Sportswriter Norman Chad recently described California as being either a punch line or a pacesetter,[1] and, based on several recent legislative and judicial actions, it is clear that the state is most definitely a leader when it comes to challenging the National Collegiate Athletic Association’s monopoly on amateurism in college athletics. 

The triad of trendsetter events began on Oct. 9, 2018 when Los Angeles Superior Court Judge Frederick Shaller ruled that the NCAA’s “Show Cause” sanction against former USC assistant coach Todd McNair constituted an illegal work restriction under California law.[2] 

A few months later, on March 8, U.S. District Judge Claudia Wilken of the U.S. District Court for the Northern District of California found that the NCAA’s student-athlete compensation rules constituted an unreasonable restraint on trade in violation of federal antitrust laws and that student-athletes should be allowed to receive compensation or benefits beyond their scholarships “related to education.”[3]

Most recently, on Sept. 30, California Gov. Gavin Newsom signed into law the first-of-its-kind Fair Pay to Play Act allowing student-athletes, beginning in 2023, to profit from the use of their name, image and likeness, or NIL, by others.

As California leads the charge to protect the individual rights of college coaches and players, the NCAA’s ability to maintain its stronghold over its member institutions and their student-athletes is at the forefront of these California legal and legislative actions. California’s Fair Pay to Play Act is wholly in line with public sentiment, which, according to the most recent Seton Hall University sports polls, shows that Americans favor student-athletes being able to profit off their NIL by a 60-32% margin (with 8% undecided).[4]

This article summarizes the three recent California actions while analyzing their impact on the continued vitality of amateurism in college athletics. 

The NCAA and Amateurism

The NCAA traces its roots back to a meeting held in New York City on Dec. 28, 1905, during which 62 higher-education institutions became charter members of what was then known as the Intercollegiate Athletic Association of the United States. The organization changed its name to the NCAA in 1910, and, today, the association is a private, voluntary organization composed of over 1,200 member colleges and universities throughout the country.

As the California Court of Appeal has noted, the NCAA’s purpose is:

'to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body, and by so doing, retain a clear line of demarcation between college athletics and professional sports.' Toward that end, the NCAA adopted a constitution, bylaws, and regulations. One of the ways it accomplishes its purpose is by enforcing its rules and regulations. Member institutions, their employees, student athletes, and alumni agree to comply with the rules and regulations and to submit to the NCAA’s rule-enforcement process.[5]

The NCAA Division 1 Manual is updated annually and sets out the rules for an amateur collegiate athlete and the institutions for whom they play. Bylaw 12 states:

  • 1.2: If a student-athlete receives payment for their athletic skills or enters into an agreement with a sports agent, they are stripped of their amateur status and thus their right to participate in any NCAA sporting events.
  • 5.2.1: A student-athlete will lose their ability to participate in NCAA sporting events if it is discovered that the athlete is receiving payment, through commercial advertisement, promotion, or endorsement, for their “name or picture.”[6]
  • 5.1.1: A member institution or athletic conference may use a student-athlete’s “name, picture or appearance” to support both its charitable and educational purposes. Items that single out one particular student-athlete can only be used for informational purposes and cannot be sold. However, items that do not single out one athlete’s name or physical likeness can be sold by the institution or its outlets.

In addition to enforcing these rules regarding the amateur status of student-athletes, the NCAA and its staff is responsible for investigating alleged rule violations and presenting possible violations to the NCAA’s committee on infractions.[7]

The COI is supposed to be made up of independent volunteers who are representatives of NCAA institutions or lawyers.[8] After hearing a matter, the committee may issue findings of fact and penalty determinations in an infractions report.[9]

Among the penalties levied by the NCAA is something known as a “Show-Cause Order,” which requires an NCAA “member institution to demonstrate to the satisfaction of the [COI] why it should not be subject to a penalty (or additional penalty) for not taking appropriate disciplinary or corrective action against an institutional staff member ... identified by the committee as having been involved in a violation of NCAA regulations.”[10] Each of these duties is discussed more fully below.

