Critical Decision: United States Court of Appeals for the Third Circuit to Consider Whether Division I Student Athletes are Employees

What’s Going On

For decades, courts have held that student athletes are not employees of either the schools they attend or the National Collegiate Athletic Association (the “NCAA”). Then, in 2021, in NCAA v. Alston, the United States Supreme Court considered whether the NCAA’s prohibition on compensation for college athletes violated federal antitrust law and unanimously ruled that the NCAA’s rules restricting certain education-related benefits for student-athletes did in fact violate those laws. As a result of that case, there has been a renewed focus on the relationship between student athletes, their schools, and the NCAA, and the laws that should be applicable to those relationships.

Then, in a recent case out of the United States District Court for the Eastern District Court of Pennsylvania, Johnson et al. v. NCAA et al., the court scrutinized this very issue and determined that student athletes could be considered employees of universities and colleges under the Fair Labor Standards Act (“FLSA”).

In Johnson, the plaintiffs (comprised of former and current Division I student athletes) allege that they are employees of the NCAA, as well as certain schools, under the FLSA and state wage and hour laws. In August 2021, the District Court denied a motion to dismiss filed by the schools attended by the plaintiffs and concluded that if the plaintiffs proved the facts alleged in their Complaint, the student athletes would be considered employees of those schools under the FLSA. The District Court also denied a motion to dismiss brought by the NCAA, rejecting the NCAA’s argument that the Complaint failed to plausibly allege that the NCAA could be a joint employer of the plaintiffs for purposes of the FLSA.

The Court’s decision in Johnson diverges from previous decisions by the United States Court of Appeals for the Ninth and Seventh Circuits, in which both Circuits rejected the argument that student athletes could be considered employees under the FLSA.

On December 28, 2021, the District Court certified the following question to the Third Circuit: “Whether NCAA Division I student athletes can be employees of the colleges and universities they attend for purposes of the Fair Labor Standards Act solely by virtue of their participation in interscholastic athletics.” The Third Circuit agreed to hear the appeal and determine the answer to this question before the litigation can continue in the District Court.

What Does This Mean?

A determination that Division I student athletes are employees under the FLSA would mean that schools would have to treat these student athletes as employees, including for purposes of workers’ compensation coverage, unemployment benefits, and other legal requirements. Of course, as stated above, it is very likely that any decision by the Third Circuit will be reviewed by the United States Supreme Court. Accordingly, the ultimate decision of whether Division I student athletes are employees under the FLSA may not be imminent.

What’s Next?

The Ninth and Seventh Circuits’ decisions that student athletes cannot be considered employees under the FLSA predate the Supreme Court’s decision in Alston, including Justice Kavanaugh’s notable concurrence in which he seemingly rejected a core argument as to why student athletes are not employees—the concept of amateurism in collegiate sports and that schools may decline to pay student athletes because it is a core aspect of college sports that student athletes are not paid. The Third Circuit’s ultimate decision on this issue will only be binding within the Third Circuit. However, it is reasonable to presume that the Third Circuit’s conclusion will be appealed to the United States Supreme Court.