This summer brought significant legal and administrative changes to college athletics, reshaping the landscape for the upcoming academic year. Key court rulings, including the landmark House v. NCAA settlement, have mandated a $2.8 billion payment to former Division I athletes and established a future revenue-sharing model. Additionally, the Third Circuit Court's ruling in Johnson v. NCAA has opened the door for athletes to be considered employees, potentially entitling them to minimum wage and overtime pay. These developments, along with new NCAA regulations and policies, are set to have profound financial and operational implications for institutions across the nation. 

THE HOUSE V. NCAA SETTLEMENT

In May 2024, before summer officially kicked off, the NCAA and its Power Five conferences (SEC, ACC, Big Ten, Pac-12, Big 12) agreed to settle a veritable trilogy of cases: House v. NCAA, Hubbard v. NCAA and Carter v. NCAA. 

The settlement would resolve a host of antitrust claims by requiring the NCAA to pay around $2.8 billion over ten years to former Division I athletes and establishing a revenue-sharing model for athletes beginning with the 2025-2026 academic year.[1] The agreement still requires approval from the federal judge overseeing the case, and plaintiffs will have the opportunity to opt out of or challenge the settlement terms. However, if it is approved, it would not be an understatement to suggest that the era of amateurism in intercollegiate sports is over. 

The Trio of Cases 

While the three cases are close to concluding, it’s worth briefly restating their respective backgrounds: 

• House v. NCAA, 4:20-cv-03919 (N.D.Cal.): Former and current athletes filed a lawsuit arguing that the NCAA committed antitrust violations when it prohibited schools from compensating athletes for using their NIL and prohibited athletes from receiving NIL compensation based on athletic performance. The athletes seek to recover damages for being prohibited from profiting off NIL prior to the NCAA’s interim NIL policy – essentially “backpay” in NIL monies. 
• Carter v. NCAA, No. 3:23-cv-06325 (N.D.Cal.): Similar to the House case, athletes claim that the NCAA’s rules prohibiting “pay for play” violate antitrust laws and seek damages for payments they would have received had the NCAA rules not been in place. 
• Hubbard v. NCAA, 4:23-cv-01593 (N.D.Cal.): Former athletes filed suit against the NCAA and other athletic conferences seeking to recover damages for being prohibited from receiving Alston awards – essentially “backpay” in Alston awards. Following the landmark NCAA v. Alston decision, schools can award educational-related benefits up to $5,980 annually (also known as Alston awards).

The Objections Era 

While the settlement officially terminates only the above three cases, it would effectively end other ongoing cases because the athletes would be covered under the House settlement. These cases include: 

• The Colorado Cases (Fontenot v. NCAA, No. 1:23-cv-03076 (D.Colo.) and Cornelio v. NCAA, 1:24-cv-02178 (D.Col.)): Athletes in Fontenot assert that the NCAA and Power Five conferences committed antitrust violations when they prohibited sharing revenue with athletes. In Cornelio, a former baseball athlete claims that the NCAA committed antitrust violations when it capped the scholarship limits for sports other than basketball and football. Plaintiffs in these cases filed objections to the House settlement on many bases, including that the proposed settlement amount is inadequate, the representation is inadequate, and the proposal contains unfair terms, including an “imposition of a salary cap without going through collective bargaining.”[2] 
• Choh v. NCAA, 3:23-cv-00305 (D.Conn.): Ivy League athletes asserting that the Ivy League and its member schools committed antitrust violations when they decided not to provide athletic scholarships to their Division I athletes – known as the “Ivy League Agreement”. Plaintiffs in this case filed objections to the House settlement on the basis that their claims would be improperly released and not properly address their claims.[3]

In addition to the above, a group of female rowers filed an objection to the settlement, arguing that the settlement discriminates against women athletes as it (1) undercompensates women’s NIL damages and (2) does not account for lost scholarships.[4] The trajectory of these objections will be interesting to follow, after one objection has already been rejected. Houston Christian University attempted this summer to intervene and stop the settlement, which was denied, but is now appealing the ruling to the U.S. Court of Appeals for the Ninth Circuit. [5]  

What the House Settlement Means for Your Campus 

The NCAA and every Division I program is on the hook for the $2.8 billion. The NCAA announced that it will use its reserve fund — set aside from its profits — to pay roughly 40%. Division I conferences will have to pay the other 60%, but in a unique way: the Power Five conferences (ACC, SEC, Big 10, Big 12, Pac 12) will take on 40%, and the rest will be paid by non-power conference schools. As it relates to sharing revenues with athletes in the future, athletic departments would be permitted to pay 22% of the average Power Five school’s revenues to athletes, with that percentage automatically increasing year over year. 