California’s Fair Pay to Play Act

The FPTP allows student athletes in the state to receive compensation for their name, image and likeness.[11] Before this act, the college licensing and broadcast rights of student athletes were owned by schools, conferences, and the NCAA and sold to third parties. This has resulted in billion-dollar revenue for the NCAA and its member schools that many say is unfair to the athletes responsible for creating that wealth.[12]

One of the major issues surrounding the FPTP is whether, if college athletes in California begin to profit from athletics, those athletes would be found to be in violation of the NCAA’s amateurism rules and therefore banned from NCAA competitions.[13]

The NCAA issued a letter stating the FPTP “would erase the critical distinction between college and professional athletics and, because it gives [California] schools an unfair recruiting advantage, would result in them eventually being unable to compete in NCAA competitions.”[14] In support of this position, the NCAA argued that top athletes would be more incentivized to attend California institutions because of the potential financial gain available there.

However, whether the NCAA can ban California schools from following state law is unknown. Democratic Sen. Nancy Skinner, who sponsored the FPTP, noted that such a ban would violate federal antitrust law. Proponents of the act also claim that banning California schools from NCAA competitions for simply complying with valid and existing state law would constitute an illegal form of wage fixing and an unlawful restraint of trade, all in violation of existing federal law as well.[15]

Since California adopted the FPTP, similar bills have been or will be introduced in 16 other states and it is likely that Florida and New York will soon pass similar legislation.[16] As other states consider and pass laws like the FPTP, the NCAA could be forced to change its bylaws if the Association wants to maintain its status as the national governing body for collegiate athletics.

On Oct. 29, the NCAA’s board of directors unanimously voted to start the process of permitting student-athletes “the opportunity to benefit from the use of their name, image and likeness in a manner consistent with the collegiate model” and to implement a new NIL policy no later than January 2021.[17] The NCAA’s decision to start considering whether to allow student-athletes to profit from their NIL, simply bought the association time to act before California’s FPTP takes effect in January 2023.[18]

In early December, a bipartisan group of influential U.S. senators announced that they will be working together to discuss federal legislation that could allow college athletes to be paid for playing sports.[19] One of the issues the Senate will explore is the dangers of allowing individual states to pass a patchwork of conflicting laws trying to address a national issue. Although there has been a relative flurry of apparent activity in the area of allowing student-athletes to profit from the use of their NIL, it does not appear that anything is going to change in practice for at least another year.[20]

Todd McNair v. NCAA

In McNair v. NCAA, A California court of appeal will soon decide whether to uphold a trial court decision invalidating the NCAA’s show-cause order issued against former University of Southern California assistant coach Todd McNair. The order, which was handed down in 2010, penalized McNair for his involvement in NCAA violations by former USC running back Reggie Bush. The penalty required an NCAA member school to literally show cause as to why it should be allowed to hire McNair after he violated NCAA rules.[21]

USC let McNair’s contract expire shortly after the penalty was issued, and McNair, unable to obtain other employment, filed suit against the NCAA in June 2011.[22]

Seven years later in October 2018, a Los Angeles trial court judge granted declaratory relief in favor of McNair holding that the order was essentially a career-terminating sanction and was an illegal work restriction under California Business and Professions Code Section 16600.[23] That section states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”[24] The court determined that the legislature’s purpose in enacting Section 16600 was to promote open competition and employee mobility.[25]

The court ruled that the NCAA bylaw restricted McNair from securing employment at any NCAA school during the one-year penalty “and was a substantial factor in McNair’s continuing unemployment” thereafter.[26] It reasoned that no NCAA member school would risk exposure to such sanctions or the negative impact on their athletic programs, even after sanctions expire, that comes from hiring a coach with a tainted reputation.[27]

