Transcript

Host: Hello and welcome to Prevention and Protection, the United Educators risk management podcast. Today, Amy Piccola, a partner at Saul Ewing Arnstein & Lehr in Philadelphia, and Melanie Bennett, Senior Risk Management Council at United Educators, will discuss higher education athletics benefits.

A reminder to listeners that you can find other UE podcasts, as well as UE risk management resources, on our website, www.ue.org. Our podcasts are also available on Apple Podcasts and Spotify. Now, here’s Melanie.

Melanie Bennett: Thank you. I’m pleased to welcome back Amy to our podcast. Amy, in an episode last year, we discussed how the, at that time, new Supreme Court decision and the NCAA changes might affect athletics benefits. It’s a year later. Let’s find out what we’ve learned. To start with, what changes have occurred in college and university athletics over the last year?

Amy Piccola: We’ve had some big changes and there are promises to have more, or at least to have more developments of the changes that we’ve already seen over the past year. We have this new post-Alston world of education-related benefits. We have a brand new name, image, and likeness [NIL] landscape to continue navigating. On top of all of that, and this is outside of the scope, I think, of our conversation today, but it’s worth noting as an item of interest headed into 2023, is that the debate about student-athletes as students or as employees will really continue.

The NLRB has staked out a pretty firm position that, in its view, student-athletes should be considered to be employees. We have a case pending in the Third Circuit that’s taking on a different angle of that same debate. Keep your eyes and ears open for continued developments on that front for sure.

Bennett: A lot of the conversation last year was specifically around name, image, and likeness allowances. Are student-athletes taking advantage of this now that it’s available?

Piccola: They are. We have seen a proliferation of brand deals, training clinics associated with individual student-athletes, paid appearances, autograph signings, all of the things that I think we imagined would happen for student-athletes have, in fact, come into being. It’s important to think about this, though, that it’s not necessarily big money for individual student-athletes, but it’s meaningful for college students to have even a few hundred dollars here and there or free products. You’ll often see, The Vitamin Shoppe is a good example of engaging student-athletes who have maybe not a ton of social media followers, but they’ve created a cohort of these athletes. Those athletes are using their protein powders and vitamins and things and in payment for endorsing those products, they’re getting more of those products.

We see a lot of that type of action. It may not be the big money, the big dollars, but it’s meaningful, particularly again when you think about this through the lens of college students covering day-to-day living expenses and the like. An interesting but sort of related note on that it’s not necessarily big-money piece is really that while NIL continues to get the headlines, many athletes and institutions have reported that Alston benefits are really more impactful for those students.

Those Alston benefits being the education-related benefits that student-athletes are now entitled to in a new way after the Supreme Court’s decision last year, and if you think about those students being able to access up to $6,000 or just short of $6,000 a year or $24,000 over the course of a four-year college term, that’s pretty impactful. On the other end of the spectrum, just to close the loop, from these day-to-day expenses being covered through NIL are really the athletes primarily at Power Five schools. These are the folks who are making what some people would call life-changing money. These are the people who are in really big programs, they get a ton of attention, and they’re accessing almost the same types of endorsements that we see from young professional athletes.

Just as a data point, the University of Arkansas released some data earlier this year that said that through July of 2022, somewhere around 140 of the university student-athletes had participated in some type of NIL activity. Remember, that can range from autograph signings to brand deals. They engaged with over 170 companies. They had 300 individual NIL agreements and the average student-athlete at the University of Arkansas was earning a little over $4,000 on those NIL deals through the first half of this year. All of that’s to say the spectrum is broad, the range is broad, but absolutely, student-athletes are taking advantage of this new entitlement to benefit from their own names, their own images, their own likenesses, which is, I think, the goal.

Bennett: It sounds like your predictions last year were pretty spot on. I remember you talking about a lot of these practices as possibilities at that point. Have you seen any unexpected effects this year that you weren’t anticipating?

Piccola: I’m not sure if I would say unexpected necessarily, at least from the institutional perspective. In some ways, we’re seeing exactly what we anticipated from a risk management or legal perspective, but that’s not to say that we aren’t seeing maybe more messiness than we thought would be possible. What I mean when I say messiness really is that we continue to struggle with trying to determine whether a student-athlete’s individual NIL deal conflicts with a school or team contract. You’ll remember from the discussion last year, we really talked about individual state legislation, NCAA guidance, saying, “Great, go out there and make money. Benefit from your NIL, but don’t be in conflict with what your institution is doing.” The classic examples are something like an apparel company having a deal with a particular school, so all of the athletes are outfitted in that apparel company’s gear. Then, the student-athlete goes into the marketplace and makes their own individual NIL endorsement deal with a different apparel company. At what point is there a conflict when the student is out and about on the town wearing that non-institution endorsement deal apparel company’s attire? Is it only when they’re on campus? Is it only when they’re at games or in practices? There’s, again, some messiness as we try to understand what these rules or what the black-and-white-seeming language of legislation actually means in real practice.

