SPORTICO

Treating College Athletes as Employees May Create New Problems

By John Wallstreet

Treating College Athletes as Employees May Create New Problems

In the last few weeks, five coaches have signed contracts worth nearly $500 million, strengthening the argument for those who believe college athletes deserve to be paid. As we wrote yesterday, that could become a reality in 2022 if college athletes are reclassified as employees. But Casey Schwab (CEO and founding partner, Altius Sports Partners)—and a pair of Power 5 athletic directors, who all view reform very differently from those advocating on behalf of the athletes—caution that athletes are likely to find out the grass is not greener on the other side. “This whole idea that the continued expansion of athletes’ rights [to include a minimum wage and the ability to collectively bargain] is necessarily better for the athletes is likely a fallacy,” Schwab said.

JWS’ Take: To be clear, no one we spoke to was against players being compensated. As one AD who asked to remain anonymous said: “When you have Brian Kelly going to LSU for $15 million, that creates a very [distinct] contradiction. You begin to think… is that fair, should the LSU players be getting some of that [money]? I say they should be, and we should figure out how they could.”

But both ADs and Schwab were in agreement that reclassifying college athletes as employees is not the answer. Schwab explains that those pushing for change in employment status—which would guarantee college athletes a minimum wage and enable them to collectively bargain for a percentage of revenues—are leaving out some key details. “If you’re an employee, you join a union and sit down to bargain, everything from ​wages, to health care, contract length, security clauses and other fundamental aspects of the athlete-school relationship—from scholarships, to visa status, financial aid, insurance, workers’ comp, terminations would be on the table for negotiation. So all of the benefits that college athletes currently enjoy could potentially be taken away.” And any benefits that remain—including the value of their education—could be taxed.

It is worth noting that revenue sharing only applies if there is revenue to share (50% of $0 is $0).

“If you’re in the MAC, and you’re spending $10 million net-negative a year to fund the football program, why are you going to pay more [in salaries] to lose more? Versus just going [to a lower level] and saying we’re not even going to have scholarships anymore, we’re just going to have need-based aid. If students want to come and have this [college sports] experience, they can come and pay to have this experience. It would be devastating for opportunities,” the unnamed AD said. It is worth noting that of the 1,000 or so schools that comprise the NCAA, about 800 of them currently use athletics to fill beds.

Heeke agreed that “if the model changes, it will dramatically impact [schools’] ability to support the opportunities that exist for thousands of young people.” Like the other AD, he does not believe universities will agree to underwrite additional losses for a football program already operating in the red and said there would probably “be a whole resetting of all other sports into more of a club program. There would be much more limited space [for Division I programs] with revenues going into the player labor force.” It’s also safe to assume if the players are being paid, college football rosters will also be closer in size to those in the NFL (as opposed to the 125 players many currently carry).

There are some D-I programs operating at a loss that would survive should this seismic shift occur. “It just depends on the school and the cash flow. Harvard and Princeton have broad-based sports programs that their alums fund. A university with an elite golf or tennis program might choose to keep playing golf [at that level],” the anonymous AD said.

College athletes being deemed employees will likely open the door to the seemingly inevitable breakaway of football’s biggest powers. “About 50 schools will spin off their football programs into licensed entities,” the AD said. “They will hire coaches and hire players and as part of [those players’] employment at [XYZ] Inc., maybe they have the opportunity to go to the [affiliated] school. Is that really going to be best [for an 18- to 22-year-old]?”

Heeke agreed a “break-off of the Division I football playing body” would likely occur. But he wasn’t convinced it would be 50 schools (or that the athletes would be students). “There could still be further dissection among the [Power 5],” he said.

While some football programs would balk at paying athletes, there are others (think: SEC football powers) that would likely welcome their athletes becoming employees. Remember, employees face repercussions when they don’t meet minimum performance standards (i.e. they can be terminated), and they will sign binding contracts, which would limit their ability to transfer out of the program.