The NCAA appealed the judgment in January, and the case is currently pending before the California Court of Appeal, Second Appellate District.[28] In that appeal, the association argues that upholding the trial court’s application of Section 16600 could result in sweeping invalidation of every professional regulation, including those of medical boards and state bars, that is not specifically enacted into California code.[29]

In response, McNair argues that the NCAA is uniquely distinguishable from other professional organizations and, therefore, Section 16600 invalidates NCAA regulations while not invalidating the regulations of other associations.[30]

In the McNair appeal, the NCAA also argues that the Commerce Clause precludes application of Section 16600 in the same way it has invalidated other state laws requiring the NCAA to execute additional procedures before penalizing member institutions and employees.[31] In response, McNair argues that the NCAA failed to raise the Commerce Clause issue at trial and is, therefore, precluded from doing so on appeal. The NCAA’s reply brief is due in January 2020 and the issues presented could be resolved during the first half of 2020.[32]

In re NCAA Athletic Grant-In-Aid Cap Antitrust Litigation

Shawne Alston played running back at West Virginia University between 2009 and 2012. In 2014, he filed a lawsuit against the NCAA in the U.S. District Court for the Northern District of California claiming that NCAA rules improperly capped the amount of compensation student-athletes could receive in exchange for their athletic services in violation of federal antitrust laws.[33]

The Alston case was thereafter consolidated with nearly 30 other Division I football and basketball student-athletes.[34] The student-athletes have asked the court to lift the NCAA caps on compensation with the goal of creating a free market where NCAA conferences can individually set rules for compensating the athletes competing within each conference.

The NCAA rules placed limitations on three types of compensation and benefits: (1) grant-in-aid or athletic scholarships, up to the cost of tuition; (2) compensation and benefits unrelated to education paid on top of grant-in-aid; and (3) compensation and benefits related to education paid on top of grant-in-aid.

The court agreed with the NCAA that the first two types of restrictions produced a pro-competitive effect that was fundamental to preserving a demand for college sports. It reasoned that the amateurism valued by college sports fans would be diminished if compensation for college athletes was unlimited or otherwise mirrored the compensation of professional athletes.

However, in line with the idea of promoting amateurism, the court held that the third type of compensation and benefits related to education should not be limited and issued a permanent injunction against the NCAA preventing it from limiting educational benefits like tutoring, graduate school tuition and paid internships.[35] The court reasoned that the academic purpose of such compensation is distinct from the compensation of professional athletes and does not negatively affect consumer’s interest in college sports.

In August, the NCAA appealed this ruling to the U.S. Court of Appeals for the Ninth Circuit, arguing that the district court contradicted precedent that recognized the important distinction between professional athletes who are paid employees and student-athletes who are not.[36] Final brief submission is scheduled for December.[37]

Conclusion

The first serious legal challenge to the NCAA’s amateurism rules was a California lawsuit filed by former UCLA basketball star Ed O’Bannon in July 2009 and tried in June 2014 before the same federal judge who is currently hearing the NCAA Grant-in-Aid Cap Antitrust Litigation discussed above.

In September 2015, the Ninth Circuit concluded in O’Bannon that the NCAA’s compensation rules constituted an unlawful restraint of trade in violation of federal antitrust laws, while simultaneously upholding, for the most part, those very same unlawful compensation rules in order to perverse amateurism in college sports.

U.S. Circuit Judge Jay Bybee, writing for the three-judge appellate panel in O’Bannon, expressed concern that “offering [student-athletes] cash sums untethered to educational expenses” — such as an annual amount paid to certain student athletes for their NIL rights — could transform college sports into “minor league status.”[38]

Despite the fact that it has been over four years since the Ninth Circuit handed down its decision/nondecision in O’Bannon[39] questioning the continued viability of the NCAA’s compensation rules, it wasn’t until the recent triad of California legislative and judicial events analyzed in this article that the association’s monopoly on amateurism in college athletics has been seriously challenged. 

