The NLRB, Northwestern University and Unintended Consequences

March 31, 2014

By: John Gaal

As reported here last week, the NLRB’s Regional Director in Chicago has determined that those members of the Northwestern University football team who receive grants-in-aid are “employees” under the National Labor Relations Act.  Even aside from the questionable basis for this conclusion, the Regional Director’s decision begs the question what are the possible unintended consequences of this decision?  And there are quite a few, only some of which are mentioned below. Perhaps the first unintended consequence is whether the Board’s determination, if upheld, will actually render these student athletes ineligible to play intercollegiate football.  Under NCAA By-law 12.1.2, only amateurs are eligible for competition under NCAA rules.  Therefore,  student-athletes may not use their athletic skill for pay in any form in the sport in which they compete.  If a student-athlete is receiving compensation for their services, as determined by the Regional Director, is that student-athlete now receiving “pay in any form in [their] sport” and as a result no longer an amateur able to compete?  The irony of course is if that ends up being the NCAA’s interpretation of its by-law, that would of course defeat the very purpose behind unionizing in the first place.  Moreover, this possibility is not dependent upon the student-athletes actually unionizing but rather on the mere fact that they are now “paid” for playing.  It would seem that if bargaining actually resulted and any additional benefits were provided to these student-athletes, the likelihood of a loss of amateur status would be even greater. For any other “employee” being “compensated” for their services, income tax is required to be paid on that compensation.  While the test for an employee under the National Labor Relations Act may not be identical to the test used by the IRS, how far behind can taxation be?  Using the numbers reported in the Regional Director’s decision for the value of the players’ grants-in-aid (as much as $76,000 per year at Northwestern), where is a player, or his family, going to come up with the cash to cover this tax bill? In addition, if an employee for this purpose, do players now become employees for purposes of Workers’ Compensation law, and the exclusivity of relief against their “employer” for injuries incurred “on the job” (which may well be less than beneficial to players)? Just how effective can collective bargaining even be in this circumstance?  Colleges and universities are constrained by NCAA rules in terms of benefits that can be given to student-athletes, so it is hard to imagine how bargaining could result in “more” than what is currently provided student-athletes.  In addition, the impact of Title IX would likely require any benefits provided to, for example, football players to be provided to a comparable number of scholarship student-athletes on women’s teams.  Or more likely, the added cost of so complying with Title IX simply makes it that much less likely that any meaningful benefits would flow from bargaining.  And would there be any institutional incentive to provide benefits to non-scholarship players, who even the Regional Director found were not employees?  What would the impact be of some student athletes on a team having the benefits of collective bargaining and others not? Of course, this ruling is presumably not limited to football teams and players.  How does it impact other sports where perhaps only a minority of team members receive grants in aid (and therefore might be “employees” who can be covered by a collective bargaining agreement), but the majority do not (and therefore are not employees at all)? In fact, this ruling presumably is not even limited to athletics.  At some institutions, members of the marching band receive scholarships in return for the “services” they provide.  Undoubtedly, they too are subject to various rules that constrain when and what they can and cannot do (for example, not schedule classes that conflict with afternoon practices).  Other student activities (e.g., Debate at some institutions) also carry stipends or scholarships and likely subject participating students to certain rules not applicable to others.  Are they all now “employees” eligible to organize?  And given the Board’s willingness to recognize “micro-units,” will these all be separate bargaining units? These are just some of the “unintended consequences” flowing from what appears on any number of levels to be an ill thought out determination, as the NLRB continues to attempt to make itself “relevant” in an era when traditional unionization of American workers remains at or near all-time lows. Of course we may not know the answer to these questions for years to come.  The nature of the NLRB review process in an organizing context makes it likely that this issue will not come before the courts, where it is most likely to be resolved, for many years to come.