On October 14, 2024, Wake County Superior Court Judge A. Graham Shirley II signed an order granting a preliminary injunction that allows high school student-athletes to profit from their name, image, and likeness (NIL). While the State Board of Education’s (SBE) proposed permanent rule was anticipated next summer, Judge Shirley’s ruling accelerates the implementation of the proposed rule such that public school units (PSU) must be prepared for these changes now.
The Dispute Over NIL
College athletes have been able to earn money from their NIL since July 2021. Increasingly, many states are extending the same opportunity to high school athletes.
In May 2023, the North Carolina High School Athletic Association (NCHSAA) Board of Directors approved NIL for high school athletes. However, in September 2023, the General Assembly passed a law which gave the SBE control over interscholastic athletics, including rulemaking authority “related to use of a student’s name, image and likeness.” In March 2024, the SBE adopted temporary rules, including a rule that banned NIL compensation for high school athletes.
The temporary rule took effect on July 1, 2024. Shortly thereafter, on August 23, 2024, the mother of a high school student-athlete who had been offered a substantial NIL endorsement opportunity, sued the SBE seeking to enjoin the enforcement SBE’s temporary rule banning NIL compensation for high school athletes.
On September 5, 2024, the SBE heard a proposal for a permanent rule that would allow high school student-athletes to earn compensation from NIL opportunities. The SBE intended to vote on the proposed permanent rule in January 2025, which, if approved, would have become effective on July 1, 2025.
However, after a hearing on the plaintiff’s motion for a preliminary injunction on October 1, 2024, the Court found that the SBE’s temporary rule contravened the General Assembly’s intent that public school athletes be able to make “use” of their NIL. Thus, the Court granted the preliminary injunction for the plaintiff, concluding she had a substantial likelihood of succeeding on the merits and that her son would suffer irreparable harm from the enforcement of the temporary rule. In addition to enjoining the enforcement of the temporary rule, the Court ordered the proposed rule to take effect immediately.
The New NIL Landscape and What It Means for PSUs
The proposed rule defines NIL as “the use of a student’s name, image, or likeness for commercial purposes and in exchange for compensation to the student or an immediate family member of the student.” Compensation is anything of value, including cash, gifts, discounts, and other tangible benefits given to the student or an immediate family member.
Compensable NIL activities may include autograph signings; athletic camps and clinics; public appearances and commercials; product or service endorsements; and other promotional activities in person or on social media. However, the proposed rule includes certain restrictions related to NIL:
- NIL activities cannot reference the student’s school
- The student cannot appear in the school sports team’s uniform or promote goods or services during athletic competitions or other school activities
- NIL activities cannot involve the promotion of certain goods and services, including adult entertainment; alcohol, tobacco, and other drugs; weapons, firearms, and ammunition; casinos and gambling, including sports betting; and activities that would disrupt the operations of the school or PSU
- NIL agreements cannot condition compensation on the student-athlete’s performance
The proposed rule also imposes new requirements:
- NIL agreements must include a release from liability for the PSU, the NCHSAA or another administering organization, DPI, and the SBE
- Prior to entering into an NIL agreement, the student and his or her parents or legal guardians must complete a course in NIL offered through the National Federation of State High School Associations
- If the student is a minor, the student’s parents or legal guardians must be a party to the NIL agreement
- The student must provide a copy of each NIL agreement to the head coach, athletic director, principal, local superintendent, and chairperson of the local board of education
- The school athletic director must file copies of the agreements with the NCHSAA, which will provide an annual report of all agreements to the SBE
Importantly, there is no minimum amount of compensation that would trigger the reporting requirement.
In addition to these requirements, the proposed rule prohibits NIL from being used as a recruitment tool. Coaches, athletic directors, and other PSU employees as well as booster clubs and NIL collectives cannot promise NIL deals to recruit student-athletes to transfer to a school.
Conclusion
The SBE is not expected to appeal. Unless the General Assembly passes new legislation that conflicts with this ruling, the Court’s order that the proposed permanent rule take effect imposes new responsibilities on PSUs and their personnel. For assistance understanding the obligations under the proposed rule, contact an Education Law attorney at Poyner Spruill.
