A National Labor Relations Board decision that Northwestern University scholarship football players are employees of the Evanston, Ill.-based private university presents a series of risk management and employee benefits hurdles for colleges providing grant-in-aid scholarships to student-athletes.
If the closely watched ruling is upheld by the full NLRB in Washington, student-athletes would have to be covered by their colleges' workers compensation programs and would be eligible for fringe benefits offered to other full-time employees.
Student-athletes on scholarships also could subject their universities to the panoply of state and federal employment laws governing wages and hours, discrimination and disability, legal experts say.
Last week's ruling by NLRB Regional Director Peter Sung Ohr in Chicago came in response to a January petition by 85 Northwestern scholarship football players seeking the right to form a players' union. Mr. Ohr said the players met the definition of university employees under the National Labor Relations Act based in part on the number of hours they dedicate to their team — up to 50 hours some weeks — the level of “strict and exacting control” the college exerts over scholarship athletes, and the revenue and profit Northwestern reaps from its football program. The ruling said the university's football team generated about $235 million in revenue from 2003 through 2012.
The university said it “believes strongly that our student-athletes are not employees'' and plans to appeal the ruling to the five-member national NLRB panel, a move it must make before April 9. In the meantime, it has until April 2 to turn over to the local NLRB office in Chicago the names of all Northwestern grant-in-aid football players eligible to vote on forming a players' union.
“The potential implications, if the athletes are treated as employees for collective bargaining purposes, are far beyond what everyone might think,” said Brad Livingston, partner and co-chair of Chicago-based Seyfarth Shaw L.L.P.'s labor relations practice group. “Whether or not those players organize, it would open the door for any other group of scholarship athletes to make the argument that they, too, are employees. If the players vote against unionization, they'd be classified in the same way as any other unrepresented employees.”
While Mr. Ohr's ruling was made in the context of unionizing Northwestern's football team which competes in the Big Ten conference, it eventually could set a precedent that applies to all college and university students who receive athletic scholarships “because it would seem like they are being paid to play,” said Michael Pang, managing partner of the sports law practice group at Adelson, Testan, Brundo, Novell & Jimenez in Santa Ana, Calif.
Treating student-athletes as employees “is certainly going to impact the cost of workers compensation programs,” said John McLaughlin, managing director of the higher education practice at Arthur J. Gallagher & Co. in Itasca, Ill. While most Division 1 colleges self-insure this exposure, “there's going to be a lot of underwriting, looking at self-insured retentions, perhaps creating isolated retentions focused on sports injury.”
“It's going to be difficult for these universities to buy (workers) comp,” said Alex Fairly, senior vice president and Amarillo, Texas-based leader of Willis North America Inc.'s global sports practice, based on his experience in negotiating the National Football League's workers compensation program last June.
“Most of those (workers comp) carriers, when they find out they are sitting on top of football injuries, they may not be willing to continue those programs with the injured athlete exposure. The vast majority of reinsurance treaties exclude this type of exposure,” Mr. Fairly said. “It will be a very similar landscape to the way the professional sports world has to deal with workers compensation. It's without a doubt the most stressed sector of the professional sports world's risk profile.”
If their designation as university employees is upheld on appeal, student-athletes also could be extended employment protection under federal and state labor laws governing wages and hours, employee benefits and workplace discrimination — all at a substantial cost to universities, legal experts said.
For example, scholarship athletes likely would be entitled to protection under the minimum wage and overtime provisions of the U.S. Fair Labor Standards Act, which could include millions of dollars in unpaid back wages, said Jim Sconzo, a shareholder and co-chair of the national labor and employment practice at Carlton Fields Jorden Burt in Hartford, Conn.
“Just think about the overtime claims,” said Jeff Pasek, a New York-based member concentrating on labor and employment law at Cozen O'Connor L.P. “Student athletes are not likely to fall into any of the traditional exemptions from overtime requirements under the FLSA.”
Athletes with scholarships also could be granted access to employee health care and retirement benefits governed by the Employee Retirement Income Security Act, legal experts say. “ERISA has an extraordinarily broad definition of an employee,” Mr. Pasek said. “It only takes 1,000 hours of employment to be eligible.”