On August 17, 2015, The National Labor Relations Board (the Board) declined jurisdiction over the group of Northwestern University scholarship football players who petitioned the Board for union recognition under the National Labor Relations Act (NLRA). The Board concluded that exercising jurisdiction would not serve to promote stability in labor relations.
While the Board’s decision was impactful in the labor relations context, the decision also significantly affected the landscape of American sports. The prospect of scholarship student-athletes being recognized as employees who can form a union under the NLRA is terrifying to higher education institutions that sponsor Division I athletics, Division I conferences and the NCAA.
The NCAA’s tax-exempt status has been publicly scrutinized by sectors of the federal government since 2006 when Rep. Bill Thomas, then Chair of the House Ways and Means Committee, asked the NCAA to defend its status as a tax-exempt organization. At the heart of Thomas’s inquiry was skepticism that major college athletics is actually an amateur or educational enterprise in light of massive spending on athletic facilities, lucrative coaching contracts and student-athlete participatory demands. While the NCAA has successfully maintained its tax-exempt status, the Northwestern unionization push may reopen the public scrutiny surrounding the NCAA’s tax-exempt status.
One reason for such additional scrutiny is based on the fact that the NCAA obtained (and retains) its tax-exempt status, in part, because of the NCAA’s promotion of “amateur sports competition.” Had the Board ruled that the Northwestern players could unionize, it may have furthered the argument that certain elements of college athletics function as a form of professional athletics, thereby diminishing one of the bases on which the NCAA retains its tax-exempt status. That is, the IRS (relying on that potential Board ruling) could have taken the position that the NCAA was no longer promoting “amateur athletics,” but rather was promoting a professional athletic organization.
In response to pressure from “Big Five” universities, media and litigation such as the O’Bannon case, Keller case and Northwestern Unionization case, the NCAA adopted legislation that creates autonomy for “Big Five” universities to provide additional benefits for student-athletes which were previously barred by financial aid and extra benefits limitations. In addition, the NCAA recently adopted legislation that allows student-athletes to receive athletics scholarships up to the university’s cost-of-attendance figure, where they previously could only receive scholarships up to the grant in aid amount. Depending on the university, scholarship student-athletes can now potentially take home thousands of additional dollars each semester. The NCAA continues to promote a paradigm of increased autonomy which will likely result in more deregulation allowing for increased student-athlete access to benefits at “Big Five” schools.
The goal of the NCAA and its affiliates is to placate student-athletes, and in-turn public perception, by providing student-athletes with additional benefits while maintaining its core foundation of amateurism, therefore maintaining its status as a tax-exempt organization. The Board’s decision to deny the unionization of college athletes at Northwestern represents a massive win for the NCAA and its members. The NCAA and its members may be able to point to this decision as support for their continued tax-exempt status as a promoter of “amateur” athletics.
While it appears that the push for student-athlete rights may have stalled on the labor front for now, the battle will switch to the anti-trust front as the NCAA must now deal with the lawsuit filed last year by Jeffrey Kessler. That lawsuit may once again open up public scrutiny of the NCAA’s tax-exempt status.
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