The Seventh Circuit Court of Appeals has affirmed a lower court decision holding that student athletes' participation in college sports does not make them school employees entitled to compensation, a decision that should cause colleges to breathe a collective sigh of relief.

Two University of Pennsylvania (Penn) track and field athletes sued the National Collegiate Athletic Association (NCAA) and approximately 120 NCAA member institutions in 2014 alleging that student-athletes are employees entitled to minimum wages and overtime under the Fair Labor Standards Act (FLSA).

In a 2015 decision, a judge in the Southern District of Indiana held that the student-athletes did not have standing to sue colleges other than Penn, and they failed to state a claim against Penn because student-athletes are not employees under the FLSA. The student-athletes appealed.

The Seventh Circuit agreed, noting that under the FLSA, the burden rests on the plaintiffs to establish the employment relationship and that the student-athletes "have not, and quite frankly cannot" do so.

The student-athletes advocated for application of the intern test used by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc., but the Seventh Circuit noted that the test to determine who is an employee under the FLSA is "a flexible one." The court emphasized the importance of examining the "economic reality" of the relationship between student-athletes and their colleges to determine whether Congress intended the FLSA to apply to this particular relationship. As part of this examination, the court looked to U.S. Supreme Court and circuit court decisions that emphasized the "revered tradition of amateurism in college sports," stating that the Glatt test does not take this tradition into account. Nor does it account for the reality of student-athletes' experience. The court also cited the Department of Labor's Field Operations Handbook, which states that student-athletes are not employees under the FLSA, as persuasive authority for its position.

The court further noted that student-athletes have no expectation of remuneration for voluntary participation in extracurricular, interscholastic activities. "Simply put, student-athletic 'play' is not 'work,' at least as the term is used in the FLSA."

Finally, the Seventh Circuit agreed that the students had no basis to sue other colleges, noting the students' relationships with other colleges were "far too tenuous to be considered an employment relationship."

While the status of students as employees remains an area of contention in other contexts, such as the status of graduate students under the National Labor Relations Act, this decision helps to reinforce prior holdings that participation in intercollegiate athletics does not turn students into employees.