CCHA Sports Law attorneys, Kelleigh Fagan and Katie Collyer, tackled questions on the NIL frontier with Athletics Veritas. Athletics Veritas is a weekly series aimed at helping higher education executives, faculty, and other stakeholders stay tuned in on trending national issues impacting college athletics, especially NCAA Division I. Athletics Veritas is created by senior DI athletic administrators around the nation. Subscribe to Athletics Veritas here
- How institutions might best prepare their student-athletes, coaches and staff for NIL
- Insights from the Office of Civil Rights (OCR) on the evolution of NIL laws and Title IX
- Institutions using exculpatory waivers to mitigate potential liability when supporting student-athletes on NIL matters
- The possibility that third-party NIL and branding service providers become institutional boosters
- Navigating the layers of federal, state, and NCAA legislative concepts in 2021
- Monitoring NIL agreements for fair-market value and how NIL opportunities and NCAA recruiting rules may coexist
Whether the vote on the Division I NIL proposals happens this week or voting is postponed per the recommendation of NCAA President Mark Emmert in response to the Department of Justice Antitrust Division’s input, NIL remains top of mind for the college athletics and higher education spaces.
AV sits down with the CCHA Collegiate Sports Law Practice to sort through a few pressing questions and scenarios encircling NIL and college sports. The following Q&A is for informational purposes and should not be construed as legal advice.
AV: As we begin a new year, NIL policies seem to be a work-in-progress and the actual NIL marketplace is full of unknowns. What are ways universities can best prepare their student-athletes, coaches, and athletics department staff for the new NIL world?
CCHA: We believe one of the first steps institutions can take to prepare for NIL, whatever shape NIL ultimately takes, is to form an NIL task force on campus and begin to build the infrastructure necessary to commence and maintain an NIL program. That NIL task force can consult with outside entities and firms as needed and should be meeting regularly to discuss the newest NIL developments and plan, as best as possible, for enactment of new laws and rules. A second step institutions can begin to take is to create policies and procedures. Institutions cannot finalize those policies until the NCAA legislation is finalized, but the general parameters are starting to become clearer. Having a start on that process will allow institutions to adapt more quickly when the final legislation is clear. Third, institutions can start developing educational programs. Institutions may want to consider partnering across campus or with third-parties for such education given the number of constituents to educate (staff, coaches, counsel, student-athletes, multi-media rights partners, apparel partners, other commercial sponsors, boosters, non-athletics campus personnel) and the depth of information involved. Fourth, institutions should determine what technology is available to make some of the processes, such as the disclosure aspect of the legislation, more efficient. Some of this technology or companies may be dictated or provided by the NCAA. More information on this will be provided when the NCAA completes its third-party RFP process. Finally, we have seen several institutions publicly announce partnerships with various organizations for NIL services. Institutions should at the least explore what partnerships are being offered to determine if they align with the institutional plans for NIL and pending legislation.
AV: What are some of the Title IX implications universities need to mind as they pertain to NIL activities? Where do university legal obligations exist in the NIL marketplace?
CCHA: It’s unclear exactly how the federal government will evaluate universities’ Title IX obligations within NIL. However, institutions should be mindful that broadly speaking, any assistance it offers in the NIL space to its student-athletes — whether it’s permissible education, evaluation of professional service providers, review of potential conflicts, its relationship with brand building services — should be offered equitably between male and female student-athletes. So for example, if an institution is using a third-party to teach student-athletes about branding, it should allow male and female student-athletes to benefit equitably from that third-party professional.
AV: What should university counsels be considering when, for example, a female student-athlete and male student-athlete with relatively equal notoriety and social media following are paid markedly different rates for an NIL activity? Do institutions have potential exposure to alleged unequal pay? Does this present a Title IX issue? Or, alternatively, are there potential causes of action under state law for this type of NIL scenario?
CCHA: In a vacuum, so long as institutions are not taking any action or inaction to promote one gender student-athlete over another, if the market results in disparate pay and/or NIL opportunities between a male student-athlete and a female student-athlete, institutions should not have exposure to claims regarding unequal pay and/or Title IX. All of that being said, university counsels should play an important role in setting up and monitoring the parameters of an institution’s NIL program. Institutions should see themselves as providing equal support for student-athletes, no matter the gender of the student-athlete, and conducting equal evaluations to ensure NIL transactions are NCAA compliant. Getting too involved in the process, though, may trigger Title IX obligations or violations of NCAA legislation.
Regarding state law, each state would be different, which again emphasizes the need for counsel to be involved in NIL matters.
AV: Have the Office of Civil Rights (OCR) or other government agencies provided any indications on how they may play a role in assessing NIL activities?
CCHA: Our firm has spoken to OCR regarding the intersection of Title IX and NIL. At that time, they were aware of states passing various forms of legislation and of the NCAA’s potential legislation but declined to indicate how it would view NIL. We would expect that once legislation is passed either at the federal level or within the NCAA, OCR will be more willing to provide guidance. That may or may not be timely, however, for institutions getting their NIL programs up and running, so consultation with university counsels is key along with building flexibility into the program to react to legal and other considerations as the new space develops. At a minimum, OCR will likely view an institution’s NIL activities related to student-athletes within the “laundry list” analysis. Beyond the participation and financial aid requirements of Title IX, institutions must be equitable in a “laundry list” of areas like facilities, access to coaching, and promotion/marketing of men’s and women’s sports. OCR could potentially view an institution’s NIL activities as part of the existing promotions/marketing area on the “laundry list” or it could become its own area on the “laundry list.”
