NLRB General Counsel Authors Memo Characterizing ‘Student-Athletes’ as Employees, Clearing Way for Them to Unionize; Employment Law Implications Extend to Others Misclassified as Independent Contractors

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

‘Student-athletes’ have long been prevented from profiting from the billions in dollars of sports revenues they generate for their colleges and universities – other than by receiving scholarships and other nominal benefits.

That all changed in July, when the combination of newly-enacted state laws and a June United States Supreme Court case, NCAA v. Alston, led the National College Athletic Administration (NCAA) to amend its rules to allow colleges athletes to profit from use of their names, images, and likenesses (NIL). With this rule change, the NCAA has effectively stepped aside and triggered a free-for-all in the market for college athlete sponsorship deals.  Virtually anything now goes – although pressure is building for Congress to legislate, so as to at minimum reconcile competing state laws (see my September post, Sports Desk: Top College Athletes Strike Endorsement Deals; Meanwhile, the NCAA Seeks to Influence Pending Federal Legislation, for more on these developments; see also two previous posts, for background and context: NCAA Votes to Allow College Athletes to Benefit from the Use of Their Names, Images, and Likenesses; and Supreme Court Rules 9-0 Against NCAA, Opening Door to Further Antitrust Challenges of Student-Athlete Compensation Bans).

The FT published a long-read on Sunday, Payday for US college athletes rattles $14bn industry, which is well worth your time (if you can get past the paywall). It summarizes the current state of play regarding compensation for college athletes as well as provides some  additional updated information not included in my previous posts on the topic.

Beyond mentioning my previous posts and the FT article, I’m not going to discuss these developments much further here. Instead, my prime focus will be a memo circulated last week by National Labor Relations Board (NLRB) general counsel, Jennifer Abruzzo. I have embedded the full memo below for interested readers.

From the NLRB press release:

Today, National Labor Relations Board General Counsel Jennifer Abruzzo issued a memorandum to all Field offices providing updated guidance regarding her position that certain Players at Academic Institutions (sometimes referred to as student athletes), are employees under the National Labor Relations Act, and, as such, are afforded all statutory protections.

The memo further advises that, where appropriate, she will allege that misclassifying such employees as mere “student-athletes” and leading them to believe that they are not entitled to the Act’s protection has a chilling effect on Section 7 activity and is an independent violation of Section 8(a)(1) of the Act.

“Players at Academic Institutions perform services for institutions in return for compensation and subject to their control.  Thus, the broad language of Section 2(3) of the Act, the policies underlying the NLRA, Board law, and the common law fully support the conclusion that certain Players at Academic Institutions are statutory employees, who have the right to act collectively to improve their terms and conditions of employment,” said General Counsel Abruzzo. “My intent in issuing this memo is to help educate the public, especially Players at Academic Institutions, colleges and universities, athletic conferences, and the NCAA, about the legal position that I will be taking regarding employee status and misclassification in appropriate cases.”

Unionisation and Collective Bargaining

Abruzzo’s memo is significant for two reasons. Most narrowly, it lays out  a new relationship between private universities and what were formerly called   ‘student-athletes’ – a designation she noted was deliberately deployed to make these workers think they lacked basic employment rights. The memo makes clear that Abruzzo considers these workers to be employees and thus entitled to employment law protections under the National Labor Relations Act (NLRA). Note that her memo only pertains to athletes at private universities, as the NLRB lacks statutory authority to regulate employment relationships at public universities.

Employees may unionize, as well as bargain collectively with colleges and universities over employment terms and conditions. I think that for the  ‘ordinary’ college athlete – not those superstars in the marquee events of men’s (American) football and men’s basketball – but for most others, collective bargaining provisions will prove to be far more important than the new NIL framework, which is most valuable only for top class athletes in the most popular sports. In addition to the unionisation provisions, the NLRA protects employee speech.

Now, I note that the memo – although important – requires further action from the full NLRB for the situation to change. According to an article in the Chronicle of Higher Education, ‘Hugely Significant’: Biden Official Says College Athletes Are Employees

Though Jennifer Abruzzo, who was appointed the NLRB’s general counsel by President Biden this year, does not have voting power on the labor-relations board, her memo sends a strong signal that the administration might back college players who seek to claim the rights that employees are guaranteed. The NLRB or a federal judge could still disagree with her.

Nonetheless, scholars called the memo an important and long-overdue milestone in a decades-long effort to protect college athletes.

“It’s hugely significant,” said Robert A. McCormick, an emeritus professor at Michigan State University’s College of Law, who has written several articles on college athletics with his wife, Amy C. McCormick,also an emeritus professor at Michigan State. “We’re very gratified to see these changes happen.”

Being able to enter into joint negotiations will also have implications for sponsorship deals as well. According to the FT:

[Jamie Mottram, chief executive of Breaking T, a licensed sports shirt business] says that without player unions or player associations to negotiate group licensing deals — typical in professional sports leagues — his firm has had to resort to “sliding into the DMs”, or direct messages, of athletes’ social media profiles after they make a big play.

