On Wednesday, the Regional Director for the Chicago Region of the National Labor Relations Board ("NLRB") ruled that football players receiving scholarships from Northwestern University are "employees" for the purpose of the National Labor Relations Act ("NLRA"). This ruling clears the way for the players to unionize and bargain collectively with Northwestern over mandatory subjects including wages, hours, and other conditions of employment, such as room and board, practice schedules, and more.

The term "employee" under the NLRA is broadly defined, and requires application of the common law agency principles; however, in the context of universities and colleges, the NLRB also examines an individual's relationship with the college or university and determines whether that relationship is based on education or economics. In 2004, the NLRB decided that graduate, research, and teaching assistants were not employees because their relationship to their university was based on education, not economics. (see Brown University, 342 NLRB 483 (2004)).

In applying these principles to Northwestern football players, the Regional Director noted: (1) players receive between $61,000 and $76,000 per academic year in scholarships; (2) players are subject to special rules of conduct and are under Northwestern's control (for example, players are prohibited from profiting off their image or reputation and must sign a release to Northwestern and the Big Ten Conference for the same); (3) players, on average, dedicate approximately 40 to 60 hours per week to their sport (in spite of the NCAA rule limiting players to 20 hours per week during the season); (4) players are recruited for their football prowess, not their academic achievements; and (5) Northwestern's football program generates a large amount of revenue (since 2003 the football program has generated $8 million in profits, each year).

Based on the factors listed above, the Regional Director found scholarship-football players are employees under the NLRA. In distinguishing the graduate students in Brown University, the Regional Director noted that the football players cannot be considered "primarily students" because they spend so much time on football, they do not receive any academic credit for playing football, the academic faculty do not supervise the athletic duties of the football players, and Northwestern never offers a scholarship to a prospective student unless he intends to provide athletic services to the university.

On the other hand, the Regional Director found walk-on players do not receive compensation for athletic services, do not sign a formal tender offer, and are not subject to the same strict controls exerted over scholarship players. Therefore, walk-on players are not employees under the NLRA.

Northwestern has publicly stated its intention to challenge the Regional Director's decision by appealing to the NLRB. In the event the football players vote to be represented by a union, Northwestern may continue to fight the NLRB by refusing to bargain with the union. In that event, the union would seek relief from a Federal Court of Appeals, and the question of whether football players are employees under the NLRA will be decided by that court, and perhaps even the Supreme Court.

In the meantime, the Regional Director's decision is limited to private universities because the NLRB's jurisdiction only applies to private universities. In Oregon, state universities are under the jurisdiction of the Oregon Employment Relations Board ("ERB"). In January 2013, ERB decided that graduate assistants are employees under Oregon's Public Employee Collective Bargaining Act. Coalition of Graduate Employees, Local 6069, Case No. UC-04-12, 2013 WL 485140 (Jan. 4, 2013). This decision signals a potential favorable outcome under Oregon law should student athletes decide to petition for representation by a labor organization.

In the wake of the Regional Director's decision, private colleges and universities have legitimate concerns over potential claims under the Fair Labor Standards Act ("FLSA"). If football players are employees under the NLRA, are they also employees under the FLSA? If so, this decision could trigger former and current college athletes to file claims seeking compensation for minimum wage, unpaid wages, and overtime.