As a former Division 1 athlete, my bank account was never flush with cash during my four years of college. While I am unaware of any written policy stating that an athlete could not hold a part-time job, it was widely understood that you were not to have one during the school year. In any event, between a regular class schedule and the time demands that came with being an athlete, it was not really possible to also hold down a job. In addition, while most of our classmates returned home for the summer, as baseball players, we were sent off to play in a summer league for two or three months. Most often, we only had a week off, maybe two, before we had to return to college to begin fall ball.
The opportunity to play a sport in college was incredible, and the experience was one I would not have missed for anything. Years later, however, and working as a professional, I am now more aware of the business side of college athletics.
During the 2016-17 school year, the NCAA (not individual schools) reported revenues of more than $1 billion. Nonetheless, the competitors on the playing surfaces who played a role in generating those revenues have always been “unpaid.”
In 2015, the NCAA took the first step toward closing the gap between scholarship money and what it actually costs to attend college, allowing schools to provide student athletes with an annual stipend, ranging from $2,500 to $5,000. Outside of the Power Five conferences—the Big 12, SEC, Big Ten, ACC and Pac-12— schools have struggled with this concept. For instance, many smaller schools do not have major media contracts that provide enough revenue to fully fund the cost of attendance. As a result, those schools have either passed on the stipend or provided it only to some sports. Thus, even after the 2015 stipend rules went into effect, many student athletes are still unable to cover the cost of their education.
On October 29, 2019, the NCAA Board of Governors voted unanimously to allow student athletes to be paid for the use of their name, image and likeness, once each Division (1, 2 and 3) enacts rules for such opportunities. The Board asked each Division to create rules by January 2021. This comes on the back of California passing the Fair Pay to Play Act, which is to take effect in 2023. The California law will allow college athletes to sign endorsement deals and licensing contracts, something NCAA rule makers will also have to address. Other states, including New York, are looking at similar legislation.
While the logistics of the legislation and how this will all work remains to be seen, it will definitely create opportunities for student athletes, universities, colleges and businesses. Still to be addressed are questions such as: (i) will there be a cap on the income allowed? (ii) will players have to put money into a trust account to protect their amateur status? (iii) what will the tax and legal implications be, both for players and for businesses using an athlete’s image and likeness? and (iv) will an athlete be able to negotiate a contract prior to arriving on campus?
Hancock Estabrook, LLP has already developed a team of professionals working across legal disciplines who are prepared to actively guide our clients through the challenges presented by these new opportunities.
If you have any questions or would like more information on the issues discussed in this communication, please contact James J. O’Shea or Ryan M. Poplawski.