While it is admittedly difficult to predict how appellate courts might rule on pending appeals, and it is equally challenging to correctly forecast what additional regulatory or legislative efforts might be passed in response to California’s Fair Pay to Play Act, it is clear that 2020 should be a banner year in delineating these evolving issues.


[1] Norman Chad, “California’s Fair Pay to Play Act is a step in the right and wrong direction at the same time,” The Washington Post (Oct. 13, 2019), https://www.washingtonpost.com/sports/colleges/the-fair-pay-to-play-act-is-a-step-in-the-right-and-the-wrong-direction-at-the-same-time/2019/10/13/9f98a262-ec6d-11e9-9306-47cb0324fd44_story.html

[2] The NCAA appealed that ruling and the matter is currently pending before a California court of appeal. McNair v. The National Collegiate Athletic Association (McNair v. NCAA) California Court of Appeal, Second Appellate District, Case No. B295359, Docket, (“McNair v. NCAA, California Court of Appeal Docket”) https://appellatecases.courtinfo.ca.gov/search/case/dockets.cfm?dist=2&doc_id=2277689&doc_no=B295359&request_token=NiIwLSIkTkg%2BWzBdSCJdVEJJQFw6USxTKiNOSz9RICAgCg%3D%3D.

[3] The NCAA appealed that ruling as well and, like the McNair appeal, the matter is currently pending before the Ninth Circuit Court of Appeal. 

[4] Tim Sullivan, “Lawmakers forcing slow-moving NCAA to pick up the pace of change,” USA Today (Oct. 10, 2019), https://www.usatoday.com/story/sports/college/2019/10/10/ncaa-amateurism-model-being-pushed-change-legislation/3928243002/.

[5] McNair v. NCAA , 234 Cal. App. 4th 25, 28-29 (2015).

[6] NCAA Bylaw 12.5.1.1(h) states “Any commercial items with names, likenesses or pictures of multiple student-athletes…may be sold only at the member institution at which the student-athletes are enrolled, the institution’s conference, institutionally controlled (owned and operated) outlets or outlets controlled by the charitable, educational or nonprofit organization….Items that include an individual student-athlete’s name, picture or likeness (e.g., name on jersey, name or likeness on a bobblehead doll), other than informational items (e.g., media guide, schedule cards, institutional publications), may not be sold.” 

[7] NCAA Const. and Bylaws, 2009-2010 at § 32.2-32.3.

[8] Id. at §§ 19.1, 32.8.

[9] Id. at § 32.9.

[10] Id. at § 19.02.1. 

[11] Matthew Impelli, “NFLPA Wants to Help College Athletes Receive Compensation Following California’s Fair Pay To Play Act,” Newsweek (Oct. 28, 2019), https://www.newsweek.com/nflpa-wants-help-college-athletes-receive-compensation-following-californias-fair-pay-play-act-1468232.

[12] Steven Silver, “Is ‘Fair Pay to Play’ Fair in College Sports? What California’s New Law Means for the Future of Amateur Athletics,” The National Law Review (Nov. 9, 2019), https://www.natlawreview.com/article/fair-pay-to-play-fair-college-sports-what-california-s-new-law-means-future-amateur.

[13] Matthew Impelli, “California Becomes First State to Allow College Athletes to Make Money; Here’s What That Means,” Newsweek (Sept. 30, 2019), https://www.newsweek.com/california-becomes-first-state-allow-college-athletes-make-money-heres-what-that-means-1462124.

[14] Silver, supra note 11.

[15] Impelli, supra note 12.

[16] Similar legislation has already been introduced in Florida, Illinois, Michigan, New Jersey, New York, and Pennsylvania and it is anticipated that Colorado, Connecticut, Georgia, Iowa, Kentucky, Minnesota, Nevada, South Carolina, West Virginia, and Wisconsin, will also soon take up similar legislation. https://www.washingtonpost.com/politics/2019/11/18/californias-fair-pay-play-law-college-athletes-has-other-states-racing-join-up-heres-why/.

[17] https://www.guilfordian.com/sports/2019/12/04/ncaa-vote-to-allow-athletes-to-be-paid/.

