In Johnson v. NCAA, judges are asking the right questions of the college sports model

The NCAA returned to a federal courtroom this week, and that setting looks to be no safe haven for the organization amid mounting pressure for structural change.

A three-judge panel on the U.S. Court of Appeals for the Third Circuit heard oral arguments on Wednesday in Johnson v. NCAA, a case that could upend the collegiate model. It centers on the assertion from former Villanova football player Trey Johnson and other athletes that Division I college athletes are employees under the Fair Labor Standards Act (FLSA) and are therefore entitled to be paid a minimum wage.

The hearing, held in Philadelphia and presided over by Judges Theodore McKee, David Porter and L. Felipe Restrepo, lasted just over an hour. The panel is tasked with deciding whether Judge John Padova applied the correct standard when he refused to throw out the case against the NCAA despite the organization’s attempts to have it dismissed. The panel’s decision is expected later this spring or early summer.

If the panel agrees with Padova, the NCAA could immediately appeal the case to the Supreme Court, or the organization could wait to see what happens at the district court level. A decision by the lower court, which could then itself be appealed, could come by the end of the calendar year.

The three judges poked holes early and often in many of the NCAA’s long-running arguments in defense of its business model. They asked questions about the time commitment required to participate in Division I athletics and the degree to which coaches control athletes’ schedules and courses of study. They also asked about a coach’s ability to rescind an athlete’s scholarship. And they did not seem swayed by the NCAA’s assertion that it and its schools are not employers because athletes are not classified as employees.

At one point, one of the judges even explicitly said he could not see how athletes were not employees, based on the control the schools assert over their lives, among other factors. In another exchange, the panel pushed back on attorney Steven Katz, arguing on behalf of the NCAA, when he said that college athletes are not employees because they play “without an expectation of pay.” One judge responded that there is no expectation of pay solely because that’s the NCAA rule and the system operates “not in a free market universe.”

“The judges definitely have a nuanced understanding of the collegiate model and the way in which it’s been shifting,” said lawyer Sarah Wake, a partner at McGuireWoods who previously served in-house at Northwestern University and as a Title IX coordinator at Notre Dame. “Their questions suggested that they think student-athletes should be considered employees for purposes of the Fair Labor Standards Act — at least at this stage in the case.

“The questions that they were asking about the level of control that an institution exerts over their student-athletes really signaled to me that they understand how regimented a student-athlete’s life is. They were asking those questions because a major component of whether somebody can be considered an employee under the FLSA is how much control the employer exerts over the employee.”

Johnson is one of a few prominent challenges the NCAA is currently facing, though it is the first to advance to this point of the process in the current legal environment. That environment has shifted considerably since the U.S. Supreme Court ruled unanimously against the NCAA in June 2021 in NCAA v. Alston. Alongside that decision, Justice Brett Kavanaugh published a blistering concurring opinion that described the NCAA and its members as a cartel and blasted the circular logic of refusing to pay college athletes because college athletes are not paid.

It’s clear that judges, including those on hand in Philadelphia on Wednesday, are better-versed in NCAA jargon than ever before. The panel asked the right questions and raised key points. They referenced massive NIL deals recruits have signed and the gender equity issues exposed during the 2021 NCAA women’s basketball tournament. They brought up billion-dollar media rights deals and the disparities in value generated by athletes in various sports. On that last point, attorney Michael Willemin, arguing on behalf of the plaintiffs, said that employees do not need to be deemed profitable to be classified as employees.

“Let’s say you have a person who works at Dairy Queen serves the ice cream, and then you have a person who works at Dairy Queen at a vice president level position,” Wake said. “What the plaintiffs’ lawyer would say is, ‘They’re both employees entitled to certain things. The fact that one is a vice president, in the eyes of the law, doesn’t make them any more or less an employee than the person who does the essential work of serving the ice cream.’”

The judges also pressed Willemin on the value of a scholarship and the need for an hourly wage on top of said value. Willemin said that scholarships were not unlike a 401k or other benefits provided by a company on top of an employee’s actual wage.

“What the judges were trying to get to was, ‘Don’t these students essentially already make more than minimum wage when you factor in the value of the benefits of their scholarship?’” Wake said. “If a student-athlete receives a scholarship valued at approximately $75,000 to cover the cost of attendance, isn’t that more than minimum wage? And the answer to that is, yes, it is. … But that doesn’t mean that you still don’t have to somehow show that you’re paying minimum wage.”

It’s never wise to read too far into the questions asked by judges during oral argument, at least in terms of predicting a case’s outcome. But it’s safe to say the questions asked of both sides on Wednesday were good, fair and tough. The judges understood the big business that is college athletics, and they wanted to know why the NCAA believes its labor still deserves special designation under the law like it always has. The latter is the crux of it all, everything the NCAA is fighting for as it stares down an uncertain future. The next step, and the next challenge, awaits.

(Photo: Grant Halverson / NCAA Photos via Getty Images)