Breaking down implications of NLRB ruling on Northwestern players union

SI.com's legal expert Michael McCann breaks down all the implications of the NLRB's ruling on the Northwestern football players union.

After spending the last 16 months considering the question of whether football players on athletic scholarships at Northwestern University are employees under the National Labor Relations Act, the National Labor Relations Board has essentially punted on that question.

In a seven-page decision published Monday, the five-member NLRB unanimously declined to exercise jurisdiction in the matter. As a result, the NLRB has dismissed the Northwestern players’ petition, effectively vacating a 2014 ruling by Peter Sung Ohr, the NLRB’s regional director for Chicago, in favor of those players. Northwestern football players are thus not employees under federal labor law and cannot unionize. Although today’s decision represents a defeat for the labor movement of college athletes, it is a carefully limited—and not necessarily permanent—setback.

Why the NLRB declined to exercise jurisdiction

In dismissing the Northwestern players’ petition on jurisdictional grounds, the NLRB enunciated a basic rationale that to do otherwise “would not promote stability in labor relations.” As the NLRB alluded to in its decision, because most of the Football Bowl Subdivision teams are at public universities and public universities are not governed by the National Labor Relations Act, a ruling on the program of one FBS team at a private university might have carried unintended and undesired consequences for college sports.

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For instance, a decision by the NLRB that Northwestern players are employees—and by implication eligible for salary and other employment benefits—would have altered Northwestern’s recruiting as well as the recruiting of other sports programs at private universities. These developments could have caused “a patchwork” problem between public and private institutions where some college football players are employees and some aren’t.

The NLRB also asserted that it would be inappropriate to render a decision given that “the situation of scholarship players may well change in the near future.” The NLRB highlighted the NCAA’s recent decision to allow FBS teams to award guaranteed four-year scholarships as an example of crucial change in the relationship between college athletes and their schools. The NLRB also cited potential legislative reforms that could dramatically alter the financial life of college athletes. Although the NLRB did not mention Ed O’Bannon’s and Martin Jenkins’s ongoing litigations against the NCAA, it’s fair to assume the NLRB factored in the uncertain outcomes of those cases.

Notably, however, the NLRB declined to rule on the merits of the legal arguments. Instead, the NLRB recapped both sides’ arguments and indicated that both sides raise persuasive points. This is a crucial point because the NLRB could very well encounter the same underlying legal question again and at that time offer a substantive decision. In fact, the NLRB stressed the possibility of future review: “The Board’s decision not to assert jurisdiction does not preclude a reconsideration of this issue in the future. For example, if the circumstances of Northwestern’s players or FBS football change such that the underpinnings of our conclusions regarding jurisdiction warrant reassessment, the Board may revisit its policy in this area.”

This was a surprising decision

In speaking this afternoon with persons familiar with the NLRB’s thinking, I consistently heard astonishment that the board would decline to exercise jurisdiction.

One expert found it very odd that the NLRB has been willing, on multiple occasions, to rule on whether graduate assistants and teaching assistants at private universities are employees but is now unwilling to rule on whether football players at private universities are employees. This is especially curious given that the NLRB’s willingness to rule on graduate assistants and teaching assistants posed the accompanying risk of causing instability between private and public universities—in other words, the very same risk of instability that the NLRB now cites as a key reason to decline to rule on the employment eligibility of college football players.

Another person familiar with the NLRB felt that the “board blinked under some very bright lights”—namely pressure from various constituencies that did not want to see players recognized as employees—in refraining from issuing a substantive ruling.

Lauren Victoria Burke/AP

What happens next?

As explained below, an uncertain and complex aftermath for college sports awaits.

I. For now, Northwestern football players are not employees and thus cannot unionize. They also cannot directly appeal the NLRB’s decision to court.

The immediate effect of the NLRB’s decision is that the question of whether Northwestern football players on scholarship are employees has been answered. The answer is that they are not employees, and the answer is grounded on jurisdictional rather than substantive grounds.

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Because they are not employees, Northwestern football players cannot unionize under federal labor law. In April 2014, Northwestern players voted on whether to unionize. The result of that vote has been kept confidential pending the NLRB’s decision; the formation of a union would have required a majority of the ballots cast.

If the players had voted to unionize, the expectation is they would have joined the College Athletes Players Association, a labor organization that intends to formally represent college athletes in bargaining working conditions with universities. If the players had declined to unionize, they still would have remained employees of Northwestern and encountered a separate set of legal issues. Today’s decision by the NLRB renders the April 2014 vote legally irrelevant.

The players cannot directly appeal the NLRB’s decision to court. There is a fairly convoluted roadmap that could allow the union to seek judicial review of the employee question by engineering a picketing violation, but it is extremely unlikely to work. For all practical purposes, the NLRB’s decision is not appealable.

