Author: Zach McCormack

On July 1, 2024, Virginia’s recently passed amendments to its NIL law—which include significant restrictions on the NCAA’s ability to enforce its NIL policies—will take effect.  Virginia Governor Glenn Youngkin signed House Bill 1505 into law on April 18, 2024.  Under the updated law, it will be illegal in Virginia for the NCAA to “take any adverse action against an institution, its supporting foundations, or an entity acting on its behalf” for any NIL activity permitted under the statute, including direct compensation from an institution to its student-athletes for their name, image, and likeness rights (provided that student fees are not used).  Current NCAA rules purport to prohibit institutions from “compensating student-athletes for use of their NIL,” but Virginia’s new law puts additional pressure on the NCAA to adapt.

On top of re-affirming the rights of student-athletes to earn NIL money and limiting the enforcement powers of athletic associations and conferences, Virginia’s amended law expressly authorizes private rights of action by athletes, institutions, “supporting foundations,” and entities acting on an institution’s behalf.  Any student-athlete “aggrieved” by an institution, athletic association, conference, or similar organization may go to court for an injunction, while any institution (or its supporting foundations and entities acting on its behalf) may recover actual damages and attorneys’ fees if it is subjected to “any actual or threatened complaint, investigation, penalty, or other adverse action of an athletic association, athletic conference, or other organization with authority over intercollegiate athletics for engaging in activities permitted” under the new law.

Virginia’s decision to allow institutions to directly compensate student-athletes stands out from other states that allow colleges to enable, but not necessarily be a direct party to, NIL deals.  As we wrote about previously, states like Missouri allowed collectives to condition NIL deals on attendance at a particular school and allowed schools to “enable” such deals.  Virginia, however, may be the first to permit direct NIL relationships between student-athletes and their colleges.

While the new law could give Virginia colleges an upper hand in recruiting for now, some stakeholders still hope a federal law will make its way through Congress.  University of Virginia Director of Athletics Carla Williams made it clear that, despite the advantage that Virginia universities may gain from the new law, the ultimate goal is “a federal solution or a national solution” to NIL.  Legislation similar to Virginia’s new law that other states (South Carolina, Nebraska, Oklahoma, Illinois, Louisiana and Mississippi) are considering may increase the pressure on the NCAA and Congress to develop a NIL law that applies nationwide.  Virginia’s law could also engender support for Charlie Baker’s proposed plan from December, as major Division I schools outside Virginia will want to minimize any advantages for schools in The Old Dominion.

On February 23, 2024, United States District Judge Clifton L. Corker of the Eastern District of Tennessee granted a preliminary injunction requested by the attorneys general of Virginia and Tennessee to enjoin the NCAA from enforcing its ban on collectives, boosters, and other third parties from discussing NIL deals with a recruit before the recruit signs at a university (referred to as the “NIL-recruiting ban”).  The ruling also bars the NCAA from enforcing Bylaw 12.11.4.2, which is its “rule of restitution” (i.e., a rule that allows the NCAA to impose a retroactive punishment if an ineligible athlete is permitted to compete under an injunction, restraining order or other order of a court).

The states persuaded Judge Corker that student-athletes would suffer irreparable harm absent a preliminary injunction (though the court was critical that the states themselves, or the universities in them, suffer any irreparable harm from the NCAA’s policy).  More importantly, Judge Corker agreed that the NCAA’s policy is likely to be found to violate the Sherman Antitrust Act by unreasonably restraining trade in the relevant market and restricting competition among schools and NIL collectives to arrange the best NIL opportunities for athletes.  The decision, while not a final adjudication on the merits of the case, may be a momentous step toward further limiting the NCAA’s power to regulate compensation to student-athletes.  It also calls into question whether state laws that impose the same recruiting limitations (like Tennessee’s NIL law) are preempted by the Sherman Act.

The court’s signal that the attorneys general are likely to succeed in invalidating the NCAA’s policy may inspire other student-athletes (or attorneys general) in other states to bring challenges to other NIL policies.  While the NCAA has been in the legal crosshairs of many student-athletes, states, and universities for quite some time, this lawsuit is among the most direct challenges to the NCAA’s ability to limit compensation to student-athletes.  The court’s decision that Tennessee and Virginia are “likely to succeed” could drive interest in attacking other NCAA policies.

