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The National Labor Relations Board’s (NLRB) Los Angeles Regional Director has determined that the National College Players Association’s (NCPA) Unfair Labor Practice charge against the University of Southern California (USC) has enough merit to move forward. In February 2022, the NCPA filed the Unfair Labor Practice charge against USC, the Pac-12 Conference, and the NCAA, under a joint employer theory. The charge also initially included UCLA—a public institution—but that part of the charge has since been dropped. Notably, the NLRB does not have jurisdiction over government-operated entities, like state colleges and universities. The NCPA’s charge claims that USC, the Pac-12, and the NCAA have misclassified USC football and basketball players as “student-athletes” when they are statutory employees under the National Labor Relations Act (NLRA). In finding that these claims have merit, the NLRB’s Los Angeles Regional Director will pursue charges against the three entities.

Unfair Labor Practice Case Procedure and Potential Appeals

Following briefings and a trial, an administrative law judge will consider the charges and the arguments of all of the parties, and determine if USC, the Pac-12, and the NCAA have engaged in unlawful behavior. That decision could (and likely would) be appealed to the five-Member NLRB, to review the administrative law judge’s decision and determine whether or not an Unfair Labor Practice has occurred.

The Board’s decision can then be appealed to one of the U.S. Courts of Appeals for further review, upon a claim by either party that the NLRB has misinterpreted the NLRA’s provisions. The U.S. Supreme Court may choose to review the Court of Appeals’ decision, if any of the parties petition the Court for certiorari. It may ultimately be years before we have the final resolution of the case. This flowchart provides more detail of the complexity and procedure in an Unfair Labor Practice case.

Likelihood of a Finding that the Football and Basketball Players are Employees

In determining whether or not a particular group of workers are statutory employees under the NLRA, the NLRB will look at the nature of the relationship between the employer and employees. Generally, the more control that an employer has, the more likely that the Board will find that they are employees. Conversely, the less control that an employer has, the more likely that the Board will find that they are independent contractors. The NLRB is currently considering a case in which it may adjust the standards for determining employee vs. independent contractor status (after doing so in 2014 and then again in 2019). As the law currently stands, the NLRB will consider a non-exhaustive list of factors from the common law agency test, including employer control, skill required to complete the work, and methods of compensation.

A promising sign for the USC football and basketball players is the NLRB’s 2016 Columbia University decision concerning teaching and research student assistants. In that case, the Board determined that the students were statutory employees because they performed services for the university for which they were compensated, even though the primary reason for their relationship was the students’ education. The NLRB’s decision in the Columbia case is more recent than its decision to “punt” on deciding the employment status of the Northwestern football players in 2015. In the Northwestern University case, the Board declined jurisdiction because of the impact a finding of employment status would have over college athletics as a whole, primarily at public institutions.

The Board’s concerns from Northwestern still exist today, although its decision to classify the Columbia graduate student assistants as statutory employees may prove helpful for the USC football and basketball players. Given the unique relationship between the student-athletes and USC (compared to more traditional employer-employee relationships), it is difficult to predict how the NLRB may ultimately decide their employment status. Considering the developments within college athletics since the NLRB’s 2015 Northwestern decision—namely, the expansion of the College Football Playoff and the start of the NIL era—the tide may be on the athletes’ side.

The Joint Employer Theory

Although the most direct relationship with the USC football and basketball players is with USC itself, the NCPA has included the Pac-12 and NCAA in the charge as joint employers. This is likely an effort to subject conferences and the NCAA to the jurisdiction of the NLRB—even though many (and in some cases most) of their member institutions are public schools which would not be covered by the NLRA.

The Pac-12 and NCAA would be considered joint employers of USC’s football and basketball players if the NLRB determines that: (1) the players are employees of USC; (2) USC, the Pac-12, and the NCAA share or codetermine the players’ essential terms and conditions of employment; and (3) the Pac-12 and NCAA possess and exercise such substantial direct and immediate control over one or more essential terms and conditions of employment of USC’s football and basketball players as would warrant a finding that the Pac-12 and NCAA meaningfully affect matters relating to the employment relationship. The joint employment factors ultimately hinge on the alleged joint employer’s direct control over the employees. The NLRB could also find that only one of either the Pac-12 or the NCAA are joint employers, but not both. Moreover, without a finding that USC is the athletes’ direct employer, neither could be liable as a joint employer.

The Unfair Labor Practice charge against USC, the Pac-12, and the NCAA has a long road ahead, and could take years to be resolved. Should the USC football and basketball players ultimately be deemed statutory employees, they would have the opportunity to unionize and collectively bargain over the terms and conditions of their employment.

