Don’t Expect College Athletes To Unionize Any Time Soon

Don’t Expect College Athletes To Unionize Any Time Soon

The powers that be won't let college athletes unionize.
Kristi Dosh
By
Email
Print
Hangout with us

Football players at Northwestern University have officially filed a petition with the National Labor Relations Board asking to be treated as a labor union. The College Athletes Players Association, as they propose to call it, would have a seat at the table when the NCAA decides on issues that impact student athletes; like the players associations in professional athletics, they would have the right to collectively bargain with the NCAA.

Principally, the student athletes say their concerns focus primarily on issues of health and safety. Among other things, they’d like scholarships to be guaranteed, even if the player can no longer play due to injury or other medical issues. In addition, the group would pursue the creation of a trust fund players could tap into after their NCAA eligibility is complete in order to complete their degree or be rewarded for degree completion.

A union would give student athletes leverage they lack now, from the simple strength of acting as a group to the protection of labor laws. It’s easy to see why student athletes might want to form a union, but there’s no doubt they’ll face an uphill battle.

Two things are important to note right off the bat. First, only employees can unionize. Student athletes are not currently recognized as employees and haven’t been since 1953 when a short-lived decision by the Industrial Commission in Colorado was upheld by the Colorado Supreme Court regarding workers’ compensation rights. The NCAA thereafter created the term “student athlete,” distancing itself from the employee conversation.

Graduate research assistants have spent years wrangling with the NLRB and state labor relations boards in their quest to be recognized as employees. It worked in California. It’s even worked before with the NLRB…for a few years. In 2000, the NLRB found that an employee/employer relationship exists between graduate research assistants and private universities because those assistants perform services for the university under the control of professors, or others at the university, in return for payment, the basic definition of an employee. However, in 2004 the NLRB reversed its ruling, finding that the primary function of the graduate research assistants was primarily educational, not economical.

At its very nature, the NLRB is political; the five board members of the NLRB are chosen by the President, with the consent of the Senate, and serve four-year terms. Hence the wishy-washy nature of the board’s decisions. Generally speaking, Democratic appointees have favored union rights and Republicans have not.

Don’t believe it’s political? Consider the name of a joint hearing called by a committee and several subcommittees in the House of Representatives after the NLRB granted review to graduate assistant cases in 2012 seeking employee recognition: “Expanding the Power of Big Labor: the NLRB’s Growing Intrusion Into Higher Education.” In case it’s unclear, the House had a Republican majority at the time, meaning committees were all chaired by Republicans.

As with anything political, it’s tough to predict an outcome, and as you can see from the graduate assistant example the ruling might not even be consistent over time.

Second, the NLRB can only issue a decision that will allow student athletes at private universities to unionize, as the National Labor Relations Act specifically excludes those employed by federal, state or local government. Student athletes at public universities would have to attempt to unionize under state law, meaning they’d be seeking favorable decisions from 50 different states and the District of Columbia. In the end, it’s very unlikely that student athletes from every state would be treated similarly, meaning the NCAA could potentially be bargaining with unions formed under federal law and dozens of different state laws. And those students athletes at public schools in states that don’t decide they’re employees? They won’t have a seat at the table at all.

A determination that student athletes are employees opens a whole new can of worms. Currently, athletic departments are tax-exempt entities because of their close relationship to the university’s educational mission. Some athletic departments are tax exempt because they are a subsidiary or auxiliary unit of the university, while others have formed their own separate 501(c)(3).

Massive Tax Exemptions At Issue

The question if student athletes become employees will be with regards to whether what they’re doing has become more entertainment-based than educational. If so, the IRS could determine that athletic departments should not be tax-exempt organizations (if they hold their own exemption), or that the athletic department’s revenue should be subject to Unrelated Business Income Tax. That tax could range from 15-35 percent at the federal level and would vary at the state level.

Maybe you’re thinking athletic departments shouldn’t be tax-exempt anyway, so what’s the big deal? The big deal is that most athletic departments generate more money from donations than from all those millions in television money you hear about in the news. For example, in fiscal year 2012, University of Florida’s athletic department reported contributions of $46 million. Its conference distribution, which included revenue from the conference’s television contract and payouts from bowl games and March Madness, totaled $22 million.

What if those donations weren’t tax deductible? Sure, maybe you’d still make the required donation for your seat at the football or basketball game, but would big-money donors who generally kick start capital campaigns still make those donations? University of Central Florida’s athletic department recently received the largest gift in its history: $4 million from the Wayne Densch Charitable Trust for a new leadership center for student athletes. As a charitable trust, the gift would not have been made to a for-profit entity. Not to mention, gifts over $14,000 would be subject to the gift tax. So, not only would big-money donors no longer get a tax deduction, but now they’d be paying for the right to donate to the athletic department.

The loss of tax exemption would have a number of other implications. Naming rights would no longer be tax deductible for facilities owned by the athletic department. That might mean no $15 million naming rights deal at UCF for Bright House Networks Stadium or no $60 million naming rights deal at University of Illinois for the State Farm Center.

There would also be implications for bowl games, which enjoy a tax-exemption because they support amateur athletics. If football players were employees, it’s likely bowl games would lose their exemption. Athletic departments would no longer be issuing tax-exempt bonds to build stadiums and arenas, although the university could still do so. Otherwise, they’d be looking at higher commercial loan rates.

Ruling With Massive Ramifications

So, what’s the likelihood the student athletes at Northwestern will be successful in their quest for a union?

The ripple effect of a ruling that student athletes are employees would require a complete overhaul of college athletics in the United States, with the issues mentioned here only scratching the surface. Don’t expect Congress to let that happen.

In the past, Congress has closely protected college athletics. For example, in 1997 Congress added a provision to the Internal Revenue Code that allowed for certain sponsorship payments to be exempt from UBIT after the IRS attempted to apply UBIT to a sponsorship payment from Mobil to the Cotton Bowl. Time and again we have seen Congress slap the IRS and NLRB on the wrist for attempting to meddle in higher education. Right or wrong, it’s tough to imagine they’ll do a complete 180 and side with the student athletes here.

Kristi Dosh is a sports business reporter, attorney, author and a sports management instructor. She is the author of Saturday Millionaires: How Winning Football Builds Winning Colleges, on the business of college football.

Photo By: Cheri Murphy
comments powered by Disqus