Although the court’s ruling temporarily lifts the NIL-recruiting ban, schools, boosters, student-athletes, and NIL collectives still need to be cautious of state laws and other unaffected NCAA policies that remain in effect.

This week, media outlets reported that the NCAA is investigating alleged name, image, and likeness (NIL) violations by the University of Tennessee and its NIL collective.  Just one day later, Tennessee’s attorney general, joined by the attorney general of Virginia, filed an antitrust lawsuit against the NCAA.  The lawsuit is a counter-punch that could have significant implications for college sports and the NIL phenomenon.

Although the concrete details surrounding the NCAA’s investigation into Tennessee’s NIL activities are scant, it is widely believed that the investigation involves the university’s main NIL collective run by Knoxville-based sports marketing group Spyre Sports Group, and that it covers the football program as well as athletes in other sports.  Among the matters under investigation are reports that Tennessee’s NIL collective flew Volunteer quarterback Nico Iamaleava on a private jet during his University of Tennessee recruiting visit.  It appears likely that the investigation focuses, at least in part, on the NCAA’s policy that NIL dollars cannot be used to induce or mandate an athlete’s enrollment or attendance at a particular school.

On Wednesday, in the wake of the announcement of this investigation, Tennessee Attorney General Jonathan Skrmetti, joined by the Commonwealth of Virginia Attorney General Jason Miyares, filed suit against the NCAA for violations of the Sherman Antitrust Act.  The attorneys general filed a motion for a preliminary injunction that would bar the NCAA from enforcing its NIL policies while the lawsuit is pending.  If that motion is granted in full, (1) the NCAA would instantly lose its ability to police schools for alleged violations of its NIL policies; and (2) the court would send a signal that Tennessee and Virginia are likely to succeed on the merits of their lawsuit, potentially ending all current NCAA-driven NIL regulation as we know it.  United States District Court Judge Clifton L. Corker will hold a preliminary injunction hearing on February 13, 2024, and he could decide the motion shortly thereafter.

The NCAA’s ban on NIL-based inducements is at odds with laws in some states.  For example, in 2022, Tennessee deleted a provision from its NIL law that prohibited collectives from conditioning NIL payments on the student-athlete’s enrollment at a school.  Other states, like Missouri, have laws that expressly permit inducement, while others simply have no law that bans inducement (or no NIL law at all).  Recognizing this tension, the NCAA purports to require member schools to “adhere to NCAA legislation (or policy) when it conflicts with permissive state laws.”

This Complaint, among other things, claims that the NCAA unfairly places “protections” on college athletes to pursue NIL compensation by banning prospective college athletes (including current college athletes in the “transfer portal”) from discussing potential NIL opportunities before they actually enroll.  These restrictions, Virginia and Tennessee contend, restrict competition among schools and NIL collectives to arrange the best NIL opportunities for the athletes.  The complaint alleges that “[a] prospective athlete must commit, enroll, or transfer without understanding the NIL opportunities available at the destination or comparing those opportunities to the ones at competing schools.”  According to the states, this NIL-recruiting ban limits competition and artificially decreases NIL compensation that college athletes could otherwise obtain in a free market.

Although the investigation against the University of Tennessee and the lawsuit against the NCAA are new and developing matters, the potential for either (or both) to affect athletes, schools, collectives, and other parties involved in NIL is clear.  If the investigation results in findings against UT, it may signal that the NCAA has drawn a line in the sand that it intends to defend in spite of what state law might say.  Meanwhile, Tennessee and Virginia’s antitrust claim has the potential to become another milestone NIL decision, the likes of which we have not seen since NCAA v. Alston.

This week, NCAA President Charlie Baker sent a letter to Division I member schools proposing the creation of a new subdivision in which the institutions with the wealthiest athletic programs could directly pay student-athletes for their name, image, and likeness.  If accepted, schools in this subdivision—which would likely include institutions like the University of Texas, Ohio State, the University of Georgia, and the like—would have the flexibility to set their own recruiting, roster, transfer, and NIL rules.  The NCAA’s letter may be a step toward a “super league” that some commentators believe is inevitable.

