Labor & Employment Law Daily California governor signs measure allowing paid student-athlete endorsements, heightening conflict with NCAA
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Friday, October 4, 2019

California governor signs measure allowing paid student-athlete endorsements, heightening conflict with NCAA

By Thomas Long, J.D.

The measure—which was opposed by the NCAA—will allow student athletes to be paid for endorsements without being barred from competition or losing scholarships.

California Governor Gavin Newsom on September 30 signed legislation that allows student athletes to earn income from commercial exploitation of their names, images, and likenesses. The Fair Pay to Play Act (S.B. 206) amends the California Education Code to prohibit four-year secondary educational institutions from upholding “any rule, requirement, standard, or other limitation” that prevents students participating in intercollegiate athletics from earning compensation for use of their name, image, or likeness. Student athletes will also be permitted to hire sports agents and keep their scholarships if they receive income for their endorsement work. The measure also would prohibit the National Collegiate Athletic Association (NCAA) and other athletic associations, conferences, and organizations from preventing educational institutions affected by the bill from participating in intercollegiate athletics. The bill, however, stops short of allowing student-athletes to receive remuneration from the schools themselves, except for scholarships covering educational costs. The Fair Pay to Play Act will take effect on January 1, 2023.

The bill, introduced by Sen. Nancy Skinner (D-Berkeley), passed the State Senate on May 22 by a 31-5 vote. The Assembly passed the bill 73-0 on September 9 after amending the bill to include provisions addressing conflicts between athletes’ deals and teams’ merchandising deals, such as shoe and apparel contracts. Athletes would not be allowed to have a deal that conflicts with their team’s contract, but a team contract would not be allowed to restrict athletes from using their names, images, and likenesses for a commercial purpose when not engaged in official team activities. Another Assembly amendment explicitly exempts community colleges from the bill’s provisions relating to student athlete compensation and representation, while requiring the California Community Colleges to convene a working group to review current rules governing the use of student athletes’ names, images, and likenesses. The Senate approved the amended measure unanimously. Governor Newsom signed the measure during a special episode of sports talk show “The Shop: Uninterrupted.”

Beginning of a national trend? “This is the beginning of a national movement—one that transcends geographic and partisan lines,” said Governor Newsom. “Collegiate student athletes put everything on the line—their physical health, future career prospects and years of their lives to compete. Colleges reap billions from these student athletes’ sacrifices and success but, in the same breath, block them from earning a single dollar. That’s a bankrupt model—one that puts institutions ahead of the students they are supposed to serve. It needs to be disrupted.” Senator Skinner added, “Signing SB 206 makes California the first state to restore to student athletes a right everyone else has: the right to earn money from their name, image, and likeness.”

NCAA resistance. The NCAA, which has opposed the legislation, is considering next steps, and a working group on name, image, and likeness is expected to release its recommendations in October. In a statement following Governor Newsom’s signing of the bill, the NCAA said, “As a membership organization, the NCAA agrees changes are needed to continue to support student-athletes, but improvement needs to happen on a national level through the NCAA’s rules-making process. Unfortunately, this new law already is creating confusion for current and future student-athletes, coaches, administrators and campuses, and not just in California.” The NCAA continued, “As more states consider their own specific legislation related to this topic, it is clear that a patchwork of different laws from different states will make unattainable the goal of providing a fair and level playing field for 1,100 campuses and nearly half a million student-athletes nationwide.”

After the Assembly’s passage of the measure on September 11, the NCAA Board of Governors published a letter it sent to Governor Newsom, asking California to “reconsider” the bill. “If the bill becomes law and California’s 58 NCAA schools are compelled to allow an unrestricted name, image and likeness scheme, it would erase the critical distinction between college and professional athletics and, because it gives those schools an unfair recruiting advantage, would result in them eventually being unable to compete in NCAA competitions,” the letter stated. Instead of taking unilateral action, the letter urged California to participate in a collaborative process to resolve the issue. According to the letter, “NCAA member schools already are working on changing rules for all student-athletes to appropriately use their name, image and likeness in accordance with our value—but not pay them to play.”

Earlier class action. In January 2015, the NCAA amended its bylaws to allow member schools to provide up to the full cost of attendance in athletic aid. The action was taken in response to class action litigation filed by student-athletes. In September 2015, the Ninth Circuit affirmed a district court ruling that NCAA rules prohibiting student-athletes from being paid for the use of their names, images, and likenesses constituted an unreasonable restraint of trade in violation of the Sherman Act, but overturned the district court’s remedy of prohibiting the NCAA from barring colleges from providing deferred compensation to student-athletes. O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015).

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