A Primer on the Northwestern-NLRB Decision and Its Effects

It is unlikely that any ruling by a Regional Director of the National Labor Relations Board (NLRB) has ever sparked such nationwide commentary as that of Region 13 Regional Director Peter Sung Ohr in ruling that Northwestern University scholarship football players are “employees” of the University, a decision discussed in Arent Fox’s alert on March 26, 2014 (available here). While this decision is certainly groundbreaking and controversial, it is also widely misunderstood, both on its own terms and in its likely effects. Accordingly, we have prepared this alert to clear up some common misconceptions about the Northwestern NLRB decision.

Doesn’t this decision mean that we now have to pay athletes?

Perhaps the most common misconception — one which even made its way into the official statement the NCAA issued in the wake of the decision — is also the most easily dispelled. The Regional Director’s decision was not about paying athletes, because it was based on the assumption that the scholarship athletes are already being paid. Specifically, they receive “grant-in-aid” scholarships in return for playing football. Indeed, the first substantive portion of the ruling is entitled “Grant-in-Aid Scholarship Football Players Perform Services for the Benefit of the Employer for Which They Receive Compensation,” in which the Regional Director found that the value of the scholarships “totals as much as $76,000 per calendar year,” and that the scholarships “are in exchange for the athletic services being performed.” This is also why the Regional Director rejected Northwestern’s argument that the proposed bargaining unit was inappropriate because it did not include non-scholarship, walk-on players: because non-scholarship, walk-on players do not receive money to play football, and therefore cannot be considered employees.

But it’s eventually going to lead to paying athletes, right?

The Regional Director’s decision has one and only one immediate effect: it allows Northwestern football players receiving grant-in-aid scholarships to vote on whether they wish to form a union to represent them in collective bargaining with Northwestern University. That vote is scheduled for April 25, 2014. If the NLRB does not issue a stay pending Northwestern’s request for review of the Regional Director’s ruling, then the election will proceed and the ballots will be impounded until the Board rules. If ultimately a union does get elected, then it will engage in collective bargaining with Northwestern with the goal of negotiating a collective bargaining agreement (CBA) governing the relationship between the athletes and the University.

“If college scholarship athletes are ever going to be paid more than the amount currently allowed by the NCAA, it will first require significant changes by the NCAA itself, and not through a collective bargaining process between a union and Northwestern University.”

In negotiating a CBA, the union and the University will be cognizant of the requirements of both the National Collegiate Athletic Association (NCAA) and the Big Ten Conference (BTC). Unless the bylaws of those governing organizations change dramatically, the union will likely not even ask for direct payment over and above the amount of the grant-in-aid scholarship. For instance, in the unlikely event that a union did ask for — and was able to obtain — some form of payment over and above the “cost of attendance,” each athlete receiving any such payment would be rendered ineligible to play under NCAA Bylaws § 15.01.2. Moreover, in agreeing to such payments, the University could be subject to sanctions under Article 19 of the NCAA Bylaws. Such discipline could come at a steep price: the Regional Director noted that in the 2012–2013 academic year, the Northwestern football team generated $30.1 million in revenue for the University, against $21.7 million in expenses. Unless and until the NCAA changes its position, any CBA would have to work within the existing rules. Of the 11 stated goals of the College Athletes Players Association (CAPA) — the petitioning union in the Northwestern case — only two are monetarily related, and both would necessarily require NCAA action rather than Northwestern’s agreement alone. The first of these is a call to the NCAA to raise the ceiling on what constitutes a “full scholarship,” and the second is to eliminate the NCAA’s restrictions on what CAPA terms “legitimate employment.”

CAPA’s other stated goals — which could potentially be included in a CBA without NCAA repercussions – include prohibiting a university from using a permanent injury suffered during athletics as a reason to reduce or eliminate a scholarship, and prohibiting the coaches from refusing to grant a release to a player who wishes to transfer (players that transfer without a release cannot play or receive an athletic scholarship for an entire year, and refusing to grant a release is a common practice).

If college scholarship athletes are ever going to be paid more than the amount currently allowed by the NCAA, it will first require significant changes by the NCAA itself, and not through a collective bargaining process between a union and Northwestern University.

Does this decision mean that all college athletes are employees and can unionize?

Put simply — no. Even under an expansive reading of the Northwestern decision, it potentially applies only to:
 

1. NCAA Football Bowl Subdivision (FBS) football players, who are…
2. Receiving scholarship money for their athletic prowess, and are enrolled in…
3. Private institutions.
    

The last point is critical, as state employees are exempt from the National Labor Relations Act (NLRA) with respect to unionization, although many states have their own laws on unionization of state employees. Currently, only 17 private universities participate in NCAA FBS football. The vast majority of FBS football programs would be unaffected by any potential ramifications of this ruling, except perhaps to the extent they chose to be.

Additionally, the Regional Director’s analysis only begins with the assumption that football scholarships are wages. The second part of the analysis is the degree to which Northwestern University exercises its control over the scholarship football players. It is possible that another university may not exercise the same level of control over its football players’ daily lives as did Northwestern. However, it is significantly more likely that universities do not so strictly control the lives of athletes in other sports. In any event, because institutional control is a significant part of the analysis, the question of whether a particular athlete in qualifies as an “employee” requires a case-by-case (or sport-by-sport) determination.

Shouldn’t it be enough that they get a free education in exchange for playing a game?

This was another misconception that found its way into the NCAA’s official response. However, the “control” exhibited by Northwestern for the purposes of the second part of the “employee” analysis included examples of how Northwestern may have prevented athletes from gaining an education — or, at least, in the opinion of the Regional Director, may have prevented them from getting the education they wanted. As noted in the Northwestern decision, “[w]hile the football coaches … appear to value the players’ academic education, it is clear that the players are controlled to such a degree that it does impact their academic pursuits to a certain extent.” The impact includes the inability to take certain courses and the forced missing of classes. Moreover, in its defense, Northwestern only provided one instance where Coach Pat Fitzgerald accommodated a scholarship player’s academic work by permitting him to miss practice and one game.

* * * *

Many responses to the Northwestern decision have been emotional, and understandably so. College athletics — particularly college football — play an integral part in the day to day lives of many Americans. However, emotional reactions cannot change the reality that the decision was based on specific facts, assumptions, legal theories and analyses. Whether these assumptions and theories will be upheld as the process unfolds will remain to be seen. Arent Fox’s Labor & Employment and Sports practices will continue to monitor developments in this case, which Northwestern has appealed to the full NLRB. If you have any questions about this case, please contact the listed attorneys or the Arent Fox professional who regularly handles your matters.