Another thing that I think is, it’s not necessarily unexpected but has created some speed bumps for some institutions and students is to really figure out what happens if a student doesn’t follow either an institution’s NIL rules or is in conflict with state legislation. At the institution level, are we talking about a disciplinary action? Under what processes have we developed NIL-specific processes for dealing with what’s essentially a conduct issue? Is there an impact on eligibility to continue to participate in athletics? Have the students been warned about these things?

Then, on the state level, we’ve seen, and there were some pretty interesting reports over the course of the year. There was this proliferation of state legislation. Various states have said, “Yeah, we’re not actually engaging in enforcement action,” which means either an institution or a student who doesn’t comply with the law isn’t necessarily facing consequences for doing so, and really, to put a fine point on that, it’s often because the legislation itself doesn’t say what the ramifications for noncompliance might be.

Again, it’s not necessarily unexpected that we would have these types of speed bumps or things to work through, but it’s the messiness. What does this all mean now that it’s real life? If I had to give you something that’s unexpected, it may be sitting in the shoes of a student-athlete who you get this news, I’m going to be able to benefit from my NIL, the reins have been loosened, the NCAA isn’t going to be as involved as it was before, and I think we’re seeing some shock around impacts on financial aid. Tax implications, potentially impacts on immigration status when students are able to start earning money in ways that they weren’t before. Again, that’s not unexpected. I think we were ringing that bell a year ago, saying that this is not going to be without consequence to the students. But when you have those moments of we won, those moments of victory, sometimes the realities again of those impacts can take us by a little surprise.

Bennett: Yeah, that’s a lot of complications. I’m glad you’re here to walk through everything and explain it. But for those student-athletes, I’ve got to imagine for students coming into athletics for the first time, unfamiliar with athletics benefits, that’s a lot to quickly learn. Are you seeing campuses provide training to student-athletes, training to employees on athletics benefits allowances?

Piccola: This is going to sound super lawyerly, but I’m going to say probably not enough training or at least not enough yet. And I hope that speaks to your risk management heart as well. In many areas or many facets of what we’re doing on campus, more training, more structure could benefit. Athletes at many schools, particularly these really robust athletics programs, the name brand athletics programs, are undoubtedly accessing more resources. They’re getting training on things like financial literacy, what does it mean to start making money and potentially for, again, those Power Five athletes, that life-changing money. How do you build your brand? What does it mean to engage in the marketplace? How do you get an NIL deal, and how do you start assessing NIL deals that may be worth it, may not be worth it.

That’s all really important, and I commend institutions who have the resources to provide that type of training for doing so. It’s necessary, I imagine, for recruitment. I am a school that offers all of this robust programming, all of this robust training on how to do NIL right or better. I imagine it’s the same thing on the retention side of things when we talk about student-athlete enrollment. But it’s not necessarily helpful, and it’s not always helpful looking at some of the curriculum for these programs, to helping students navigate some of that messiness we talked about. The implications on financial aid, if they’re financial aid eligible, tax implications, the implications on immigration status, all of those things. It’s always referenced, at least mostly it’s referenced in policy, but whether students are actually getting the training and are being encouraged to engage in conversations before they enter the NIL landscape is a little bit uncertain.

I think the same is probably true on the employee side, as with so many things, when you have a change, you have a new set of rules or the skeleton of a set of rules, when we think about what the NCAA did with respect to NIL. The focus in the first instance is, “How do we get a policy and process in place, so that we’re in legal compliance or we’re in compliance with [the] NCAA in conference expectations? How do we take advantage of this new latitude for recruitment purposes?” Some of the things that we just talked about with respect to student-athletes. Again, those are really important, and I don’t question the need to prioritize just getting something in place.

But I’m not sure that there’s been as much space for that ground-floor training. How do I assess whether a student-athlete’s NIL deal is in conflict with our institution’s endorsement agreements? How do I assess whether or not a particular student-athlete should be guided to financial aid resources? Some of those things, I imagine, are the things that are on the agenda of athletics departments, general counsel offices headed into 2023 as we continue to get our feet under us a bit more in dealing with some of these things.

Bennett:

That’s a good takeaway from this conversation. Institutions that don’t yet have training should start looking into getting that training, making sure it’s available, and institutions that do should take a closer look and just making sure it’s as comprehensive as possible and I would assume continues to grow over the next few years.