Educational resources created for college athletes have been extensive in the Name, Image, and Likeness (NIL) era. There have been materials developed to help athletes understand NIL laws, NIL contracts, intellectual property, taxes, and more. One area where college athletes have expressed a lack of sufficient educational material is in evaluating professional service providers. Because college athletes can sign NIL deals worth thousands or even millions of dollars, there is a significant need for professional services. Athletes can (and often should) work with attorneys, marketing agents, tax professionals, accountants, financial advisors, and branding experts. Here are 5 questions that all high school, college, and professional athletes should ask professional service providers before working with them:

Are you properly licensed to provide this service?

There is a lot that can be at play here, like state athlete-agent laws and state bar licensing and ethics rules. The important thing is to make sure that agents are appropriately registered as athlete-agents, lawyers are barred in the state where they are practicing, and financial service providers are CPAs or CFPs.

It is particularly important to ask this question of athlete-agents. There has been some confusion about the need for NIL agents to register as athlete-agents with appropriate state bodies. Even though they may not be negotiating professional playing contracts, NIL agents that negotiate endorsement deals still must be registered.

What is your experience working with athletes?

Just because someone hasn’t worked with athletes in the past doesn’t necessarily mean that they can’t in the future. But athletes have unique legal and financial needs. It is important that anyone representing you is appropriately equipped to do so. Professionals with experience working for athletes will generally be better suited to assist you.

What did you do before the NIL era?

This question goes hand-in-hand with the last question, and can be very telling. You should be cautious if you hear something like personal injury or criminal defense attorney. Just because someone has “NIL Agent” or “NIL Attorney” in their Twitter biography doesn’t mean that they have ever actually negotiated an endorsement deal. It would be best to work with professionals that have experience working in the sports industry or working with athletes. Some background working with the NCAA bylaws is helpful too!

Do you have any other relevant experience or education that qualifies you to represent me?

If you are hiring a service provider, you are paying for their expertise. Make sure they have it! Experience in the sports industry or college athletics is great. Experience negotiating contracts or having a law degree can be very helpful for agents as well.

What fees do you charge and how does that compare to other service providers in your industry?

We’ve all heard about NIL marketing agents charging a 30% commission to negotiate NIL deals. That is much more than the industry standard. Do your diligence and ask multiple service providers to get a better idea of what is fair. While each industry is different, there are some standard ranges for rates. Agents will typically charge about 10-20% of each deal, while financial advisors will typically charge about 1% of your portfolio per year. If someone is looking for substantially more than that, ask why, and consider hiring someone else.

The bottom line is this: ask as many questions as you need to until you are confident that a professional service provider is qualified to work for you. If you aren’t confident, look elsewhere. Moreover, if you are signing a contract for professional services, consider hiring an attorney to review the contract. Many professional service contracts (including agency contracts) are extremely one-sided in favor of the service provider. It is important to have a fair contract that does not limit your long-term rights.

At slightly more than one year old, the name, image, and likeness (NIL) industry is booming. And it’s not just for high school and collegiate athletes. The billion-dollar industry has created countless jobs and business opportunities. In addition to the corporate sponsors that have looked to capitalize on ultra-high-engagement athlete marketing, hundreds of businesses have either formed or expanded their service offerings to tap in to the NIL industry. As of this writing, NIL Network’s industry directory includes 425 athlete service providers, 62 businesses that provide NIL services for institutions, and 280 collectives and university-specific platforms. Furthermore, the NIL industry contains several sub-industries, which can be classified to include marketing agencies, attorneys, financial service providers, branding and public relations companies, athlete education providers, marketplaces, collectives, NFT companies, and others that operate within the NIL industry.

Although some companies are established businesses that have expanded their service offerings to include the NIL industry, most are start-ups. And while there is certainly some disparity in resources available to various NIL industry start-ups (some are sole member LLCs with a part-time founder and others are backed by venture capital dollars and have full-time employees), all businesses operating within the NIL industry need to be aware of the legal challenges and constraints that may affect them. This guide will outline some of the primary legal considerations that NIL industry businesses should consider, including the regulatory landscape of NIL, intellectual property, business organization and registration, liability planning, and contracts with athletes, brands, or institutions. Here is a guide to help sponsors looking to utilize NIL to partner with college athletes.

 Regulatory Landscape of NIL

            Since the outset, the NIL industry has had a dynamic regulatory landscape. The myriad of state laws and differing institutional policies can contain nuanced differences that require careful navigation. Furthermore, any organizations looking to work with athletes must be aware of any other relevant laws, including athlete-agent laws and Federal Trade Commission regulations.

