Seventh Circuit Rules Student Athletes Not Employees of University

Seventh Circuit Rules Student Athletes Not Employees of University

December 14, 2016

by Jerry Glover

The U.S. Court of Appeals for the Seventh Circuit, located in Chicago, has ruled that college athletes are not employees of their universities and thus are not entitled to minimum wages under the federal Fair Labor Standards Act (“FLSA”). Berger v. National Collegiate Athletic Association, 2016 WL 7051905 (7th Cir. December 5, 2016). The athletes sued the University of Pennsylvania and over 120 other NCAA Division 1 universities/colleges. The lead plaintiffs were former athletes at Penn on the university’s women’s track and field team.

The trial court had ruled that the athletes had failed to state a claim against Penn holding that student athletes are not employees under the FLSA. The Seventh Circuit agreed.

The appeals court noted that the FLSA (29 U.S.C. Sec. 201 et seq.) requires employers to pay employees a minimum wage of $7.25 per hour. The court added, however, that the statute does not clearly define who or what an employee is; it only states that an employee is “any individual employed by an employer.” The Act also defines “employ” as “to suffer or permit to work.” The word “work” is not defined. So what’s a court to do when confronted with the question of whether someone is an employee under this federal law?

The Seventh Circuit noted that the terms “employee” and “employer” as used in the FLSA should be defined expansively but not without limits. The court added that each case under the statute that presents the question of whether the plaintiff is an employee requires an examination of the economic reality of the working relationship between the so-called employee and so-called employer. The court explained that courts have developed several multifactor tests to determine whether someone is an employee including the U.S. Court of Appeals for the Second Circuit (located in New York City). We discussed the Second Circuit case here.

The Seventh Circuit noted that it had rejected multifactor tests in the past because they were not flexible enough and especially when they fail to capture the nature of the plaintiff’s and defendant’s relationship. Consideration of the parties’ economic reality, the court noted, was always a better way to decide these cases.

Turning to the athlete’s matter, the court noted that the economic reality of college sports was a long tradition of amateurism. The court noted that the NCAA had established a set of eligibility rules to maintain that amateurism among its athletes. The appeals court also noted that several other courts had ruled that student athletes are amateurs in various contexts including workers compensation cases (see, e.g., Rensing v. Indiana Statue University Board of Trustees, 444 N.E.23d 1170 (Ind. 1983)). The court also noted that the U.S. Department of Law Field Operations Handbook indicates that student athletes are not employees under the FLSA. The Handbook explains that students who participate in extra-curricular activities are generally not classified as employees under the FLSA. The book lists several examples of those extracurricular activities including dramatics, student publications, bands, debating teams, radio stations as well as intramural and included interscholastic athletics. The Handbook notes, however, that employer/employee situations can arise with students if the student is participating in a work-study program including working a school’s food service counters or selling programs or ushering at school event.

The student athletes in this case claimed to be like those students in a work-study program arguing that the Handbook’s reference to extracurricular activities/interscholastic sports meant student-run club sports. But the Seventh Circuit disagreed noting that the students had failed to provide any argument to suggest the Department of Labor meant to limit “interscholastic athletics” to student-run sports noting that the list of extracurricular activities in the Handbook was not limited to activities that are entirely student run. The court also noted that NCAA sports are “extracurricular” and “interscholastic athletic” activities.

The court concluded that the students participated in college athletics voluntarily and participated in those activities for reasons wholly unrelated to immediate compensation.

NOTE: The National Labor Relations Board has side-stepped this issue. In a case brought in 2015 by Northwestern University football players, the Board decided it did not have jurisdiction to determine whether the students were employees under the National Labor Relations Act. See Northwestern University and College Athletes Players Association, 13-RC 121359 (NLRB August 17, 2015).

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