Monumental Ruling Still Leaves Questions About Student-Athlete Compensation
6.16.2025
The landscape of college athletics continues to change at an unprecedented rate. Name, image and likeness has opened the flow of compensation to student-athletes at all levels. Up until recently, payments for NIL have only been allowed through entities not associated with a university. However, a new era emerged on June 6 when Judge Claudia Wilken of the Northern District of California granted final approval of a long-anticipated settlement in House v. NCAA that will allow colleges to directly pay their student-athletes for use of their name, image and likeness as of July 1. Student-athletes will still be allowed to sign NIL deals on their own with outside organizations. These NIL deals will be processed through a clearinghouse managed by the accounting firm Deloitte who will ensure that payments made by outside organizations in excess of $600 are not above fair market value.
Another case at the center of the evolution is Johnson v. NCAA, which was filed in the U.S. District Court for the Eastern District of Pennsylvania. This case seeks to address the fundamental issue: Are student-athletes employees of their institutions?
Direct Payments (House v. NCAA)
The House case was filed in 2021 and garnered national attention due to the significant amount of potential damages and transitional impact on college sports. In May 2024, the parties submitted a preliminary settlement agreement to the court for approval. Judge Wilken returned the preliminary settlement to the parties and requested revisions be made. The amended preliminary settlement was submitted on Sept. 26, 2024 and was preliminarily approved by Judge Wilken on Oct. 27, 2024.[1] Interested parties had until Jan. 31 to file objections with the court for consideration prior to the final approval hearing, which was held on April 7. At the hearing, and subsequently in writing, Judge Wilken indicated support for the settlement, subject to suggested revisions regarding roster limits that placed caps on the number of players that each team can field.
Testimony at the hearing from student-athletes who were in danger of losing their roster spots due to the cap convinced Wilken to push schools to grandfather in current students and incoming freshmen.[2]
The settlement accomplishes several things. First and foremost, it awards $2.78 billion in back pay to be distributed to class members (former student-athletes). Second, the settlement sets forth a 10-year model for NCAA Division I institutions to utilize future revenues to compensate student-athletes directly for their name, image and likeness. Each institution will have the right to enter into an exclusive or non-exclusive license and/or endorsement agreement for a student-athlete’s NIL, institutional brand promotion or other rights as permitted by the settlement. The license or agreement shall authorize payments to student-athletes for the right to use a student-athlete’s NIL for a broadcast of collegiate athletics games or events. If an institution opts in to the settlement, they will be able to spend up to a maximum 22% of the average shared revenue on its student-athletes through direct payments and additional scholarships. Average shared revenue is based on the named defendants’ and the University of Notre Dame’s most recent NCAA membership financial reporting system that shows their athletic media, ticket and sponsorship revenue. Notre Dame is not a member of any conference, but it is included in the calculations because of its capacity to generate revenue on par with the Power 5 conference schools (Big Ten, Southeastern Conference, Big 12, Atlantic Coast Conference and Pac-12). For the 2025-26 academic year, that equates to approximately $20.5 million per institution. Payments over this capped amount are not permitted and penalties will be enforced by a to-be-determined entity. The cap amount escalates each year for 10 years. Institutions are not required to spend up to the 22% number – each institution retains the right to determine its own payment amounts, so long as they stay below the applicable cap.[3]
Other Issues Raised by the Settlement
Eight female student-athletes filed an appeal to the settlement on June 11, arguing that women would not receive their fair share of $2.78 billion in back pay. They have standing to appeal because they previously filed objections to the proposed settlement.[4] Additional appeals are expected in the coming days.
The settlement also sets out a number of changes to longstanding NCAA policy. The most prominent of these changes were the elimination of scholarship limits and the aforementioned institution of roster limits.[5] Under current NCAA policy, each sport is limited in the number of scholarships it can provide for its student-athletes (for example, NCAA’s Football Bowl Subdivision colleges are allowed 85 scholarships).[6] In the days leading up to the settlement being approved, Judge Wilken focused on the effects of the roster caps on existing student-athletes and requested the parties modify the settlement agreement to protect the student-athletes in question. What resulted is an individual designation that a school can make for existing student-athletes who, as determined in good faith by the institution, would have been cut due to the roster limits. Incoming freshmen who were recruited prior to April 7, 2024 will also receive the designation. The designation allows the student-athlete to not count against the roster limits for the duration of their eligibility. To consider the effect of this modification to the settlement, consider that most Football Bowl Subdivision teams carry 125-140 student-athletes on their roster. With roster limits in place, there will be fewer opportunities available to student-athletes to participate at a given school (football will have a roster cap of 105 student-athletes). This change will modify longstanding NCAA financial aid legislation[7] and will eventually have a profound effect on the total number of student-athlete opportunities at a university. Many Power 5 institutions are estimating a reduction in total student-athletes between 80-150 as a result of the roster limits.[8] The settlement allows for individual student-athletes to be protected and to ensure a smoother transition for the institutions that opt in to the settlement.
