Seyfarth Synopsis: The Ninth Circuit has held that, under federal and California law, college student-athletes are not employees of either the NCAA or the Pac-12, the regulatory bodies that govern college sports.

The Facts

Dawson played football for the University of Southern California. USC is a member of the National Collegiate Athletic Association and the Pac-12 Conference. The NCAA is an organization encompassing more than 1,100 colleges and universities nationwide. The Pac-12 operates a multi-sport collegiate conference.

NCAA member schools agree to administer their athletic programs in accordance with the NCAA constitution, bylaws, and other NCAA policies. Consistent with its decades-long tradition of amateurism, the NCAA in its bylaws prohibits student-athletes from being paid to participate in school athletic programs. The bylaws also provide that student-athletes may receive financial aid based on athletic ability, but that the amount of aid must not exceed the value of the student’s cost of attending the school.

Dawson sued the NCAA and the Pac-12, claiming that he and other Division I athletes were employees for purposes of California and federal law. Dawson did not sue USC.

The Court of Appeal’s Decision

Reviewing the District Court’s order dismissing Dawson’s complaint, the Ninth Circuit held that Dawson was not an employee of either the NCAA or Pac-12. The Ninth Circuit first applied the “economic realities” test under the federal Fair Labor Standards Act (FLSA), which considers (1) the expectation of compensation, (2) the power to hire and fire, and (3) evidence that an arrangement was conceived or carried out to evade the law.

The Ninth Circuit held that Dawson’s scholarship did not create an expectation that he would receive compensation from the NCAA or the Pac-12, as he did not receive his scholarship from either of them. The Ninth Circuit also held that the regulation limiting scholarships to the cost of attendance did not create any expectation of compensation. Next, the Ninth Circuit found that neither the NCAA nor Pac-12 had the ability to hire or fire Dawson. Although the NCAA bylaws regulate college athletics, neither the NCAA nor Pac-12 choose the players on a team or supervise the players’ performance. Finally, the Ninth Circuit held that there was no evidence that the arrangement was designed to evade the law because the NCAA rules have existed in some form since before Congress enacted the FLSA.

The Ninth Circuit also rejected Dawson’s claim that the NCAA and Pac-12 were his employers under California law. California, by statute, exempts student-athletes from workers’ compensation benefits. California appellate courts have held that student-athletes are not employees of their universities for purposes of the California Tort Claims Act and the Fair Employment and Housing Act, reasoning that the workers’ compensation exemption reflects a legislative intent to exclude student-athletes from California’s employment laws. Applying similar reasoning, the Ninth Circuit held that student-athletes also are not employees of the NCAA or Pac-12 for purposes of California’s wage and hour laws.

Seyfarth Shaw represented the Pac-12 before both the district court and the Ninth Circuit.

What Dawson Means for Employers

There have been numerous efforts over the years to persuade courts and administrative agencies to confer employee status on student-athletes. In Dawson, the Ninth Circuit has recognized that, as a matter of law, student-athletes are not employees of either the NCAA or the Pac-12, the regulatory bodies governing college sports, for purposes of the FLSA and California wage and hour law. Dawson provides useful insight into how the Ninth Circuit applies the sometimes amorphous FLSA “economic realities” test. It remains to be seen what impact Dawson will have on other efforts to challenge the status of student-athletes.