The letter’s overarching theme is that a single set of rules governing all Division I schools is no longer practicable.  Since 2021, the year the NCAA amended its transfer portal rule and the Supreme Court decided NCAA v. Alston, 141 S. Ct. 2141 (2021), the law and economics underlying college athletics have become more and more unsettled, and the legality and practicality of the NCAA’s model has come under increased scrutiny.  The letter signals the NCAA’s willingness to consider major policy changes.

In his letter, Baker acknowledged the widening financial gap between the Division I schools with the highest-funded athletic programs and other competitors, which has only grown since the Alston ruling.  To counteract this disparity, Baker proposed three changes for consideration of the NCAA’s affiliates.

The first suggested change is to create the possibility for all Division I colleges to discretionarily offer “enhanced educational benefits” to athletes. Baker did not expand upon the meaning of “enhanced educational benefits” or whether these are novel benefits. The second proposal are optional rule changes for Division I institutions to enter into NIL licensing opportunities with athletes.  Again, Baker did not elaborate on this suggestion.  Baker did, however, deem these two proposals as beneficial to gender equality, considering schools will need to follow gender regulations when contemplating investments in their athletic programs.

As noted above, the final, and most groundbreaking suggestion, is to create a subdivision allowing high revenue institutions to directly compensate athletes “[w]ithin the framework of Title IX.” Members of this subdivision would invest at least $30,000.00 per year into an “enhanced educational trust fund” for half, or greater, of the school’s student-athletes, and also commit to creating rules that differ from the rules affecting all other Division I institutions.

The letter is unclear as to whether the NCAA will abandon efforts to lobby for federal NIL legislation, and there is always the possibility that state governments will take their own actions in response to the NCAA.  As ever, the interplay between NCAA policies and state/federal law is dynamic, leaving interested parties with more questions than answers.

As the holidays (and the College Football Playoff!) approach and the NCAA continues to push for federal Name, Image, and Likeness (NIL) legislation, current and former student-athletes are arguing their cases to the federal courts, White House, and the National Labor Relations Board (NLRB).

Potentially groundbreaking hearings in NLRB Region 31 (covering the Los Angeles area) began on November 7, 2023, regarding allegedly unfair labor charges.  The outcome of the hearings, arising out of claims brought by athletes against respondents including the University of Southern California (USC), the Pac-12 Conference (Pac-12), and the NCAA, may dictate whether these entities should be considered “joint employers” who systematically misclassify employees as “student athletes,” as the athletes argue.

Administrative law judge Eleanor Laws is presiding over the hearings.  If ALJ Laws decides that the athletes should be classified as employees, the respondents will have a new set of legal issues to consider under the Fair Labor Standards Act (FLSA), including minimum-wage and overtime compensation obligations (subject, of course, to appeal).  Furthermore, if the athletes prevail, other hurdles for the respondents could include developing compliance measures related to social security, workers’ compensation, health and safety protections, ensuring protections against discrimination and harassment, and recognizing a statutory right to unionize and collectively bargain for a share of collegiate sport revenues.  While ALJs are independent decision-makers, NLRB General Counsel Jennifer Abruzzo has already indicated that, in her opinion, certain players at colleges and universities should qualify as employees of their institutions.  The hearings could last until February 2024.

While the decision in this case would only directly affect the parties to the action, other athletic conferences and universities are almost certainly interested in the outcome, given that similar claims could be brought against them, in which the judge’s order could be cited as persuasive authority.

The NLRB case is not the only major legal action concerning NIL.  As our colleagues covered in detail, on November 3, 2023, Judge Claudia Wilken of the U.S. District Court for the District of Northern California certified three classes seeking to recover compensation for use of their NIL.  The plaintiffs in that case, including Power Five conference players in football, men’s basketball, and women’s basketball, have demanded back pay related to the use of their NIL during television broadcasts.  A favorable ruling could result in more than $4 billion in damages.

Outside the courtroom, President Biden and other White House officials met with former college football players to discuss the rights of college athletes.  In the meeting, former players reportedly presented their cases for player safety, compensation to student-athletes, Title IX, and unionization.  Notably, however, neither Biden nor his staff made any commitment to push for passage of any of the bills currently pending in Congress or for any other legislation or regulations.