More states draft legislation to address student athlete compensation as the NCAA passes the ball to congress

In response to the enactment of California's Fair Pay to Play Act and the National Collegiate Athletic Association’s (NCAA's) subsequent approval of a policy change to compensate student athletes for the use of their name, image and likeness, state legislatures across the country are drafting laws that would enshrine similar protection. Further, the NCAA is appealing to Congress to request federal legislation to ensure uniformity across the United States for compensation in this area.

Background – NCAA and California's Fair Pay to Play Act

On 30 September 2019 California Governor Gavin Newsom signed the state’s Fair Pay to Play Act into law. The act will come into effect in January 2023 and is the first state law to compensate student athletes for the use of their name, image and likeness. In response to this, on 29 October 2019 the NCAA's board of governors voted "unanimously to permit students participating in athletics the opportunity to benefit from the use of their name, image, and likeness in a manner consistent with the collegiate model" and set the deadline for the rule change to January 2021.

Leading the pack – state legislatures rally with individual state bills to address compensation issues

Similar bills are now under consideration in Florida, Georgia, Illinois, Michigan, Missouri, Oklahoma, South Carolina and Tennessee (among others), all of which are known for their prominent athletic programmes. Legislators have indicated that the goal is to ensure that the NCAA adheres to its agreement promise to develop policies surrounding student athlete compensation by January 2021. The proposed legislation in these states will be of particular import to the NCAA as it proceeds with its policy change.

Proposals in each of these states is largely consistent on the following issues:

  • post-secondary institutions and athletic associations will be prohibited from preventing student athletes from earning compensation based on the use of their name, image or likeness;
  • athletes will be entitled to representation by a qualified agent or lawyer; and
  • athletes will be required to disclose any contracts to the institution – these cannot conflict with the institution's own contracts.

However, there are some variations among the proposed state laws with regard to whether they prohibit or are silent as to providing compensation for prospective student athletes.

Florida legislators have prepared four bills – SB 582, SB 646, H 251 and H 287 – all of which were filed in September and October 2019, referred to committee and introduced on 14 January 2020. SB 582 and H 251 are identical and consistent with the California Fair Pay to Play Act, with the exception that they do not address whether institutions will be permitted to compensate prospective athletes. SB 646 and H 287, on the other hand, prohibit post-secondary educational institutions and athletic associations from providing or offering to provide a prospective student athlete with compensation for use of their name, image or likeness. Florida legislators have previously considered legislation addressing this and may have a leg up on other states considering similar bills. If adopted, Florida's proposed legislation could be effective as early as 1 July 2020, even before the NCAA drafts rules to address the policy change.

House Bill 743, "relating to postsecondary education, so as to provide that student athletes participating in intercollegiate athletics at postsecondary educational institutions may receive compensation for the use of the student athlete's name, image, or likeness" was pre-filed on 19 November 2019 and filed on 16 January 2020. While the legislation proposed in all states is generally ambiguous as to whether the student athlete will be compensated for their name, image or likeness by the institution or through endorsement deals with third parties, Georgia's House Bill 743 further muddies the issue, providing that "[n]othing in this article shall be construed as requiring or authorizing a postsecondary educational institution to compensate a student athlete for participation in intercollegiate athletics or for a postsecondary educational institution to compensate a student athlete for the use of the student athlete's name, image, or likeness”.

In Illinois, HB 3904 has already passed in the House of Representatives and was referred to Assignments in the Senate on 1 December 2019. State Governor JB Pritzker has publicly voiced support for this bill. HB 3904 is substantially similar to the California Fair Pay to Play Act and, if adopted, would also come into effect 1 January 2023.

Michigan legislators are currently considering two bills, SB 0660 and HB 5217, one in the Senate and one in the House – both have been referred to committee. Although the legislation proposed in other states has thus far been limited to college athletes, SB 0660 permits high school athletes to earn compensation for their name, image or likeness. It is also silent as to whether prospective student athletes could receive this compensation. On the other hand, HB 5217 limits compensation to college athletes, but permits them to earn compensation for their "athletic reputation" as well as their name, image or likeness. The proposed legislation could come into effect in Michigan as early as 1 July 2020.

Three separate bills, HB 1564, HB 1792 and HB 1748, have been filed in the Missouri House of Representatives. They were read for a second time on 9 January 2020 and are in line to be assigned to a committee. HB 1564 and HB 1792 are nearly identical and both permit student athletes to receive compensation for their "name, image, likeness or athletic reputation”. While HB 1564 and HB 1792 do not address whether prospective student athletes could receive compensation, HB 1748 prohibits universities and athletic associations from compensating prospective student athletes. Each of these proposed bills has an effective date of 1 January 2023.

