March 27 (Bloomberg) -- Northwestern University football players were given the right to form college sports’ first labor union in a ruling that could seismically change the $16 billion business of top-level university athletics.
Peter Ohr, the National Labor Relations Board regional director in Chicago, ruled that all scholarship football players at the Evanston, Illinois, school who have not exhausted their college eligibility are “employees” and ordered an immediate election to create a union board.
Northwestern said it would appeal yesterday’s 24-page ruling, which for now only affects athletes at private schools and not at public universities, to the full NLRB in Washington.
The decision, which comes as the National Collegiate Athletic Association is defending separate lawsuits that challenge its authority, has the potential to force a change to the business model of college sports, which generate $16 billion annually in revenue.
“Today, college athletes are employees,” said Ramogi Huma, a co-founder and president of the Northwestern players’ group that won the right to unionize. “It’s a first step toward forever changing the balance of power and guaranteeing players have a seat at the table and the right to bargain for basic protections.”
In his ruling, Ohr said the scholarship football players are employees because they are compensated and come under the university’s control. The NLRB governs the rights of private-sector employees, meaning that the ruling only affects athletes who compete at private schools. Public-school players seeking to unionize would have to gain approval from state-run labor boards.
“This is totally uncharted territory,” Paul Haagen, a professor of sports and contract law at the Duke University School of Law in Durham, North Carolina, said in a telephone interview, adding that it’s less likely the players will prevail at the national level. Duke, like Northwestern, is a private university.
The Northwestern players submitted a petition to the NLRB in late January, seeking to give 85 scholarship players the right to vote on representation and stating that NCAA rules were unjust.
The group is trying to secure guaranteed coverage of sports-related medical expenses for current and former athletes, as well as compensation for sponsorships. The players also are seeking to create a trust fund to help former players finish their degrees and push for an increase in athletic scholarships.
Henry Bienen, Northwestern’s president emeritus, said this month that giving athletes the right to unionize might chase schools from top-level intercollegiate sports.
“A union means collective bargaining over a whole range of issues,” said Bienen, a member of the Knight Commission whose mission is to ensure athletic programs operate within the educational goals of their schools. “If we got into collective bargaining situations, I would not take for granted that the Northwesterns of the world would continue to play Division I sports.”
Alan Cubbage, vice president for university relations at Northwestern, said in a statement that the school was disappointed by the decision.
“While we respect the NLRB process and the regional director’s opinion, we disagree with it,” Cubbage said. “Northwestern believes strongly that our student-athletes are not employees, but students. Unionization and collective bargaining are not the appropriate methods to address the concerns raised by student-athletes.”
Lisa Powers, a spokeswoman for Pennsylvania State University, said the school “is firmly committed to the bedrock principles of amateurism.”
“We believe that all Penn State student-athletes are students, not employees,” Powers said in an e-mail.
The NCAA, while not a party to the NLRB action, said in a statement that it disagrees with the decision and opposes a move to “completely throw away a system that has helped literally millions of students over the past decade alone to attend college.”
Separately, the NCAA and five top conferences were sued twice this month by college players seeking to improve their financial standing.
A group of football and basketball players filed an antitrust suit that called the organizations a “cartel” that generates billions of dollars while illegally capping the pay of student athletes. The suit is seeking to bar the NCAA and the conferences from stopping schools that want to compensate players.
Also this month, the NCAA and five conferences were sued in San Francisco by Shawne Alston, a former West Virginia University football player who claims they conspired to limit the value of scholarships to less than the actual cost of attendance.
The NCAA also is a defendant in a case brought by former UCLA basketball player Ed O’Bannon and other athletes, who seek to profit from the use of their likeness in video games.
“It’s a very significant move,” James Quinn, a senior partner at New York-based Weil Gotshal & Manges LLP, said in a telephone interview. “Given all of the other pressures on the NCAA and member institutions, things are going to change.”
Richard Southall, director of the College Sport Research Institute at the University of South Carolina, said the ruling could lead to further changes.
“If this stands, if the players are employees, the next question is, do they have the right to control the use of their name, likeness and image?” he said. “Can they be forced to sign that over?”
The 123 schools in the NCAA’s Football Bowl Subdivision turned a $1.3 billion profit on $3.2 billion in revenue in the fiscal year ended June 2013, according to data schools submit to the U.S. Department of Education.
NLRB hearing officer Joyce Hofstra took five days of testimony last month from individuals called by the players and the school.
Northwestern quarterback Kain Colter, a co-founder of the players association who compared the NCAA system to a dictatorship before the hearings, testified that players spend 40 to 50 hours a week on football and have to sacrifice their bodies to do so. He also said that the time commitment kept him from pursuing a plan to enter the school’s pre-med program.
Among people Northwestern called to testify were football coach Pat Fitzgerald, school administrators and three former players who said that football didn’t keep them from succeeding as students.
College athletes, who can receive scholarships but are not paid, help generate more than $16 billion in television contracts, as well as revenue from sponsorships, ticket and merchandise sales, and payouts for championships.
“The Northwestern case will work its way through the court system over the next few years, and we will closely monitor it and maintain a dialogue with our student-athletes about how we can improve,” Pat Haden, athletic director at the University of Southern California, said in a March 6 statement on a university blog. “I have looked at the demands of the Northwestern players, and quite honestly, we provide most of those already at USC.”
The United Steelworkers Union backed the players’ NLRB petition and is paying their legal fees.
The case is Northwestern University, 13-RC-121359, National Labor Relations Board, Region 13 (Chicago).
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