[18] Marshall Terrill, “NCAA takes steps to allow college athletes to get paid… now what?” ASU Now (Nov. 27, 2019), https://asunow.asu.edu/20191127-arizona-impact-ncaa-takes-steps-allow-college-athletes-get-paid-now-what.

[19] The sponsoring senators are Marco Rubio, R-Fla; David Perdue, R-Ga; Mitt Romney, R-Utah; Chris Murphy, D-Conn; and Cory Booker, D-NJ. https://www.washingtonpost.com/sports/2019/12/06/us-senators-not-waiting-ncaa-form-group-explore-athlete-compensation/

[20] Silver, supra note 11.

[21] Alex Krishner, “The NCAA’s Method of Blackballing Coaches Is Now Invalid In California,” SBNATION (Oct. 10, 2018), https://www.sbnation.com/college-football/2018/10/10/17959082/ncaa-show-cause-todd-mcnair-california

[22] Id., Maureen A. Weston, “Can a Sports Sanction Constitute an Illegal Work Restriction? A Review of NCAA v. Coach Todd Mcnair,” LawInSport (2019); Pepperdine University Legal Studies Research Paper No. 2019/8 (April 16, 2019), https://ssrn.com/abstract=3381841.

[23] McNair v NCAA, No. BC462891, 2018 WL 6719796, *1 (Cal. Super. Oct. 9, 2018) “Final Statement of Decision” issued by the Honorable Frederick C. Shaller (“McNair v. NCAA, No. BC462891 Final Statement of Decision”).

[24] Cal. Bus. & Prof. Code § 16600.

[25] McNair v. NCAA, No. BC462891 Final Statement of Decision at *3.

[26] Id. at *1.

[27] Id. at *2.

[28] McNair v. NCAA, California Court of Appeal Docket. (The NCAA also appeals from the trial court’s grant of a motion for new trial, but this article focuses solely on the declaratory relief appeal.)

[29] McNair v. NCAA, Appellant’s Opening Brief in Case No. B295359.

[30] McNair v. NCAA, Respondent’s Brief in Case No. B295359.

[31] McNair v. NCAA, Appellant’s Opening Brief in Case No. B295359 (citing National Collegiate Athletic Ass’n v. Miller , 10 F.3d 633, 637-38 (9th Cir. 1993); National Collegiate Athletic Ass’n v. Roberts , No. TCA 94-40413, WL 750585, **1, **2 (N.D. Fla. Nov. 8, 1994)).

[32] McNair v. NCAA, California Court of Appeal Docket.

[33] John Wolohan, “A further anti-trust challenge to the NCAA’s athlete compensation cap (In Re: NCAA Athletic Grant-in-Aid Cap..), LawInSport (April 11, 2019), https://www.lawinsport.com/topics/item/a-further-anti-trust-challenge-to-the-ncaa-s-athlete-compensation-cap-in-re-ncaa-athletic-grant-in-aid-cap#sdfootnote1sym.

[34] In re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation , 375 F. Supp. 3d 1058, 1065 n.5 (N.D. Cal. 2019) (In re NCAA).

[35] Id.

[36] Emily James, “NCAA files appeal in Alston case,” ncaa.org (Aug. 16, 2019), http://www.ncaa.org/about/resources/media-center/news/ncaa-files-appeal-alston-case.

[37] In re NCAA, United States Court of Appeals for the Ninth Circuit, Case No. 19-15566, Docket.

[38] O’Bannon v. National Collegiate Athletic Ass’n , 802 F.3d 1049, 1079 (9th Cir. 2015). 

[39] As evidenced by the titled of this law review article, some haled the O’Bannon decision as the beginng of the end for the NCAA’s amateurism rules: Michael Steele, O’Bannon v. NCAA: The Beginning of the End of the Amateurism Justification for the NCAA in Antitrust Litigation, 99 Marq. L. Rev. 511 (2015).