Seventh Circuit Rejects Student Athletes’ “Pay for Play” Suit

On December 5, 2016, the Seventh Circuit Court of Appeals issued its decision in Berger v. National Collegiate Athletic Association. The case was brought by former University of Pennsylvania (Penn) student athletes, Gillian Berger and Taylor Hennig, who filed suit against Penn, the National Collegiate Athletic Association (NCAA) and more than 120 other NCAA Division I member colleges and universities, claiming that as track and field student athletes, they were “employees” entitled to a minimum wage under the Fair Labor Standards Act (FLSA).

Background

Penn, the NCAA, and the other schools filed a motion to dismiss Berger’s and Hennig’s lawsuit on the grounds that student athletes are not “employees.” After the district court sided with the NCAA and schools, Berger and Hennig appealed.

Claims Against the NCAA and Division I Institutions Other Than Penn

The Seventh Circuit agreed with the lower court’s finding that Berger’s and Hennig’s connection to schools other than Penn, the school they attended, and to the NCAA was “far too tenuous to be considered an employment relationship.”

The Claims Against Penn

Under the FLSA, every employer is required to pay its employees a minimum wage. In order to qualify as an “employee” for purposes of the FLSA, the Seventh Circuit noted that Berger and Hennig needed to “perform ‘work’ for an ‘employer.’”

Berger and Henning advocated use of the multifactor test set forth by the Second Circuit Court of Appeals in Glatt v. Fox Searchlight Pictures, Inc., to determine their employee status. In Glatt, the Second Circuit determined that unpaid student interns were actually employees because the company was the primary beneficiary of the relationship. Berger and Henning argued that, similarly, Penn was the primary beneficiary of the relationship between student athletes and universities, and analogized their situation to that of work-study program students. The Seventh Circuit declined to use the Glatt test and cited the “economic realities” test that the Supreme Court of the United States had previously established as the appropriate test.

The Seventh Circuit determined that Berger and Henning failed the economic realities test, noting that student athletes are part of a “revered tradition of amateurism in college sports” and that the NCAA exists in part to maintain that tradition of amateurism through an elaborate system of eligibility rules.

The Seventh Circuit also found the U.S. Department of Labor’s Field Operations Handbook (FOH) persuasive. According to the FOH, “[u]niversity or college students who participate in activities generally recognized as extra-curricular are generally not considered to be employees within the meaning of the [FLSA].” In addition, the FOH provides that the “[a]ctivities of students in . . . programs, conducted primarily for the benefit of the participants as a part of the educational opportunities provided to the students by the school or institution, are not work of the kind contemplated by [the FLSA].”

Key Takeaways

Due to greater transparency about university and college coaching salaries and due to increased media coverage about the terms of television network deals, we can expect student athletes to continue to advocate for a “play for pay” system. We can also anticipate that student athletes may want to continue to challenge the traditional notion that as amateurs, they are only entitled to the costs of tuition and not entitled to share in the revenue streams, which they argue that they help create for their institutions. As is clear from the Seventh Circuit’s ruling, however, student athletes will continue to face challenges in doing so under the existing legal tests.