A landmark settlement by the NCAA in a class-action suit may mean college athletics has changed forever.
As a $2.8 billion settlement in the case of House v. NCAA awaits approval by a US district judge in California, two major points have surfaced: first, the creation of a revenue-sharing plan that means schools will be able to directly pay their athletes. This would upend the NCAA business model in place since 1906 by redefining college athletes as professionals rather than amateurs.
Second, though colleges can now pay athletes, the athletes are not employed by the institutions, and thus are not eligible for collective bargaining.
The response to this settlement has been swift.
“It’s both a historic and deeply flawed agreement,” Michael H. LeRoy, a law professor at the University of Illinois, told the New York Times. “The idea that schools are paying millions of dollars to the people who are selling the TV contracts and filling the seats — that’s good. But it closes one Pandora’s box and opens four or five others.”
One of the most pressing issues colleges will now face is how to divvy up the estimated $20 million or so in annual share of revenue to their athletes.
“A key complexity is the fair value measurement of an athlete’s NIL [name image, and likeness], which must be initially determined and regularly assessed…This requires defined process and personnel to manage the ongoing evaluation,” Jim Booz, director of college athletics advisory services at James Moore, told Forbes.
Additionally, “as tax-exempt entities, universities must be cautious with flat payments to athletes, as this can attract IRS scrutiny,” said Katie Davis, a CPA and partner at James Moore. “Payments should reflect fair market value to avoid issues with private benefit rules and maintain tax-exempt status. Ensuring compliance through individualized valuations and proper documentation is important to meeting IRS requirements and avoiding potential penalties.”
Unionizing
While the NCAA is trying its hardest to keep college players from unionizing (and therefore demanding a potentially larger portion of the pie, amongst other things), teams at both Dartmouth and USC may be threatening that.
In March, Dartmouth's men's basketball team voted to unionize. A decision the university has since rejected. “[Refusing to bargain] will likely result in SEIU Local 560 filing an unfair labor practice charge with the NLRB, which we would appeal…This is the only lever Dartmouth has to get this matter reviewed by a federal court,” a spokesperson for the university told The Dartmouth.
Meanwhile, the men's football and both men's and women's basketball teams at the University of Southern California have filed a complaint with the National Labor Relations Board stating that the school and Pac-12 should classify them as employees rather than "student-athletes".
The Verdict
The NCAA's settlement may be historic, but it's been a long time coming. For several years, students have been fighting for pay, and now they seem to have won it. Rather than continue delaying the inevitable, the NCAA and universities should begin creating processes and legal structures for how to deal with their new reality.
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