Don’t Overlook These Things During College Athletics Reform

On September 30, 2021, the House Committee held a hearing on “A Level Playing Field: College Athletes’ Rights to Their Name, Image and Likeness.” in an effort to address the current “wild west” environment surrounding name, image, and likeness (NIL) by establishing a federal standard.  Preceding the federal NIL hearing by one day, a memo issued by National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo offers her opinion that student-athletes should be classified as employees under the National Labor Relations Act.

Financial and business administrators in college athletics should assist decision makers in their athletic departments, universities, and conferences address some of these unknowns, so that final decisions don’t lead to more unanswered questions or unintended consequences. We recommend you talk to your Athletic Director, President or Chancellor, and Conference Commissioner about these items (or at a minimum email this article to them for consideration.)

Questions about financial impact on college athletics

• What’s the appropriate amount of money that the NCAA should put toward lobbying and litigation before there is a negative impact to revenue distribution?
• What does this mean for athletic departments that rely heavily on revenues from state funding, donor contributions, and/or student-fees?
• What other employment rights will add to the expenses of athletic departments, such as workers’ comp, access to state pensions, health care, etc.?
• If the definition of employment applies only to certain athletes, will the definition of “certain” necessitate creation of a for-profit entity to operate those sports? What’s the ripple effect on available revenue streams and financing of capital projects? And how does that impact cash flow supporting non-revenue generating sports remaining within the university?
• Will the limitations on scholarships no longer exist if athletes are employees? If not, will NIL even need to exist as it does currently?
• Will universities need to change how they report taxability of athletic financial aid separate from reporting non-athletic financial aid?
• Could collective bargaining be the solution to the challenge of drastically escalating compensation to coaches and investment in facilities? Or could this lead to more disparities in coaching pay and facilities?
• How will employment impact international athletes on visas?

Questions about financial impact on college athletes

• Does becoming an employee change tax-free scholarships into taxable wages? Or at least provide more transparency into the taxable portion of scholarships that may have previously flown under the radar?
• Do college athletes understand that tax withholdings will come out of amounts treated as wages, if now classified as employees?
• Will benefits currently offered to college athletes, such as academic support, nutrition bar, complimentary tickets for family, etc. become a taxable item on their W-2?
• Can termination of employment occur mid-semester, and what does that mean for participation in courses funded by athletic financial aid?
• What benefits could athletes lose as employees, such as protection from items that are experienced in the free market?

There are, of course, many other unanswered questions from a legal and regulatory perspective, including wage and hour law, protection under labor law, Title IX, anti-trust, recruiting limitations, and other countless issues.

We are continuing to monitor all of the moving pieces of the ever-changing collegiate athletics landscape. Our collegiate athletics CPAs are here to support you as you voice financial concerns while planning for the future.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.