It means bigger-ticket deals, such as video game licensing, which typically need consent from entire team rosters, are not yet feasible. “Are gamers going to be OK with it if only eight of the top 20 quarterbacks are featured in the game? It’s not going to be a great product,” adds Mottram.

We’ll see.

I mentioned above a second implication of Abruzzo’s memo, which extends beyond the college athletics universe. It’s been widely reported – and Abruzzo has confirmed – that college athletes aren’t her only target. She wishes to address the universe of workers who are characterised – often incorrectly – as ‘independent contractors.’ As regular readers are well aware, since the late 1970s, labor’s power has steadily eroded. During this period, within the U.S. there’s been a gradual mischaracterisation of employees, who enjoy certain rights under the NLRA – as independent contractors, who don’t. Classifying workers as independent contractors has led to the rise of the gig economy – which overall, has been terrible for labor.

According to Bloomberg, Student-Athlete Employee Issue Just the Start for NLRB’s Counsel:

An effort to classify some college athletes as employees by the federal labor board’s top attorney could reach far beyond sports, giving additional protection to workers in other industries misclassified as independent contractors.

In a memo released Wednesday, National Labor Relations Board General Counsel Jennifer Abruzzo said she would formally ask the board to classify student-athletes as employees, a move that would give players the right to form a union and afford them legal protection against punishment for speaking out about lack of pay and other workplace issues.

While the designation would be limited to private colleges—public institutions fall outside the agency’s jurisdiction—it also could give the board an opportunity to create a separate standard punishing employers for misclassifying workers of all stripes, according to interviews with other labor lawyers who have studied the memorandum. Abruzzo herself affirms that is her intent.

While it’s only an unrealized plan at this point, business attorneys are taking notice.

“Normally, you don’t see general counsel memos that kind of look like throwing down the gauntlet, a declaration of war,” said Harry Johnson, a former Republican NLRB member who served as counsel for Amazon.com Inc. during the recent effort to unionionize the retailer’s Bessemer, Ala., warehouse.

Bloomberg outlines some further details:

…The general counsel implicitly calls on the Democratic-majority NLRB to scrap a Trump-era ruling relating to all independent contractors and replace it with a more worker-friendly precedent.

Abruzzo’s tone in the memo is forceful, but one footnote carries outsize significance. It comes on Page 4 when the general counsel references a dissent in the 2019 Velox Express case, in which the then-Republican board majority established a precedent that misclassifying workers doesn’t violate the National Labor Relations Act.

Abruzzo, citing an argument written by NLRB member and current chair Lauren McFerran, says that misclassification has a chilling effect in worker speech—on college sports teams, but also in the general workforce.

That led many to wonder: Could Abruzzo be planning a broader effort on misclassification?

In an interview and a follow-up email, Abruzzo confirmed that she is.

“I could see one of these cases as a vehicle for reconsidering the misclassification as an [unfair labor practice] issue that the board rejected in Velox in a broader sense beyond college athletes, such as the misclassification of statutory employees as independent contractors, which was an issue in the Velox case,” she said.

Abruzzo’ has thrown down the gauntlet. Whether the NLRB follows through on the memo’s full implications remains to be seen. As for college athletics Bloomberg described what might happen next:

Abruzzo said she hopes pursuit of such a high-profile target early in her term will capture public attention, raising awareness about workers’ rights.

“I mean, sports is a huge thing in this country,” she said in the interview. “I want an extremely robust outreach program to reach as many people as possible, and this is one way of doing that, because this memo will generate interest in a number of different communities. And hopefully, it will educate not only the workers but also their employers.”

Getting a case before the board won’t happen overnight. First, a college athlete or related party would need to file a charge, prompting an investigation and hearings on the local level.

The general counsel would then have to prosecute the complaint before the NLRB in Washington, where Democrats hold a 3-2 majority. But it’s not certain they’d go along. The board in 2015 unanimously dismissed a case asking whether Northwestern University football players qualified as employees under the National Labor Relations Act, saying that a ruling from the board wouldn’t promote stability in labor relations.

Abruzzo’s argument ups the ante. By labeling athletic conferences and universities as joint employers, athletes from multiple private schools could join under a single union, she said.

“You certainly could see a unit that would be appropriate that includes the workers of 10 academic institutions—players, private sector,” Abruzzo said.

In the meantime, from Abruzzo’s memo:

In sum, it is my position that the scholarship football players at issue in Northwestern University, and similarly situated Players at Academic Institutions, are employees under the Act. I fully expect that this memo will notify the public, especially Players at Academic Institutions, colleges and universities, athletic conferences, and the NCAA, that I will be taking that legal position in future investigations and litigation under the Act. In addition, it notifies them that I will also consider pursuing a misclassification violation [citations omitted].

Pass the popcorn.

Statutory Rights of Players at Academic Institutions _Student_Athletes_ Under the National Labor Relations Act