Current Legislation

            Currently, NIL is primarily regulated by state law. A majority of states have NIL laws that govern in their particular jurisdictions. A minority of states have no NIL law at all, which leaves NIL policy to each institution in those states. Recently, there has been federal legislation introduced that would create a uniform, national framework for NIL, although nothing has gained substantial traction yet. This post contains a more detailed legislative update. As this point, navigating the legislative framework of NIL requires looking to individual state laws to determine the confines you will have to work within. NIL industry businesses should consider state laws in all states where they are (or may be) working with high school and college athletes, not just the ones where they primarily operate.

Other Relevant Laws

            In addition to NIL specific laws, NIL industry businesses should consider how other relevant laws may affect them. For example, marketing agencies working with college athletes should thoroughly examine state and federal athlete-agent laws to determine what disclosures and notices they will be required to provide to college athletes and their universities upon signing a representation agreement. NIL businesses, especially marketing agencies, collectives, and those helping college athletes with branding and PR, should also be aware of the Federal Trade Commission guides, which regulate the disclosures that endorsers of commercial products need to include in any sponsored social media posts, which makes up the majority of NIL activity. Depending on your NIL sub-industry, other laws may be at play too, like securities regulations (for NFT companies) and tax laws (for some professional service providers).

Intellectual Property

The first rule of property law (including IP law) is first in time, first in right. Generally, the first person or company to utilize a trademark or business name is the rightful owner. In most industries, that does not create any substantial problems. However, most industries grow and develop over time, as demand for their products and services grow and develop over time. Conversely, the NIL industry has a hard start date—July 1, 2021. Given that the industry was created in the blink of an eye (but not a “twinkling of the eye”—those who have studied antitrust law will get the joke), and was a billion-dollar market in its infancy, some of the hundreds of NIL industry businesses have similar names and trademarks, many of which contain the letters “NIL.”

A basic Google search for “NIL” returns results for NIL Network, Team NIL, NIL Summit, NIL Management, The Players NIL, and others. Additionally, many NIL industry businesses have similar start dates—sometime within the last two years. Whether your company name or logo includes the letters “NIL” or not, intellectual property should be a concern. In addition to the appropriate due diligence of an internet search, NIL industry companies should conduct a search on the U.S. Patent and Trademark Office’s Trademark Electronic Search System (TESS). Ensuring that you are not infringing on another company’s intellectual property is a necessity. Failing to do so can potentially result in a trademark infringement lawsuit, as well as a required rebrand. In addition to the financial costs, this can negatively impact your business with a loss of your brand awareness and established goodwill.

Beyond ensuring that you are not infringing on any intellectual property yourself, it is also important to take appropriate steps to protect your brand and trademarks. There are a variety of important protections offered to owners of trademarks registered with the USPTO. Moreover, in addition to securing trademark registrations, it is important to enforce your trademark rights when there is infringing activity. Failing to send infringers a cease-and-desist letter and filing infringement lawsuits when appropriate can result in losing the rights to your trademarks. While intellectual property can easily fall down on the list of priorities for founders, it can prove extremely costly. Being proactive in managing your intellectual property is always a positive.

Business Organization and Registration

            NIL industry businesses should have the same business association concerns as non-NIL industry businesses do. An appropriate corporate structure depends on many factors, including number of partners, types of financing and equity, states of operation, and tax objectives. Regardless of the preferred entity structure, ensure that you have all of the appropriate documentation to register with your state (and potentially any other states where you will have substantial operations). Moreover, it is important to have appropriate governing documents, such as partnership agreements and operating agreements. Governing documents are particularly important for companies with multiple partners or any investors.

            Certain NIL industry businesses will have an additional hurdle for business registration. Companies representing athletes as an agency will need to have the appropriate state athlete-agent registrations completed. Most states have a slightly different process for registering, while some states do not require registration at all.

Liability Planning

            Given the novel and unique nature of the NIL industry, businesses must exercise caution and take appropriate steps in liability planning. Professional liability insurance is recommended for all NIL industry businesses, whether you are working with athletes directly or not. Additionally, NIL industry businesses must ensure that they are not engaging in any activity that may jeopardize the eligibility of the athletes that they are working with. This process is on-going and constant. Putting checks in place to review all transactions for state law, institutional policy, and NCAA rules compliance is critical.

