A New Era for College Athletes: The Impact of the Landmark NCAA Settlement on Student-Athlete Compensation
Times they are a changing . . . this is especially true in realm of college athletics as demonstrated recently in several courtrooms across the nation. Traditionally, college sports have operated under an amateur athlete mode. In 2021, however, that definitively changed when the Supreme Court ruled unanimously that the NCAA could not limit financial benefits provided to student-athletes by their respective member schools.
In July of this year, a U.S. Court of Appeals ruled that student-athletes may qualify as employees and merit compensation under federal law (so long as their performance provides the institution with financial benefit). Then on July 26, 2024, the NCAA and 5 so-called “power conferences” laid down their formidable but outdated swords in three multibillion-dollar lawsuits agreeing to a settlement that will forever change the landscape of collegiate sports.
The more than 100-page agreement not only provides for almost 3 billion dollars in payments to student-athletes going back to 2016 but also outlines a new framework for a go-forward compensation structure along with the formulas and mechanisms that will govern it.
The settlement resolves three separate but related federal cases:
House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA.
The plaintiffs in House, like those in Hubbard and Carter, alleged that the NCAA’s rules and limitations prohibiting athletes from seeking and receiving compensation beyond the traditional scholarship benefits (tuition, room and board, and nutritional and health allocations) when examined in the relative context of its collective, coordinated and monopolistic control of the marketplace constituted an illegal restriction on trade forbidden under the Sherman Act.
Plaintiffs pointed to the staggering revenues reaped by the defendants via the exploitation of the labor and publicity rights of college athletes, found to be sorely lacking in bargaining power or legal representation while denying these same labors and rights holders an opportunity to earn their fair share. Broadly stated, the settlement provides for fair market compensation to be paid in consideration for the services performed by former, current, and future student-athletes and for the related use of their name, image, and likeness (collectively known as “NIL”).
Further, student-athletes will now have a wide berth, subject to some evolving guardrails, when it comes to further capitalizing on their NIL rights with third-party licensees and partners to earn monies in excess of those amounts paid out to them under the terms of the new compensation schematic. This represents a significant potential source of additional revenue for student-athletes that was hereto previously restricted by the defendants.
Another significant change ushered in by the settlement is the blanket removal of maximum scholarship limits from all collegiate sports, with new limits on roster size replacing the scholarship caps of old.
All that said, some hurdles to the formalization and application of the House settlement remain. Legally, it will likely take several months before the settlement documents are formally approved by the court which may be followed by complications arising relative to the patchwork of applicable state laws that are possibly incompatible or outright contradictory to the terms of the agreement. Institutionally smaller schools and athletic conferences may be adversely affected in a disproportionate manner and Title IX compliance becomes murky and complicated under the settlement and accordingly, non-revenue sports may suffer considerably.
Holon Law Partners has 100+ years of experience combined guiding clients through complex cases and legal intricacies. Our approach is empathetic, customized, and client-centered with a focus on you and your unique business needs. To schedule a consultation with us, call our team at (866) 372-0726 or email us at: info@holonlaw.com.