For NCAA Division I institutions that decide not to opt in to the settlement, the current NCAA rules regarding scholarships will continue.[9] Student-athletes at those institutions may still enter into NIL deals, just not directly with their institution. For example, a student-athlete can promote a business in exchange for a fee or may sign autographs and get paid for the service, which is standard NIL activity.
With the approval of the settlement, revised NCAA legislation has been put in place that modifies existing rules to be in line with the settlement, while still allowing for institutions that opt out to continue with the old rules still in place. Many unknowns still exist. Who will enforce existing NCAA legislation? Will it be the NCAA or the College Sports Commission (formed under the settlement)? What are the potential long-term effects of not opting in? If a school does not opt in this year, but chooses to next year, will it be allowed to designate student-athletes to be exempt from roster cap calculation? Without any clear guidance on the matter, institutions must weigh the pros and the cons of whether to opt in and to remain nimble while navigating the changing landscape. If they decide not to opt in, instead of paying student-athletes directly, schools may risk falling behind their competition.
The settlement is also (intentionally) silent on the application of Title IX to payments from an institution to the student-athlete. Do the amounts paid directly to men and women student-athletes need to be consistent with Title IX proportionality standards, or can they be appropriated according to some other metric? Title IX states that institutions “must provide reasonable opportunities for members of each sex in proportion to the number of students of each sex participating in intercollegiate athletics.”[10] This standard has applied to athletic scholarships, access to facilities, equipment, coaches, etc. over the years. What is less clear is whether NIL payments fall into this same category, or because an individual’s NIL market value varies based on both the sport and the revenue generated from it, that market share should be utilized to determine compliance with Title IX. Institutions have indicated they intend to distribute payments based upon market value. This analysis is similar to coaches’ salaries paid by an institution. Title IX requires the school to provide equal training and coaching opportunities to its men’s and women’s teams.[11] The cost associated with equal coaching is not part of the analysis; rather, the market dictates the amount to be paid to a coach. Adding to this analysis, the Department of Education recently issued a fact sheet determining NIL payments be treated similar to scholarships.[12] The fact sheet, however, was not precedential or binding and was issued just before the Trump administration took office. On Feb. 12, this guidance was rescinded by the Department of Education. Without any clear guidance, institutions are working with their Title IX attorneys to determine the best way to navigate the settlement.
Employment Status (Johnson v. NCAA)
Ultimately, what these cases try to grapple with is the question of whether student-athletes are students who play sports or professionals who attend school.
The plaintiffs in Johnson v. NCAA contend that they should be treated as employees, entitled to minimum wage and benefits protections under the Fair Labor Standards Act.[13]
The plaintiffs make no distinction among scholarship and non-scholarship student-athletes, meaning both would be treated the same. They assert that monetary compensation from an institution, in the form of a scholarship to a student-athlete in exchange for their services is not required for them to be deemed an employee. To date, no institution has treated student-athletes as employees.
Johnson is the latest effort to define student-athletes as employees and differentiates itself from previous efforts in that a decision in the plaintiffs’ favor could have applicability to both public and private institutions. Previous efforts focused predominantly on student-athletes having the right to unionize and collectively bargain with their private institution by pursuing remedies through the National Labor Relations Board.[14]
Johnson remains in its early stages but has already produced interesting results. In denying the defendant’s motion to dismiss, the district court applied the multifactor test established by Glatt v. Fox Searchlight Pictures, Inc. to determine whether student-athletes “could” be employees under the Fair Labor Standards Act.[15] The defendants appealed, and the case was certified to the Third Circuit for an interlocutory appeal. The Third Circuit determined that (1) student-athletes “could” be employees under the act; (2) the Glatt test was inappropriate; and (3) an alternative test should be used to determine employee/employer status in college athletics.[16]
Generally, determination of whether an individual is an employee centers on behavioral control, financial control and relationship details of the arrangement.[17] Proponents for student-athletes being considered employees argue that the degree of control institutions exert over student-athletes and their schedules for training, competition and schoolwork establishes student-athletes as employees. However, the determination that student-athletes can be considered employees of an institution would have far-reaching consequences and lead to several operational and legal questions for institutions. For example:
- The cost to an institution for a student-athlete would grow significantly due to the required benefits under applicable law (e.g., health insurance). Will institutions seek additional funding or seek to cut expenses by eliminating certain sports?
- What laws or policies would govern relationships between student-athletes?
- Would student-athletes enter into a collective bargaining agreement with the institution?
- Can underperforming student-athletes be fired by the institution?
- Can an employer impose certain academic requirements (e.g., 12 hours of study per semester, GPA requirements, etc.) upon an employee?
