California’s colleges and universities to profit off their name, image and likeness would erase the critical distinction between college and professional athletics. If that happened, the NCAA argued, colleges in California could be prohibited from competing for NCAA championships and the NCAA would likely be forced to expel all 58 of California’s colleges and universities from NCAA competitions, negatively impact more than 24,000 California student-athletes.17

The NCAA has also expressed concern over the potential ripple effects of allowing athletes to sign sponsorship deals. In particular, the NCAA asks “what's to stop Nike co-founder and Oregon booster Phil Knight from using his company's resources to sign top recruits for his alma mater? Or to prevent bidding wars between school alumni seeking to curry favor with recruits by exorbitant amounts for their autographs?18

Comment

In the author’s view, the threat to expel California schools from the NCAA, while within the NCAA’s powers, is really an empty threat. It is impossible to believe that the NCAA or the other schools in the Pac-12 Conference, which has four major California schools as members, would abandon California. If the NCAA actually attempted to expel the school, the Power 5 Conferences would likely revolt and leave the organization.

Since the NCAA is never going to expel the California schools, the more likely outcome is that the NCAA will modifies its rules. In May 2019, the NCAA assembled a working group to examine changing the organization’s rules for all student-athletes to appropriately use their name, image and likeness in accordance with our values.19 That group is expected to submit a report on its findings in October 2019. It would not be surprising if it recommends that the NCAA relax its rules on image rights.

Additional pressure on the NCAA to modify its rules quickly is that other states have already expressed an interest in passing similar legislation. The state legislatures in Washington and Colorado, two states with universities in the Pac-12 conference, have already introduced similar bills. T he day after the Senate vote in California, two South Carolina State legislators, Senator Marlon Kimpson and Representative Justin Bamberg, stated that they plan to introduce a bill in January 2020 that would allow college athletes to profit from selling their name, image and likeness. The South Carolina bill, however, would go even further and would include require schools to put money into a trust fund for football and basketball player to collect after they graduate.20 A week after California’s bill, a State Senator in New York proposed legislation21 that in addition to giving athletes control over their own names, images and likenesses, would also require college athletic departments to give a 15% share of annual revenue to student-athletes.22 At a school like Syracuse University, which took in $93.8 million in revenue from athletics in 2017-18, that would mean the athletes would receive over $14 million. The United States Congress is also weighing in. United States Representative Mark Walker of North Carolina has introduced a bill that would also allow college athletes to be compensated for the use of their name, image and likeness.23

As the issue over the use of an college athlete’s name, image and likeness seems to be snowballing out of control, with the states and Federal government all proposing different legislation, the NCAA seems to be running out of time if wants to have a say over the issue. All of the legislative bills are just proposals right now; once they become laws, it will be much more difficult for the NCAA to control whether athletes are compensated just for their name, image and likeness by outside companies, or the schools directly.

Another compelling reason the NCAA will (or should) eventually modify its policy is because it and its schools are leaving money on the table24. The NCAA and EA Sports use to market a best-selling video game featuring college football and basketball teams. After the use of the athletes’ images was found impermissible in court, EA Sports stopped selling the game. If allowed to partner with the schools and the athletes, EA Sports would be able to reintroduce the games and generate millions of dollars for the NCAA and schools.25

Impact on Schools

With so much money being paid to the colleges and universities, over the last ten years there has been a growing cry to pay college athletes above and beyond their academic scholarships. Interestingly, the Act does not require or even allow the schools to pay college athlete for their services on the field or court. Instead, it simply opens the door for athletes to earn money just like any other student and pushes the question of paying students into the marketplace. By moving the issue into the marketplace, the Act reduces the pressure on schools to actually pay their players for their athletic services. Therefore, the schools do not have to consider complicated issues such as how much individual players are worth, whether paying certain players would violate Title IX,26 or whether all athletes would need to be paid an equal value. The Act would allow the star basketball player to sell his image, while those with no market value would have to be content with just their scholarships.

In relation to entering in to sponsorship agreements, the Act states that an “athlete shall not enter into a contract providing compensation to the athlete for use of the athlete’s name, image, or likeness if a provision of the contract is in conflict with a provision of the athlete’s team contract.27 In addition, once an “athlete … enters into a contract providing compensation to the athlete for use of the athlete’s name, image, or likeness [he or she] shall disclose the contract to an official of the institution, to be designated by the institution.28 Therefore, even though college athletes will be able to cash in on their name, image, or likeness, they cannot enter into just any agreement. If the school has an existing relationship with a sponsor, say Nike, the athlete would be unable to enter into a shoe deal with Adidas. As for the fear that athletes might take away some of the school’s sponsors, it should be noted that since the school is going to be in the space / community much longer than the individual athlete, sponsors will probably be careful not to upset the schools in any sponsorship agreement that they have with an athlete. As a result, the schools, working with the athletes, might be able to see a significant benefit, through higher sponsorship deals, if the sponsor also gets control over the athletes.

When viewed this way, the impact of the Fair Pay for Play Act on the college and universities could actually be quite positive.

Impact on Players

College athletes will benefit the most from the Act. First, the Act can allow college athletes to stay in college longer by easing some of the financial pressures on the athletes to turn pro before graduating. For example, in 2019, 175 college basketball players submitted paperwork as early entry candidates for the NBA Draft.29 If college athletes are able to make money while in school, without facing loss of their athletic scholarship, those athletes who are fringe NBA prospects might not feel the same financial pressure to declare for the draft when they could have the option to stay in school and still earn an income. 30 Without the financial pressure, we may see more college athletes stay in school and earn their college degrees. Since statistically, very few college athletes are actually able to make a living playing professionally, this will help the students post athletic careers.

Besides more athletes getting their degrees, the Act will also allow college athletes to earn the fair market value for their images for the first time. Once again, with all the money the NCAA and college athletic programs are making, as well as all the illegal money flowing to high school and AAU coaches, agents and shoe companies, the Act will finally put some of the money into the pockets of the athletes who are actually playing the games.

Conclusion

With over three years before the Act actually becomes law, the action of California Senate is just the beginning move in a potential long game that could end with college athletes earning the right to market, and be compensated for, the use of their name, image or likeness. With the large sums of money everyone involved in major college sports in earning, from million-dollar coaching contracts, to hundred-million-dollar television contracts, there is a growing concern that the only ones not getting paid a fair share are the actual athletes.

A lot, however, can happen in the next few years. The NCAA, with its deep pockets, has fought in court every challenge to its amateur model. While they will likely continue this course, even the NCAA has to understand that they need to get out in front of this issue. As California and the other states seeking to follow it have shown, state legislatures around the country are no longer willing to blindly follow NCAA dicta. Therefore, if the NCAA wishes to follow its practices of allowing small incremental changes to the amateur model it will allow athletes to profit off the use of their name, image or likeness, while at the same time preventing athletes from receiving direct compensation from their schools.

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Author

John Wolohan

John Wolohan

John Wolohan is an Attorney and Professor of Sports Law in the Syracuse University Sport Management program and an Adjunct Professor in the Syracuse University College of Law. In addition to being one of the lead editors of the book "Law for Recreation and Sport Managers" by Cotten and Wolohan, John has been teaching and working in the fields of doping, antitrust, gaming law, and sports media rights for over 25 years.

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