We’ve been talking a lot about the implications of the federal changes over the last year. Can you tell us a little bit about the state name, image, likeness and benefits laws that have changed over the past year?

Piccola: Interestingly, one of the most notable things over the past year has really been a slowdown in legislative activity. On the one hand, that’s for fairly good reason. I think we, at a high point, had somewhere around 30 of the states had NIL legislation cooking. Once you reach that critical mass of states, there’s not much room for continued growth. But I think the reality of the Supreme Court slapping [the] NCAA on the wrist a little bit, [the] NCAA reacting by first saying with respect to NIL, “All right, we’re going to be a little more hands-off. Institutions, states, it’s up to you unless and until we get more federal guidance.”

Then also, we saw at the start of this year, constitutional changes for the NCAA deferring more to individual divisions. I think with all of that, states said, “All right, our work here is done. We filled the void and we got what we were, at least as politicians, were saying was really important, which is giving more rights to our student-athletes, and so we’re going to take it down a notch. We’re going to slow down, and then we don’t have to maybe worry about things like enforcing legislation when our institutions or our student-athletes run afoul.”

We actually even saw a couple of states repeal or put their legislation into suspense, and I think for the same reason. It was the, “All right, we’ve gotten exactly what we wanted and we’re going to back out of the active sphere when it comes to governing student-athletes here.” All of that said that the activity wasn’t absolutely stopped on the state level, and generally speaking, to paint in broad strokes, I think we can feel comfortable in saying that the bills that were introduced or passed hued pretty closely to the issue of name, image, and likeness, making sure that student-athletes had a legal right to enter into these deals that institutions couldn’t interfere with professional representation with respect to NIL deals.

All of the things that were on that bullet point list that we had in 2021 about what NIL means and doesn’t mean, but we saw a bit less of the really broad language around things like injury funds for student-athletes, shared income, all of the things that were the step beyond NIL that were being stuck into these NIL bills when people were out banging the drum for student-athletes’ rights. We saw a step back from some of that in some of these states, because I think once the NCAA relented, so to speak, it became less of the hot-button political topic and states narrowed their focus.

The only other thing I’ll say with respect to what can we anticipate and what might we see is that we’re getting a little bit more action around high school athletes, and I think that we can anticipate to be this next wave of focus. Legislation was drafted fairly broadly, and so by its plain reading, one could argue that high school athletes were just as entitled as their collegiate counterparts to benefit from NIL, but surely, the intention behind this legislation was to focus on collegiate athletes.

We have a little bit of tension there, so we’re seeing a little more action with states getting more specific around what rights high school students have or don’t have. It’s been in the news when we’ve had some individual athletes who are perhaps college-bound, taking advantage of NIL legislation, and then some questions of, “Oh! Did we really mean that? Is it OK to be thinking about our 15- and 16-year-olds engaging in the marketplace in this way?” Probably, but do we need to think about whether or not there are additional or different types of restrictions we want to put on that marketplace? TBD. We’ll see headed into this next year.

Bennett: That’s helpful to know that we should be paying attention to the possibility of this coming in the high school arena in some way in the future. Similarly, I’m going to ask you to make one more prediction before we close out the podcast. Should we expect federal legislation on college athletics benefits?

Piccola: Unlikely. Nine bills have failed to garner enough support at the federal level to pass. That was at the center of this really intense conversation about student-athlete rights. The fact that we didn’t see more progress on the federal level despite the fact that there was all this public attention and despite the fact that it was both sides of the aisle engaging around student-athlete rights, which we all know is unusual in today’s day and age. The fact that we didn’t see that last year make more progress doesn’t give me a lot of faith that that’s going to happen headed into this next year.

The only thing I’ll say is that the SEC, the Big 10 commissioners have really supported [the] NCAA in saying, “We need federal NIL legislation. Having this patchwork of state legislation is not ideal for student-athlete recruitment. It’s not good for our institutions, it’s not good for our programs. Uniformity is better. You’ll have better enforcement mechanisms if we have one central federal oversight wherever that oversight lands.” But even though, as with all things politics, it’s not impossible, if I have to give you an answer, I’m going to say unlikely, we’re not going to get federal legislation in 2023.

Bennett: Now that is a solid prediction. That’s it for today’s podcast. Thank you, Amy, for joining me again.

Piccola: Thanks so much, Melanie, and all of United Educators for having me.

Host: From United Educators insurance, this is the Prevention and Protection Podcast. For additional episodes and other risk management resources, please visit our website at www.ue.org.