II. Today’s ruling impacts private universities across the country.

While Monday’s NLRB ruling expressly governs only scholarship football players at Northwestern, other private universities can nonetheless rely on the ruling as precedent. They can assert that their relationship with their respective football players is comparable in terms of expectations, obligations and contributions. As a result, such private universities as TCU, Stanford, Notre Dame, Boston College, USC and others with “big time” college football programs should feel more confident that they too would defeat similar NLRB petitions raised by players on their football teams.

Monday’s NLRB ruling likewise benefits private universities with major national basketball programs—schools such as Georgetown, Duke and Baylor. It would now be more difficult for college basketball players at private universities to demand recognition as employees. Their universities would contend their relationships with basketball players is roughly equivalent to that of Northwestern’s relationship with its football players. The same reasoning could be applied to players in prominent hockey and baseball programs at private universities. In short, the NLRB declining to recognize Northwestern football players as employees affects similarly situated athletes at other private universities.

III. Public universities could still soon grapple with employee student-athletes.

As an important limitation, today’s NLRB ruling governs only Northwestern and is direct precedent only for private universities that encounter athletes seeking recognition as employees. This is because the relevant area of federal law—the National Labor Relations Act—covers only private employers.

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In contrast, the capacity of student-athletes at public universities to be considered employees and possibly unionize depends on the labor laws of the states in which their universities are located. In some states, particularly those that are “right to work” states, college athletes at public universities are barred from becoming employees and/or unionizing.

In its decision Monday, the NLRB noted that, “At least two states—which, between them, operate three universities that are members of the Big Ten—specify by statute that scholarship athletes at state schools are not employees.” But in more labor-friendly states the opposite could prove true. It’s safe to say that student-athletes at public universities across the 50 states are subject to 50 different types of laws on whether they are employees and, if so, whether they can unionize.

Nonetheless, public universities will be impacted by the aftermath of Monday’s NLRB decision. While the question of athletes at those public universities being recognized as employees is not one of federal law, it is likely that today’s NLRB decision will be influential in how state labor boards, legislatures and courts consider the question.

IV. A dizzying set of court appeals is averted, for the time being.

In at least one and potentially multiple ways, Northwestern would have appealed an NLRB ruling in favor of the players. Depending on whether Northwestern players voted to unionize, CAPA might have also sought intervention by a court. A very complicated appeals process that would have likely taken years has been averted.

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V. Remaining questions of the possibility that college athletes could be considered employees and unionize.

Given that the NLRB carefully declined to endorse or reject the possibility that college athletes could be considered employees under federal labor law, the possibility of athletes becoming employees and unionizing—or not unionizing—will continue to cause anxiety for college athletic departments. Consider the following six questions that show why athletic departments should be worried:

Question 1: What would a collective bargaining agreement between a university and its employee student-athletes entail?

If college athletes are eventually recognized as employees and then vote to unionize, CAPA would likely become their exclusive bargaining representative. This would mean that individual players would not be able to negotiate employment terms with their university—only CAPA would do the negotiating. Following the players’ vote to unionize, CAPA would notify the players’ university of its intent to enter into collective bargaining over the players’ terms of employment. The university could respond by notifying CAPA of the university’s intent to accept the players’ decision.

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Shortly thereafter, the two sides would begin to bargain the terms of employment. Those terms could include minimum and maximum salaries, health care benefits, workplace safety assurances, workers compensation policies and pensions. The university would likely also owe minimum wage and overtime pay benefits. Collectively bargained terms would need to be consistent with assorted U.S., state and municipal laws and regulations, as well as other collectively-bargained policies and contracts to which the university is a party. One drawback for the players: Negotiated terms could allow the university to more easily cut players who underperform.

By bargaining with CAPA, a university would be in compliance with federal or state labor laws. Simultaneously, however, the university would be engaged in conduct that violates NCAA rules and, as explained below, possibly violates federal laws that require gender equity and that restrict foreign students and foreign employees. The university would presumably face NCAA sanctions unless the NCAA modifies its rules.

Question 2: If college athletes become employees but don’t unionize, what role would antitrust and wage laws play?

If employee student-athletes vote “no” to unionizing, federal antitrust law would become a worry for universities, conferences and the NCAA. In the absence of a union with which to bargain, a university would need to negotiate with individual players or unilaterally impose wages and other working conditions on those players.

A university might do so in consultation with conferences or the NCAA. Rules that are implemented outside of a collective bargaining agreement and developed through collaboration with competitors (such as competing colleges) would be vulnerable to antitrust challenge. This means that a university’s employee athletes could file a federal antitrust lawsuit against the NCAA and its members if they are dissatisfied with employment conditions unilaterally imposed on them.