For institutions that utilize athletics as an enrollment driver, what is the long-term effect of employee status? At this point we only have speculation; however, the added expenses that go along with deeming student-athletes employees is likely to create significant institutional discussions and decisions going forward, especially for schools with net revenues below those of the “Power 5” conference institutions.[18] The effect of the added costs could lead to the elimination of certain non-revenue sports or, in some cases, the elimination of an institution’s athletic department.
Conclusion
The past four years have provided landmark changes to collegiate athletics. The creation of NIL and NIL collectives and direct challenges to the NCAA’s authority to govern its member institutions have led many to use the phrase “the Wild Wild West” when describing the landscape.
NCAA President Charlie Baker said that while the House settlement offers a pathway for stability in college sports, he is looking to the federal government to help lock in some of the momentous changes including federal oversight and a limited form of antitrust protection that would prevent, among other things, lawsuits challenging the spending cap put forth in the settlement.[19]
Baker also said he would like to see a preemption of state laws that set different rules for paying student-athletes.
Southeastern Conference Commissioner Greg Sankey added that it is not good to have a league spanning 12 states operating under 12 different sets of laws guiding player payments and other elements of college sports.[20]
One way or another, we know that more changes to the landscape of collegiate athletics are on the horizon.
Kyle Ritchie is senior counsel at Bond, Schoeneck and King and is part of their Collegiate Sports Practice Group. He has significant experience in name, image and likeness matters and assisting institutions through the evolving landscape of college athletics.
Endnotes:
[1] House v. Nat’l Collegiate Athletic Ass’n, 4:20-cv-03919, (N.D. Cal. October 27, 2024) Amended Stipulation and Settlement Agreement.
[2] Kristi Dosh, New Roster Limits Set by House v. NCAA, Business of College Sports (June 8, 2025), https://businessofcollegesports.com/other/new-roster-limits-set-by-house-v-ncaa/
[3] House v. Nat’l Collegiate Athletic Ass’n, supra note 1, at Appendix A, pp. 8-17.
[4] Associated Press, Female Athletes Appeal Landmark NCAA Settlement, Saying It Violates Federal Antiscrimination Law, New York Post (June 12, 2025), https://nypost.com/2025/06/12/sports/ncaa-female-athletes-appeal-landmark-antitrust-settlement-claiming-discrimination-over-2-7-billion-back-pay/.
[5] House v. NCAA, supra note 1 at Appendix A, p. 18.
[6] NCAA Bylaw 15.5.3.1 (2024-2025).
[7] Updated Question and Answer: Impact of the Proposed Settlement on Division I Institutions, NCAA (Dec. 9, 2024), https://ncaaorg.s3.amazonaws.com/governance/d1/legislation/2024-25/Dec2024D1Gov_PhaseTwoInstSetQuestionandAnswer.pdf.
[8] Ross Dellenger, Historic House-NCAA Settlement Leaving Hundreds of Olympic Sport Athletes in Peril, Yahoo! Sports (Oct. 25, 2024), https://sports.yahoo.com/historic-house-ncaa-settlement-leaving-hundreds-of-olympic-sport-athletes-in-peril-125238713.html.
[9] Updated Question and Answer, supra note 7.
[10] 34 C.F.R. § 106.37(c) (2025).
[11] 34 C.F.R. § 106.41 (2025).
[12] Factsheet: Ensuring Equal Opportunity Based on Sex in School Athletic Programs in the Context of Name, Image and Likeness Activities, U.S. Dep’t of Ed.( Jan. 16, 2025). https://www.ed.gov/media/document/ocr-factsheet-benefits-student-athletes.
[13] Johnson v. Nat’l Collegiate Athletic Ass’n, No. 19-5230, 2021 U.S. Dist. LEXIS 273101 (E.D. Pa. 2021).
[14] See NLRB actions involving Dartmouth, University of Southern California and University of Notre Dame, which have been withdrawn.
[15] Johnson v. Nat’l Collegiate Athletic Ass’n, 108 F.4th 163 (3d Cir. 2024).
[16] Id.
[17] See generally IRS Publication 5520 (5-2021).
[18] Power 5 institutions, along with Notre Dame, generate significantly more revenue through their football and men’s basketball programs than other Division I institutions. See Grant Hughes, College Athletics’ 25 Powerhouses Who Produce the Most Revenue Entering 2024, 247 Sports,(June 27, 2024), https://247sports.com/longformarticle/college-athletics-25-powerhouses-who-produce-the-most-revenue-entering-2024-233312519/.
[19] Eddie Pells, NCAA’s Baker: Will Congress Back $2.8B Settlement With Antitrust Protection?, Associated Press, (June 10, 2025), https://apnews.com/article/ncaa-lawsuit-congress-017aa376df1737e9265fea1d6a1d7aa8.
[20] Id.