AV: As equal support and evaluations for student-athletes is mentioned as a north star for institutions to follow, what should institutions be considering if they intend to provide more NIL support on a team-wide basis for, let’s say, football, men’s basketball and women’s basketball — since these sports are higher profile than most other NCAA sponsored sports?
CCHA: If a school will provide inequitable support, the school must have a legitimate, non-discriminatory explanation for the disparity. In other words, the school will need to justify why two men’s sports and one women’s sport will receive that added support. OCR could potentially review an institution’s NIL support under the existing promotions/marketing area of the “laundry list” or it could become its own area on the “laundry list.” Within the promotions/marketing analysis, OCR has recognized disparate treatment is permissible on a case-by-case basis, such as an uniquely situated individual who has received a national award. However, the analysis on a team-by-team basis may be different. While schools may believe from a business perspective it makes the most sense to invest in the highest profile sports, the schools may not be meeting their obligations under federal law. Institutions may want to consider offering the NIL support to additional women’s teams to ensure the services are offered to an equitable number of women’s student-athletes.
AV: What are your thoughts on NCAA schools creating exculpatory waivers that shield universities from legal liability tied to NIL transactions that go sour?
CCHA: Whether or not to require a waiver often comes down to (1) whether the waiver is legally enforceable and (2) whether a public relations issue could arise. We saw public backlash with the COVID-19 waivers and the enforceability of those waivers was speculative at best. State law may provide more options for enforceability of NIL waivers. Whether a waiver is enforceable typically comes down to the clarity and unambiguity of the wording of the waiver and whether the waiver is aligned or against public policy. In contrast to COVID-19 waivers, NIL waivers may be more palatable from a public policy perspective. The key to any such waiver will be ensuring that student-athletes are very clear on the role of the institution, that the waivers are worded unambiguously without too much legalese, and that any decision the student-athlete ultimately makes is his or her decision. There is a delicate balance between wanting to educate and support student-athletes on issues like choosing a professional service provider, evaluating an NIL offer, teaching them business and contract skills and not overstepping and inserting the institution into the middle of NIL transactions. It will take time for universities to find that balance but relying on in-house and outside counsel can mitigate some of that risk. And for those reasons, a simple, clear waiver that is discussed in detail with the student-athlete prior to signing could be a valid legal document.
AV: If an NCAA school provides additional marketing and branding support levels based on the student-athlete’s social media followers, does that create vulnerability for the university under Title IX? Or is social media following a non-discriminatory basis to provide varying levels of support?
CCHA: The central question for Title IX purposes is whether the NIL opportunities deny one gender or the other equal access to an educational opportunity. Among other services and treatment areas, Title IX regulations require schools to provide equitable promotional services to the teams the school sponsors. The regulations require schools to provide those services without regard to the popularity of the sport. While OCR typically reviews compliance with this regulation at the macro level, not at the individual level, it would not be too far-fetched for OCR to begin considering the support institutions provide to individual student-athletes. This is another area which may require additional guidance from OCR.
AV: There are branding and marketing companies out there that have the bandwidth to partner with NCAA schools to promote their athletics brand and also partner on an individual basis with student-athletes to prospect and secure NIL opportunities. Does that triangular relationship create vulnerability for the university?
CCHA: That relationship certainly creates vulnerability for the institution on a few levels. First, institutions may choose to enact policies and procedures that prohibit a student-athlete from engaging with those companies if it deems a conflict could exist. Second, under NCAA Division I Proposal 2020-8, a professional service provider for a student-athlete cannot be an employee or independent contractor of the institution. If a third-party provides products but not services to an institution, that entity is not deemed an independent contractor. However, most of these branding and marketing companies are providing services to an institution, not a product. The NCAA issued an NIL FAQ recently and on this issue of whether a company offering multimedia rights services to an institution can be a professional service provider to a student-athlete. The NCAA stated that a “student-athlete may contract with an entity that is an independent contractor of the institution, provided the primary service provider responsible for the provision of services to the institution is not the same primary service provider for the student-athlete.” This answer from the NCAA does not offer complete clarity on this issue. Needless to say, it will be difficult for those companies to avoid being deemed an independent contractor of the institution under the current proposal, which would eliminate them from filling the role of a professional service provider to student-athletes. Third, there could conceivably be a perception issue. If a company is soliciting or facilitating sponsorships for both the institution and a student-athlete, navigating “which client” they are promoting in those cases could create an inherent conflict and perception as to which client that company is prioritizing. For those reasons, it may prove unworkable for such companies to live in both spaces. Institutions need to be mindful, and closely monitor those companies, to ensure they are not causing the institution or student-athletes to violate NCAA rules.
AV: Regarding those third-party marketing and branding companies, could any of their actions cause them to become boosters?
CCHA: NCAA Bylaw 13.02.15’s definition of a booster or “representative of athletics interests” of an institution is broad. Further, the NCAA has always maintained, and Bylaw 13.02.15 codifies that, once a person or entity becomes a booster, they maintain that status in perpetuity. We have also seen the NCAA take a broad reading of NCAA bylaws defining a booster, including apparel companies in the SDNY/FBI men’s basketball cases. That position could be taken towards these branding and marketing companies. Becoming a booster subjects those companies to several different NCAA rules. None of the proposed NIL legislation results in a change to Bylaw 13.02.15. Many thought that bylaw may need to be re-worked as a result of NIL legislation but if the NIL proposals are passed as packaged, what or who is considered a booster could arguably include these third-party companies.