Who Is an Employee Under the FLSA? Not NCAA Athletes, According to the 7th Circuit

by Sarah Caldwell Breslin

Recently, the U.S. 7th Circuit Court of Appeals—which covers Illinois, Indiana, and Wisconsin—affirmed an Indiana court’s decision to dismiss a case filed by former student athletes at the University of Pennsylvania (Penn) against the NCAA. The student athletes alleged they were employees who were entitled to minimum wage under the Fair Labor Standards Act (FLSA).

Pennsylvania

The court disagreed, holding that given the “long tradition of amateurism in college sports,” the student athletes did not work under an expectation of payment and were not employees under the FLSA. The court stated, “Simply put, student-athletic ‘play’ is not ‘work,’ at least not as the term is used in the FLSA.” Let’s take a closer look at the case.

Facts

“Helen” and “Tanya” are former Penn students and members of the women’s track and field team. Penn’s track and field team is regulated by the NCAA, which is described as a member-driven, unincorporated association of 1,121 colleges and universities. NCAA schools are divided into three divisions based on their size and athletic programs. Penn’s women’s track and field team competes in the largest division—Division I.

Helen and Tanya sued the NCAA and more than 120 Division I member schools, including Penn, alleging that student athletes are “employees” within the meaning of the FLSA and that the NCAA and the schools violated the FLSA by not paying student athletes minimum wage.

The district court dismissed the case for lack of standing (i.e., legal right to initiate a lawsuit) based on its finding that student athletes are not employees under the FLSA. An appeal to the 7th Circuit followed.

Analysis of Claim

The FLSA requires every employer to pay employees minimum wage. The court noted the term “employee” is defined by the FLSA in “an unhelpful and circular fashion as ‘any individual employed by an employer.’” “Employ” is defined by the FLSA as “to suffer or permit to work.”

Citing the U.S. Supreme Court, the 7th Circuit noted that because employee status for FLSA purposes depends on the totality of the circumstances rather than a technical label, courts must examine the economic reality of the working relationship between the alleged employee and the alleged employer to decide whether Congress intended the FLSA to apply to the relationship.

The court noted that federal courts have used a variety of multifactor tests to guide the inquiry depending on the context and the type of worker before them, including trainees, private-sector interns, and migrant workers. The 7th Circuit, however, declined to apply a multifactor test in this case. Instead, the court looked at the “revered tradition of amateurism in college sports,” the reality of the student athlete experience, and other courts’ findings that student athletes are not employees.

Finally, the court looked at the U.S. Department of Labor’s (DOL) Field Operations Handbook (FOH), which notes that college students “who participate in activities generally recognized as extracurricular are generally not considered to be employees within the meaning of the FLSA.” Helen and Tanya argued that student athletes are more akin to work-study participants (who are considered employees per the FOH), but the court rejected that argument. Finding the FOH persuasive, the court held that the athletes participated in extracurricular activities and thus were not employees under the FLSA.

Interestingly, Judge David Hamilton wrote a separate concurring opinion to point out that he does not view the court’s decision as extending to all student athletes or to other questions of employment under the FLSA. He noted that Helen and Tanya went to a school that does not offer athletic scholarships and participated in a sport that is not considered a “revenue” sport.

He opined that he is “less convinced, however, that our reasoning should extend to students who receive athletic scholarships to participate in so-called revenue sports like Division I men’s basketball and FBS football. In those sports, economic reality and the tradition of amateurism may not point in the same direction.”

Noting that revenue sports often mean billions of dollars for colleges and universities, Judge Hamilton reasoned that there is room for further debate at a more advanced stage of litigation “for cases addressing employment status for a variety of purposes.” His one-page concurrence leaves the door open for further debate regarding the FLSA’s reach and potential application to certain student athletes. Berger v. Nat’l Collegiate Athletic Ass’n, No. 16-1558, 2016 WL 7051905 (7th Cir., Dec. 5, 2016).

Bottom Line

The FLSA’s “unhelpful and circular” definition of “employee” undoubtedly leaves gray areas to courts’ interpretation. Indeed, the question of the FLSA’s application to student athletes is just the latest gray area. Courts have previously examined the Act’s application to interns, prison inmates, migrant workers, and trainees. With this decision, however, the 7th Circuit has made clear that when presented with questions related to the FLSA’s reach, it will not hesitate to look at the reality of the situation—or apply common sense—when the multifactor tests simply fail to do so.

Sarah Caldwell Breslin, a contributor to Indiana Employment Law Letter, can be reached at sarah.breslin@faegrebd.com.

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