            Should a college athlete become ineligible to compete because of an NIL service provider, it could be catastrophic to the athlete, their university, and the business. Beyond the bad PR, NIL industry businesses should be considerate of how athlete eligibility problems could expose them to lawsuits in the future. Liability planning starts with appropriate business planning (see the section above) and continues with good business practices, including having effective contracts (see the section below) and effective means of ensuring legal and rules compliance.

Contracts with Athletes, Brands, or Institutions

            Regardless of the products or services that your business is offering, you will need to have contracts that clearly outline your business relationships and transactions. For agencies working with athletes and brands, a well-drafted representation agreement is a must-have. Representation agreements should contain provisions detailing the services you will be providing, the term of the contract, payment provisions, delegated authority, rights of termination and renewal, and any required athlete-agent law disclosures, as applicable. For other NIL industry businesses that are not directly representing athletes or brands, contracts should still detail all of the specifics of any transactions or services.

In an Aug. 31 letter to U.S. Senators Joe Manchin and Tommy Tuberville, the Power 5 conference commissioners outlined their position on how Congress can most appropriately create fair and uniform legislation to govern name, image, and likeness (NIL) in college athletics. The letter was submitted in response to the Senators’ request for more information from the commissioners.

The “NIL era” has been riddled with patchwork state legislation, differing institutional policies, and a lack of straightforward guidance from the NCAA. The NCAA has been unable to create a uniform set of rules through its internal legislative process—or enforce the rules it does have—due to antitrust concerns stemming from the Supreme Court’s decision in Alston. Because of those antitrust concerns, key college athletics stakeholders, including the Power 5 conference commissioners, have called on Congress to create more uniform NIL legislation that can be applied on a national basis.

Uniformity is one of the conference commissioners’ critical goals in promoting a federal NIL law. Any federal legislation would preempt conflicting provisions in state NIL laws. The preemption doctrine comes from the Constitution’s Supremacy Clause, which gives Congress the ability to override any inconsistent state legislation. Where state laws might differ from a federal law, they would be invalidated. There are a whole host of reasons why the conference commissioners would like uniform NIL regulations. In addition to having more clarity for student-athletes and universities, the commissioners want everyone to play by the same rules. For example, certain state NIL laws prohibit universities from facilitating NIL deals for their student-athletes, while others do not. Some feel as though this can give universities in certain states a leg up in recruiting.

In addition to uniformity, the conference commissioners want a federal NIL law to prohibit boosters from engaging in recruiting prospective student-athletes and compensating them at an above-market rate. Over the past year, there have been dozens of boosters and booster-led collectives that have offered NIL deals as a recruiting inducement to high school athletes and current collegiate student-athletes in the transfer portal. This practice is against the NCAA’s Interim NIL Policy—which prohibits pay-for-play and recruiting inducements—although the NCAA has not enforced it yet. Here, the conference commissioners want to keep boosters away from the recruiting process and see NIL compensation tethered to a student-athlete’s marketability and brand value, not their athletic performance.

The conference commissioners also ask Congress to regulate the agents that are representing student-athletes in NIL activities. Athlete agent laws, such as the federal Sports Agent Responsibility and Trust Act and the Uniform Athlete Agents Act (which many states have adopted) were written and passed long before the NIL era. As a result, many of the laws regulating athlete agents are outdated and contain provisions that are no longer applicable. Moreover, athlete agent laws were written to regulate the agents that represent professional athletes—not college athletes.

Finally, the commissioners’ biggest request of Congress is an antitrust exemption that would allow the NCAA to enforce its prohibitions on pay-for-play and impermissible recruiting inducements. The commissioners cleverly disguise the ask by characterizing the prohibitions as furthering fair competition between schools, when, in fact, they are an anticompetitive restraint under the antitrust laws. Furthermore, they borrow the concepts of limited liability protection and chilling from distinct areas of the law, when they are really looking for antitrust immunity. Exemptions from antitrust law are unique and rare, but they do exist elsewhere in sports.

For example, Major League Baseball has enjoyed a broad antitrust exemption stemming from a hundred-year-old Supreme Court decision. In addition to Baseball’s common law antitrust exemption, Congress has granted sports organizations a legislated exemption from the Sherman Act in the past. The Sports Broadcasting Act of 1961 allows professional sports leagues to pool the rights to broadcast their games on free, over-the-air channels. Absent the exemption, this would be—and was previously held to be—a violation of the antitrust laws.

Although many think it is unlikely that Congress would include an antitrust exemption in any federal NIL law, it remains number one on the Power 5 conference commissioners’ wish list. While there has been bipartisan interest in passing legislation, it remains to be seen if an NIL bill will make it through Congress at all.

This article originally appeared in The NIL Deal.