“Amateurism” Eroding: The Third Circuit Opens the Door to Employee Status for College Athletes Under the FLSA

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On July 11, 2024, the U.S. Court of Appeals for the Third Circuit held in Johnson v. NCAA, No. 22-1223, (3d Cir. July 11, 2024) that college athletes may be considered employees under the Fair Labor Standards Act (FLSA). College athletes have historically been classified as “amateurs” rather than “employees” of the National Collegiate Athletics Association (NCAA) or their universities. However, in recent years, attitudes about the amateur status of student athletes have begun to change. The Third Circuit’s decision in Johnson reflects the evolving perception that student athletes may be deemed employees and accordingly entitled to the legal protections associated with employment.

From the opening lines of its opinion, the Third Circuit unequivocally rejected a bright-line classification of athletes as amateurs, remarking: “Do efforts that provide tangible benefits to identifiable institutions deserve compensation? In most instances, they do. And yet athletes at our most competitive colleges and universities are told that their ‘amateur’ status renders them ineligible for payment.” From there, the Third Circuit answered in the negative the specific question of whether college athletes are precluded from ever bringing an FLSA claim due to their putative amateur status and adopted an economic realities test to assess whether a college athlete is an employee under the FLSA.

The appellees in Johnson are athletes at several NCAA Division I (D-1) member schools. In 2019, the athletes filed a complaint against the NCAA and their member universities, arguing that they were entitled to federal minimum wage compensation under the FLSA for the time they spent representing their schools as athletes. The NCAA and universities filed a motion to dismiss, asserting that student athletes are, and have historically been considered, “amateurs,” not employees entitled to FLSA protections.

The District Court denied the motion to dismiss, determining that the athletes had sufficiently pled facts under a multifactor balancing test that might allow them to be classified as employees under the FLSA. The NCAA and universities appealed to the Third Circuit. Although the Third Circuit affirmed the denial of the motion to dismiss, it took issue with the specific multifactor test the District Court applied (which is typically used in the unpaid intern context).

The Third Circuit instead determined that the District Court should have used an economic realities analysis grounded in common-law agency principles. Under this analysis, “college athletes may be employees under the FLSA when they: (a) perform services for another party (b) ‘necessarily and primarily for the [other party’s] benefit,’ (c) under that party’s control or right of control, and (d) in return for ‘express’ or ‘implied’ compensation or ‘in-kind benefits.’”

On this basis, the Third Circuit vacated the District Court’s decision and remanded for application of this economic realities analysis. Given the District Court’s prior holding, it is likely to once again deny the motion to dismiss.

If you have any questions about the implications of this decision, please contact the authors of this alert or a member of the Steptoe & Johnson Labor & Employment Compliance Team.