A federal appellate court recently held that “student athletes” can be considered employees under the Fair Standards Labor Act (FLSA). This means that collegiate players may be entitled to minimum wage and overtime requirements for the hours spent in their sport “working” for their respective colleges and universities. A recent decision from the U.S. Court of Appeals for the Third Circuit has now set up a split with two other circuit courts that may eventually lead to the U.S. Supreme Court resolving the question on a nationwide basis.

Breaking from previous precedent from the Seventh and Ninth Circuits, the Third Circuit held in Johnson v. National Collegiate Athletic Association that student athletes can be considered employees under the FLSA.

Ralph “Trey” Johnson, a former Villanova football player, filed suit alongside other Division I student athletes, alleging that college student athletes should be protected under the FLSA as employees. Johnson and his co-plaintiffs argued that students who are engaged in interscholastic athletics on behalf of their college or university are more akin to student employees than amateur athletes. The district court denied a motion to dismiss the plaintiffs’ claim for lack of standing, arguing that student athletes are amateurs and not employees. In doing so, the district court applied a seven-factor test that weighed the student’s athletes’ activities to the institution versus their benefits as student athletes. The denial was then appealed to the Third Circuit.

The Third Circuit’s decision begins with one question – “Do efforts that provide tangible benefits to identifiable institutions deserve compensation?” The court went on to answer its own question, stating, “In most instances, they do. And yet athletes at our most competitive colleges and universities are told that their ‘amateur’ status renders them ineligible for payment.” The court affirmed the district court’s denial of the motion to dismiss but applied a different reasoning in its decision.

In analyzing the above question, the Third Circuit applied the common law economic realities test, holding that college athletes may be employees under the FLSA where (1) they perform services for another party, (2) necessarily and primarily for the other party’s benefit, (3) under that party’s control or right of control, and (4) in return for express or implied compensation or in-kind benefits. In applying this test, the Third Circuit focused on the circumstances of the whole activity. As such, the Third Circuit held that college athletes may be considered employees under the FLSA and covered by its protections. In doing so, the Third Circuit declined to follow suit of the Seventh and Ninth Circuits, which previously held that college athletes are not employees protected by the FLSA.

In light of living in the Name, Image, and Likeness era of college sports, this is a marked distinction from previous precedent and has the potential to have far reaching implications for colleges and universities.

The case was sent back to the Eastern District of Pennsylvania to apply the common law test outlined above. It is likely that more proceedings will follow, including the possibility that the split will be appealed to the United States Supreme Court.

Of note, this new standard from the Third Circuit follows the position that the National Labor Relations Board’s General Counsel Jennifer Abruzzo has taken. Ms. Abruzzo has indicated that “certain players at academic institutions” are employees under Section 2(3) of the National Labor Relations Act. This decision came following the unionization efforts of the Dartmouth men’s basketball team.

In such uncertain times, Ice Miller is always happy to assist with any questions. If you have any questions about this topic, please contact Sara Sams, herself a former Division I student athlete, or any member of the Workplace Solutions Practice Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.