Is Pay-to-Play Going Away in the NCAA? Ninth Circuit Rules that College Athletes are not Entitled to Cash Compensation

In O’Bannon v. NCAA, US District Judge Claudia Wilken ruled that the National Collegiate Athletic Association (NCAA) cannot stop players from selling the rights to their names, images, and likenesses to the schools that they attend for a sum not to exceed $5,000. The decision struck down NCAA regulations that prohibit players from receiving anything other than scholarships and the cost of attendance at their schools, holding that such regulations unreasonably restrain trade. That decision is previously discussed in detail here.

On September 30, 2015, the United States Court of Appeals for the Ninth Circuit partially overturned the District Court’s decision. The lower court based its decision on the fact that NCAA regulations limiting payment to athletes violated the Sherman Antitrust Act and that such regulations must therefore be limited. In a narrow, split-decision, the three-judge Ninth Circuit panel agreed on that point and ruled that the NCAA was “not above the antitrust laws.” It explained that the organization’s long-standing amateurism rules banning compensation were anti-competitive because they fixed the price of college education for student athletes.

Where the Ninth Circuit departed from the District Court was in rejecting the lower court’s order that college athletes could receive deferred licensing payments from schools for using their names, images, or likeness up to the $5,000 cap. Specifically, the panel wrote: “The district court’s [] remedy, allowing students to be paid cash compensation of up to $5,000 per year, was erroneous.” The panel ruled that the NCAA had to let schools grant players scholarships up to the full cost of attendance (which are higher than the previous NCAA scholarship caps) but that the $5,000 cap ran afoul of other antitrust principles.

The Court explained that the $5,000 amount was erroneous because the NCAA is subject to the Rule of Reason, which is a legal doctrine used to interpret the Sherman Antitrust Act. The Rule of Reason requires that the NCAA permit its schools to provide athletes with scholarships up to the cost of attendance but “does not require more.” The cash sum that the $5,000 represents goes beyond education related expenses and the Court recognized that education related expenses were fundamental to the NCAA’s existence and the reason that the athletes are attending school.  In other words, the Court affirmed the NCAA’s amateurism model and refused to say that college athletes should be compensated with cash sums. Each side will have 14 days to request a rehearing in front of the full Ninth Circuit, or 90 days to appeal to the Supreme Court.

The decision is generally being viewed as a major win for the NCAA. When the case went up on appeal, there remained the unanswered question of the future of the amateurism model in NCAA sports. With the most recent decision, the Ninth Circuit has affirmed the NCAA’s model and its definition of amateurism. The NCAA will continue to be able to use amateurism as a justification in antitrust cases and can restrict any payments to students to the cost of attendance at its schools.

Although the case is legally a dispute focusing on antitrust law, it has come to embody a much larger issue in college sports: should student athletes be treated as employees who deserve to be compensated for their time or more like students who also happen to play a sport? In August, the NCAA and the college sports establishment won another victory when the National Labor Relations Board overturned a Regional Director’s finding that Northwestern football players were employees who could unionize under federal labor law. That case – and the O’Bannon decision – could ultimately be bound for the Supreme Court where the issue of whether students are more like employees or more like amateur student athletes may come to a head. Until then, however, the NCAA and its member institutions are protected from both having to (1) treat college athletes like employees or (2) pay them to play beyond the cost of tuition.