This is the second installment of a series regarding legal issues affecting college athletics that will run during this year’s NCAA basketball tournament.

It is no secret that the salaries of coaches of high profile college programs are rising steadily.  In a recent report listing the highest paid public employee for each of the fifty states, 40 were college coaches.  While Alabama football coach Nick Saban led that list with annual compensation of around $7 million, the Chronicle of Higher Education also reported the Crimson Tide were just 1 of 10 athletic programs in 2014 to give more money back to its campus than it received in subsidies.  As a famous comic book hero once said – “with great power, comes great responsibility.”  It is therefore important to examine the legal concerns affecting coaching pay, which based on recent events, will increasingly include responsibility for conduct detrimental to athletic programs.

When Texas A&M’s men’s basketball team completed a historic comeback in the last minute of its second round matchup with Northern Iowa, the Aggie fan base celebrated the win and their basketball coach celebrated a new bonus payment, as did 7 of his peers coaching in the Sweet Sixteen.  Because the amounts paid by Division I institutions to coaches often dwarf the amounts paid to the presidents they report to, the subject of regulation is frequently raised.

The IRS began to chime in on this issue three years ago when it released findings from its College and Universities Compliance Project, which questioned the tax compliance of certain high-level perks such as cars, housing, social clubs and travel.  The IRS’s reach with respect to institutional penalties for Division I schools is generally limited to the tax-exempt private institutions, who are often the minority in the field of revenue-generating programs.

This does not mean legislative action is out of the question, especially after a recent attempt to enact a financial transparency bill for college athletics.  As attention to pay packages increases, the pressure to assess how public funds are spent means institutions must be increasingly mindful of the basis for compensation decisions and protections to the university for the sizable benefit being conferred.

At the risk of raising the pink elephant in the room, what then protects a university that has invested millions in a quality coach and millions more in infrastructure to build a competitive athletics program from losing that investment overnight due to sanctions caused by a major violation?  In a world where contracts are intimately familiar with terms like “related athletic income” and “liquidated damages,” where is the protection from rogue athletic staff essentially supplying improper evening entertainment to recruits?

This is an area of potential leverage for presidents and athletic directors.  For one, NCAA rules require that all contracts for athletic personnel include compliance with its bylaws.  Second, thanks to the new violation structure implemented two academic years ago, additional responsibility falls on coaches.  However, having the basis to enforce specific remedies and taking legal protections to do so remain separate matters.  Consider the following text from NCAA Bylaw 11.1.1:

An institution’s head coach is presumed to be responsible for the actions of all institutional staff members who report, directly or indirectly, to the head coach.  An institution’s head coach shall promote an atmosphere of compliance within his or her program and shall monitor the activities of all institutional staff members involved with the program who report, directly or indirectly, to the coach.

In the spirit of the winnowing of the field to the Final Four, I leave the following considerations for those who let moss grow on their coaching contracts by either renewing an old document, using a time-honored “form agreement” or sought to cure their contract ailments by enacting 16 amendments to the original document:

  • It’s time to start over – part of the problem with any employment contract is a failure to understand both legal and industry changes which may have affected your protections and contractual remedies.
  • Understand your geography – unless you follow legal opinions closely, you may not be aware of California’s position on non-competes (“what’s that?”) or the Arkansas Attorney General’s position on public universities providing post-employment sabbaticals (“expect high scrutiny”).
  • Employment rights include issues before and after employment – the right to obtain factually accurate background information does not disappear day one, nor should your right to ask a departing employee to cooperate in preparing for a Title IX investigation.
  • No one should be expected to tell the future – but you can protect your institution against a variety of potential circumstances by the conditions placed on both buyouts and severance packages.