On December 5, 2016, Berger v. National Collegiate Athletic Association brought a major setback for those advocating that “student athletes” deserve to be compensated for their contributions to the multi-billion-dollar industry of college sports.

The plaintiffs were two former “student athletes” at the University of Pennsylvania (“Penn”) who participated on the women’s track and field team.  Their lawsuit alleged that “student athletes” were employees under the Fair Labor Standards Act (“FLSA”) and that Penn, along with the National Collegiate Athletic Association (“NCAA”) and over 100 other Division I universities, was violating minimum wage laws by not compensating “student athletes.”  The district court dismissed their lawsuit, finding that the plaintiffs had no standing to sue any colleges other than Penn and that “student athletes” were not employees under the law.

On appeal, the Seventh Circuit affirmed the decision.  Briefly addressing the issue of standing, the court found that the plaintiffs’ connection with the NCAA and other colleges was “far too tenuous to be considered an employment relationship.”  Turning to the real issue—whether the plaintiffs are employees of Penn—the plaintiffs argued that the court should use the Second Circuit’s intern test to determine if they were employees.  Rejecting that test because it “fail[ed] to capture the nature of the relationship” between “student athletes” and Penn, the court instead examined the “economic reality” of the relationship.  Citing a 32-year-old Supreme Court opinion—an opinion that, notably, was written decades before colleges received multi-billion-dollar television deals—the court emphasized the “revered tradition of amateurism in college sports.”  It also found the Department of Labor’s Field Operation Handbook persuasive, which concluded that “student athletes” were not considered employees.  Accordingly, the court held that “student athletes” were not employees as a matter of law.  “Simply put,” the court concluded, “student athletic ‘play’ is not ‘work.’”

A Path to Compensation?

 In a concurring opinion, Judge Hamilton made a point of distinguishing the specific facts in this case.  He noted that Penn, as an Ivy League school, does not offer athletic scholarships.  Moreover, track and field is not a revenue sport.  Including these plaintiffs as employees would lead to universities also having to pay students in the school choir or on the debate team.  However, he was “less confident” of whether the court’s reasoning “should extend to students who receive athletic scholarships to participate in so-called revenue sports like Division I men’s basketball and FBS football.”  Noting the “billions of dollars of revenue,” Judge Hamilton left the door open for an alternative conclusion of the economic realities test.

What’s Next?

For the Penn “student athletes,” the next step is another appeal.  They are currently seeking a review by the entire Seventh Circuit.  And even if that fails, they can still ask the Supreme Court to review the case.

For “student athletes” in the revenue sports, such as men’s basketball and football, Judge Hamilton’s concurrence is a sign that these issues will continue to be considered on another day.  Another lawsuit is already underway, but this one is led by a former linebacker from the University of Southern California (“USC”) football team.  Without question, the “economic reality” that the Seventh Circuit relied on is dramatically different for “student athletes” on USC’s football team than it is for “student athletes” on Penn’s women’s track and field team.  The question, however, is, is it different enough?