By: Dan Handman
Hirschfeld Kraemer LLP
Santa Monica, CA
The California Workplace Advisor – Hirschfeld Kraemer LLP
Yesterday, an administrative judge at the National Labor Relations Board (NLRB) found that student athletes on Northwestern University’s football team who receive a scholarship are employees of the university and therefore eligible to form a union. The decision, while not the decision of the full NLRB, is a major departure from NLRB precedent and one very fraught with consequences for universities and other employers in educational fields. The central issue was whether student athletes met the definition of employees. Because the National Labor Relations Act does not define the term “employee” (it actually defines “employees” as a term which “includes employees”), the NLRB focused on two common law factors: (1) whether the football players are paid by the university in exchange for providing services; and (2) whether they are subject to the “control” of the university. To a certain degree, college football players are controlled by the university – they have set schedules, they are required to attend meetings and practices, and they are subject to a code of conduct – so, ultimately, the decision turned on whether the football players are paid by the university and if so, whether they provide services. On those two issues, the judge found that the football players provide “valuable services” for the university because the football team generates significant revenues for the university from ticket sales, television contracts, and merchandise sales. It also relied on the fact that the football team attracts alumni donations and college applicants – something which the judge found to be an “immeasurable positive impact.”
The larger issue was whether the student athletes are compensated for their “services.” On this, the judge found that the scholarship provided by the university was compensation for services. In particular, student athletes at Northwestern are provided grant in aid totaling $61,000 per year for tuition, room and board, and books, but they do not actually receive any compensation – it is provided directly to the university. They do not pay taxes on this “compensation,” nor are withholdings taken from those amounts. Nevertheless, the NLRB focused on the fact that the student athletes sign a “tender” which allows a scholarship to be canceled if a student athlete voluntarily leaves the football team or violates the university’s code of conduct. The judge found that this tender was an employment contract and that the scholarships received are compensation.
This decision is not final. It will almost certainly be appealed to the full NLRB (which is composed of 5 members, 3 of whom have experience representing unions) and thereafter will be reviewed by either the Seventh Circuit Court of Appeals or the D.C. Circuit. Although most experts expected this decision and expect the NLRB to uphold it, few think it will survive scrutiny by a court.
Nevertheless, the decision puts universities in a very difficult spot. While this judge’s decision has no precedential effect outside of Northwestern University and in many respects it contradicts the NLRB’s 2004 decision which found that graduate teaching assistants at Brown University were not employees. This judge distinguished the Brown University decision, finding that unlike the teaching assistants, student athletes on a scholarship are not “primarily students.” But, how is a university supposed to make decision about whether a student who receives some benefit is “primarily” a student or not? The judge here provided no guidance.
And it goes without saying that this decision is yet another in a trend of very union-friendly decisions by the Obama NLRB. Most employment lawyers expect that the Brown University decision will be the next domino to fall and, in fact, when the NLRB hears the appeal of this decision it would not be surprising if the NLRB overruled or at least undermined the Brown University decision.