Antitrust law would be particularly worrisome because damages would be automatically multiplied by three. Such a lawsuit could also raise federal and state wage law claims over unpaid minimum wage and overtime pay.

Question 3: Is gender equity litigation under Title IX and Title VII a risk in a world of employee student-athletes?

Title IX commands that colleges receiving federal assistance cannot treat male and female students differently. There is debate among legal scholars about whether Title IX would apply to student-athletes who are also employees. On one hand, these students are employees in the context of sports, and thus seemingly outside the reach of Title IX. On the other hand, their employment eligibility is predicated on being a student enrolled in the college and remaining in good academic standing.

The civil rights divisions of the U.S. Departments of Justice and Education would likely review this legal conundrum at some point. This debate would also constitute an issue that might ultimately be resolved in court, with women athletes suing colleges over unequal treatment.

The same uncertainty holds true of Title VII’s role in a world where student-athletes are employees. Title VII prohibits sex discrimination in the workplace. It forbids employers from paying men and women different wages for the same work. The U.S. Equal Employment Opportunity Commission and federal courts would likely review an arrangement where male student-athlete-employees are paid but their female counterparts are not.

Charles Rex Arbogast/AP

Question 4: What role might immigration law play if college athletes are employees?

Foreign students are eligible to attend U.S. colleges through F-1 student visas. This is true of foreign students who play on sports teams. F-1 visas generally cap the number of hours foreign students can be employed to 20 hours per week. While NCAA rules technically limit athletes to 20 hours per week for playing and practicing, many athletes contend they spend more hours—perhaps up to 50 hours per week—on their sport.

Violations of F-1 visa status can lead to detention and deportation, and employers can also face fines. As a practical matter, immigration attorney Theodore Chadwick tells SI.com, “If student athletes are determined to be employees, foreign student-athletes would almost certainly become ineligible to play/work on F-1 status based on current immigration laws.”

While Congress and President Barack Obama could change federal law to permit foreign college athletes to play on F-1 visas, immigration reform is one of the most divisive political topics of our time. A quick legislative fix seems unlikely.

Other visas are also unlikely to work for most foreign college athletes. Pro leagues, for example, use the P-1 visa to employ foreign players, but to qualify for the P-1 visa an athlete must be “internationally recognized.” Relatively few foreign college athletes would meet this high standard. It is also unclear if P-1 visas would permit foreign athletes to enroll in college, which would be necessary for eligibility to play college sports.

Question 5: What are the tax law implications of employee student-athletes?

Federal and state tax laws would also play a role in the world of college athletes as employees. As Garret Higgins, a partner at the accounting firm O’Connor Davies, LLP, tells SI.com, the recognition of student-athletes as employees under labor law would not dictate that they are employees for purposes of tax law. These are two completely different areas of law. In fact, in a letter last year authored by IRS Commissioner John A. Koskinen to U.S. Senator Richard Burr, Koskinen stressed that a decision by the NLRB would “not control the tax treatment of athletic scholarships” as that topic is governed by the Internal Revenue Code.

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Nonetheless, it stands to reason that college athletes earning wages as employees might be subject to paying state and federal income taxes, as well as other types of taxes (Social Security and Medicare taxes, etc.).

The NCAA and university athletic departments would also be impacted by tax consequences of college football players as employees. These entities are currently exempt from federal income taxes because they qualify as 501(c)(3) educational institutions. Universities paying student-athletes as employees will clearly threaten this classification. Student-athletes would be employees, rather than students, at least while in the capacity of athletics. It is likely that the Internal Revenue Service would review the matter. Litigation could also arise, with the U.S. Tax Court ultimately deciding the issue.

Question 6: Will the U.S. Supreme Court ultimately decide all of these questions?

The U.S. Supreme Court has jurisdiction to review most of the matters discussed above. But keep in mind, the Supreme Court needs an actual legal controversy—someone suing someone else, leading to a lower court decision and an appeal—to invoke review; it won’t take up the issue on its own.

Even if a legal controversy eventually emerges, the Supreme Court typically grants cert to only about one percent of petitions, and it frequently declines to hear cases that attract public controversy. Often, in fact, the Supreme Court declines to hear a legal challenge until there are conflicting decisions by federal courts of appeal.

On the other hand, the justices may feel compelled to hear a dispute that could dramatically change the economic relationship between thousands of student-athletes and their universities. They might not wait for a split among federal courts.

But we’re a long, long way from then in this topsy-turvy new world of college sports.

Michael McCann is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law. In the fall 2015 semester, he will teach an undergraduate course at UNH titled “Deflategate.” McCann is also the distinguished visiting Hall of Fame Professor of Law at Mississippi College School of Law.