Ed.: Class Action is a multi-part series exploring the numerous ongoing legal cases focused squarely on the NCAA and its rules regarding student athletes. Part II looks at how interconnected many of these cases are, and the possible ramifications of each ruling. Part I can be found here.
As various legal actions worm their way throughout the NCAA and the student-athletes it governs, times, as Bob Dylan said, may be a-changin’. The legal terminology may be confusing to the layperson, but for all intents and purposes, it all boils down to one concept: the athletes are getting the shaft while the NCAA and its member institutions continue to mine the gold.
First, let’s clarify some of the terminology.
The Ed O’Bannon suit mentioned in an earlier article was based on antitrust issues. In its most basic form, antitrust law is based on the concept that one party is taking money that should be available to another party, but that second party is thwarted due to some type of “restraint of trade” by the first party. Antitrust laws were originally passed to protect unfair competition and the O’Bannon suit claimed that the money made by the NCAA and its member institutions from marketing their players unfairly denied them compensation. As mentioned before, EA Sports decided not to fight the antitrust claims, settling for $60 million that can be used to compensate players it used in its video games.
And what about antitrust issues between the schools themselves? Can schools inflate their cost-of-attendance to offer prospective players more money than another college recruiting the player? While the government has guidelines for financial aid offices to follow to comply with laws, each college has the ability to estimate costs for its students. Some say that the new standards could create an “arms race” among colleges. Even Nick Saban, who some would think has a monopoly on college football recruiting, says that the new calculations “really can almost promote fraud.”
Any of these complaints can be granted class action status, like the O’Bannon suit, if they satisfy specific requirements. Class action status is usually reserved for cases that involve a large number of plaintiffs who claim that their rights have been violated or money is owed to them by one or more common defendants. Many products liability suits become class actions because so many people have been injured by the same product or device. If you watch TV at all, you’ve probably seen numerous ads by attorneys inviting people who have suffered some injury from a drug to join a lawsuit.
Class actions can also protect, or at least inure to the benefit of, the defendants. There are over 150,000 student-athletes in Division I and Division II. Can you imagine the ramifications for the NCAA and the individual institutions having to defend that many individual lawsuits?
But it isn’t always about money.
In 2014, football players at Northwestern University filed a complaint with the National Labor Relations Board which usually handles disputes between unions and employers. In the Northwestern action, the players wanted to be classified as employees because the things required of them as student-athletes met many of the criteria of an employer-employee relationship.
A regional office of the NLRB initially ruled in the players’ favor, saying that the amount of money they generated for the University and the amount of control that coaches have over players, specifically noting practice schedules, travel demands and monitoring of the athletes’ off-the-field activities (e.g., social media), essentially made a scholarship a contract for hire. Another contention in the proceeding was whether the athletes should be entitled to workers’ compensation coverage for injuries sustained as a result of playing sports, just as any other employee who is injured on the job would be able to recover.
As a result of the ruling, the College Athletes Players Association (essentially their “union”) filed a petition to represent the players before the NLRB to further determine their rights and represent them in the “workplace”. The NLRB, however, decided that it did not have jurisdiction over the petition because the NCAA is the body in charge of each individual team. Asserting jurisdiction over just Northwestern would not promote “labor stability” in the student-athlete workforce. The Board did, however, narrow its decision just to the players involved in the Northwestern case and did not rule out future consideration of the issue.
As often happens in any industry, the rich get rich and the poor get poorer.
Most of the publicity surrounding these legal actions has been focused on the most visible sports: football and men’s basketball.
If you ask any fan of collegiate sports, many would say that college football generates most of the revenue that the NCAA sees each year. But that answer isn’t correct. As March Madness spins around us, it is worthy of note that the Division I men’s basketball event accounts for 80-90 percent of the NCAA’s annual revenue. In fact, so much of the NCAA coffers depend on the Big Dance that it has a “financial recovery plan” in an investment prospectus should the tournament fail to deliver.
But that said, college football is the still most consistent moneymaker throughout the year. Most men’s basketball programs don’t come close to making that revenue during their regular seasons, if only because of the number of seats in the facilities.
So what about the less profitable sports? Can swimmers, lacrosse players and gymnasts reap the same benefits that are beginning to dwindle down to the headlining sports?
The terms used to describe NCAA economics are basically the same as for any other business. “Revenue-producing sports” are those that make money in some form. But revenue-producing doesn’t equal profitability. Many businesses have filed for bankruptcy while producing revenue, but when those revenues didn’t get the company out of the red, it collapsed.
Another term used by the NCAA is “self-sufficiency” which is defined as an athletic department’s ability to generate operating revenues that are equal to or exceed its total operating expenses. Again, Accounting 101, right? But statistics from the 2013-14 school year show that only about ten percent of Division I schools met the definition of self-sufficiency (24 of 230). It should come as no surprise that those which were the most self-sufficient are perpetual champions like Alabama, Texas, Michigan, Ohio State. Oregon led the list of self-sufficient schools, charting a surplus of $83.5 million.
While four of the Power Five conferences had at least one self-sufficient school, the ACC did not have a single school meet the benchmark.
So how are the sports that do not produce revenue or are not self-sufficient funded? To some degree by the profits made from the other sports and by funds otherwise available to the athletic department. Those funds must be spread throughout the athletic programs, especially since the “smaller” sports do not receive the donor support that the marquee sports do.
As noted previously, as the ruling now stands, student-athletes will receive an amount called “cost-of-attendance” which adds money to cover many incidental expenses that have been out-of-pocket costs for the individual student. But those cost-of-attendance expenses have to come from somewhere. And without an increase from some source, whether from more profits or more donations, the existing pool of funds will be depleted leaving an even smaller piece of the pie for the “minor” sports.
So will that spawn another class action? Will athletes who were awarded a scholarship as a swimmer and turned down other offers have a claim now that they are expected to pay their own way because their sport is no longer supported by the school?
What about Title IX? While the law doesn’t require a school to match men’s and women’s athletics sport for sport, they must accommodate to the same degree the athletic interests and abilities of each sex in the selection of sports it offers. Since, with the possible exception of women’s basketball at perennial champions like Tennessee and UConn, women’s sports are among those that draw the fewest spectators, will elimination of one or more of those programs in favor of providing more benefits to the football team result in a Title IX case, either at an individual school or against the NCAA as a whole for voting to increase scholarships to meet the “cost-of-attendance” criteria?
The legal ramifications are endless as student-athletes are rising up to assert their rights against everything from monetary compensation to protection from career-ending injuries. The road through the courts is likely to be lengthy as schools, the NCAA and college athletes grapple with all of the current and future issues.
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