New Jersey
The New Jersey Senate Higher Education Committee passed the Fair Play Act (S971) by a vote of five to zero on 30 January 2020.  An identical bill (A2106) has been referred to the New Jersey Assembly Higher Education Committee.  This bill  is modelled on the California Fair Pay to Play Act and, if adopted, will not go into effect until the fifth academic year following the date of enactment.

Oklahoma HB 3347 was introduced on 16 January 2020 and is scheduled for a first reading on 3 February 2020. HB 3347 is modelled on the California Fair Pay to Play Act and has a proposed effective date of 1 September 2020.

South Carolina
In South Carolina, S 935 was pre-filed on 11 December 2019 and was introduced, read for the first time and referred to the Committee on Education on 14 January 2020. Although it shares many similarities with the California statute, S 935 expands upon it substantially. Most notably, it includes a section requiring institutions to award stipends to student athletes based on the total number of hours the student athlete spends associated with the intercollegiate sport and to additionally deposit $5,000 per year into a trust fund for each student athlete to be paid out after graduation. In the South Carolina House, H 4973 was introduced on 21 January 2020 and was referred to the Committee on Education and Public Works. H 4973 appears to oversimplify the issues. It applies to student athletes at public universities only, provides that those universities and athletic associations cannot prevent student athletes from earning compensation for their name, image or likeness and does not address student athlete representation, compensation of prospective student athletes or potential conflicts between student athlete contracts and university contracts.

Tennessee legislators are considering identical bills in the Senate and House, SB1636/HB1694, which were both introduced on 16 January 2020. The Tennessee Bill applies only to public institutions of higher education and athletic associations, but otherwise contains substantially the same limitations as the California Fair Pay to Play Act. In addition, in light of the James Wiseman controversy, in which now-Memphis Head Coach Penny Hardaway — then a University of Memphis booster and high school coach — donated $11,500 to Wiseman's mother so that she could move the family from Nashville to Memphis in 2017, Tennessee's proposed legislation prohibits an institution from discriminating against a student athlete based on an athletic coach's donation to the institution. Also under consideration are SB 1767/HB 1710, which were introduced in the Senate on 21 January 2020 and in the House on 17 January 2020. These bills require each public institution deposit 1% of the gross athletics revenue into the fund each year. This will be used to provide grants to student athletes upon their graduation from the institution.

NCAA considers options for policy and pushes back to Congress

NCAA board of governors’ federal and state legislation working group
As states move forward with proposed legislation, the NCAA divisions are preparing changes to their own rules and regulations. According to the NCAA’s timeline, its board of governors’ federal and state legislation working group, which comprises member representatives from all three divisions, will continue to gather feedback on the policy change through April 2020. The divisions are then expected to continue to discuss various proposals and feedback throughout spring and summer of the same year. The deadline for Divisions II and III presidents councils to sponsor legislation is 1 September 2020 and the deadline for submission of legislative proposals in Division I is 1 November 2020. The divisions are expected to vote on proposed legislative solutions at the NCAA Convention in January 2021. The legislation ultimately adopted by the NCAA divisions will likely guide state legislative solutions for community colleges and high-school interscholastic athletics, which are not addressed in the majority of the pending state bills.

NCAA passes the ball to Congress
Variations of the proposed state legislation discussed above have led the NCAA to ask Congress to pass federal legislation to standardise legislation. Currently pending in the House is the Student-Athlete Equity Act (HR1804), which would modify the definition of a tax-exempt amateur sports organisation to exclude organisations that substantially restrict a student athlete from using or being reasonably compensated for the third-party use of the athlete's name, image or likeness. More recently, in December 2019, the Senate announced that a bipartisan working group was discussing how to fairly compensate college athletes.

Impact of expected NCAA policy changes and state laws

While most of the impact to universities will occur only after the NCAA divisions articulate and adopt rules implementing the policy change, there is action to consider in the meantime, including auditing all endorsement, sponsorship and licensing deals to evaluate the impact by the NCAA policy change and to consider how to best restructure the agreements when the new NCAA policies go into effect; and discussing the universities’ objectives and potentially submitting commentary or recommendations to the applicable rules committee and/or state legislature.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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