If (and when) the settlement is approved, Division I institutions will need to budget for the backpay expense at a minimum. If they choose to do so, institutions can begin revenue sharing with their athletes. For Division II (DII) and Division III (DIII) institutions, the financial obligations of the NCAA will have a trickledown effect. Undoubtedly, the NCAA will reassess its distribution formulas at each classification level. The current NCAA distribution provides most of the funding for post season championships (60% for DII and 75% for DIII). Any decrease in the current formulas would place an additional financial burden upon member schools to provide the current championship experience for their athletes. 

The Johnson v. NCAA Third Circuit Court Ruling  

This case centers around the idea of “if” student-athletes can be deemed employees and, therefore, be entitled to payment for their participation in athletics under the Fair Labor Standards Act (FLSA).  

Procedurally, the district court held that the athletes “plausibly alleged” they were employees under the FLSA, denying the NCAA’s motion to dismiss. The NCAA argued that two circuits – the Seventh and the Ninth – have opined that student-athletes are not employees under the FLSA.[6] However, this time around, the NCAA’s amateurism argument was vulnerable with recent activity in the NIL and revenue sharing space. The NCAA appealed the ruling to the Third Circuit, leaving the question whether student-athletes can be found to be employees. 

In July 2024, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal of the NCAA’s motion to dismiss. In doing so, the Third Circuit rejected the NCAA’s longstanding position that college athletes cannot be employees and ordered the district court to apply a different test – the “economic realities test” - to analyze the athletes’ employment statuses.  

What this Means for Your Campus 

Nothing immediate, at least not right now. If the district court determines that players are deemed FLSA employees, athletes would be owed at least minimum wage for their labor and eligible for overtime pay. Further, it could lead to the NCAA and colleges being ordered to pay millions of dollars in unpaid wages – and maybe even back wages – as well as forced to amend amateurism rules to recognize an employee-employer relationship. 

If (and when) this employment structure is a reality, leaders on campus should consider conducting a cost-benefit analysis of their athletic program to determine how they would plan to sponsor athletics and to what level. For example, those at institutions that don’t offer athletic scholarships would have to consider whether the new labor costs associated with athletes would be tolerable. And those at institutions that do offer athletic scholarships would have to consider whether they should “trade” the current athletic scholarship award into a cost of labor category moving forward, essentially spending the same amount of money, but classifying it differently. Many campuses will need to ‘right size’ their athletic departments based on this change alone.  

[1] Pls.’ Mot. For Prelim. Settlement Approval, In re College Athlete NIL Litigation, No. 4:20-cv-3919 (N.D.Cal.) (July 26, 2024) (ECF No. 450). 

[2] Pl.’s in the Colorado Cases Resp. in Opp’n to Mot. for Prelim. Approval, at 17, In re College Athlete NIL Litigation, No. 4:20-cv-3919 (N.D.Cal.) (Aug. 9, 2024) (ECF No. 473).  

[3] Opp’n to Pl.’s Mot. for Prelim. Approval by Tamenang Choh and Grace Kirk, on Behalf of a Proposed Class of Ivy League Athletes, In re College Athlete NIL Litigation, No. 4:20-cv-3919 (N.D.Cal.) (Aug. 8, 2024) (ECF No. 460). 

[4] Obj. to Settlement Agreement and Opp’n to Mot. for Prelim. Settlement Approval, In re College Athlete NIL Litigation, No. 4:20-cv-3919 (N.D.Cal.) (Aug. 8, 2024) (ECF No. 475).

[5] Order Den. Mot. for Intervention by Houston Christian Univ., In re College Athlete NIL Litigation, No. 4:20-cv-3919 (N.D.Cal.) (July 24, 2024) (ECF No. 446). 

[6] See Berger v. NCAA, 843 F.3d 285 (7th Cir. 2016), (holding that that student athletes were not employees and are not covered by the Fair Labor Standards Act.); Dawson v. NCAA, 932 F.3d 905 (9th Cir. 2019) (holding a student-athlete in a football program was not an employee of the NCAA or Pac-12 under the FLSA).

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