The Path to Unionization

Back in 2015, a group of football players at Northwestern University petitioned for the National Labor Relations Board (NLRB) to be recognized as employees. This approval would allow them to unionize. Unfortunately for the athletes, the NLRB dismissed the petition, claiming that doing so would cause instability in college sports.

Now, there is reason to believe that a case like this would turn out differently. Last year, Jennifer Abruzzo, the NLRB general counsel, released a memo arguing that college athletes can be considered employees under the National Labor Relations Act and are therefore eligible to organize. While this memo is not a binding document, it could influence how board members vote if a future case is brought by a different group of athletes.

What makes a student-athlete an employee?

It is important to understand that not all athletes may be recognized as employees, and it could arguably be dependent on where they go to school and what level they play at. The legal test to classify a person as an employee consists of the following elements:

1. Whether an organization exacts substantial control over a worker’s professional schedule and workflow;
2. Whether the worker also works for other organizations;
3. And, whether the worker provides something of significant value to the employer.

Applying this test, it is clear that a star football player at a major powerhouse university could be considered an employee of the school. However, how would it apply to a DIII soccer player who loves the sport, but neither has a rigorous practice schedule nor provides significant economic value to the university? Based on these examples, it is likely that each athlete’s employment status will have to be evaluated on a person-to-person basis.

Roadblocks to Unionization

While unionization for athletes who can qualify as employees may be inevitable, it still will come with its own set of hurdles. These hurdles include:

• Time – One major factor that may deter student-athletes from unionizing is their busy schedules. Forming a union takes quite a bit of effort and between practices, games, classes, traveling, and personal commitments, it may be difficult for students to find the time to organize.
• State Law – Because there are no federal regulations guaranteeing union rights, states are left to decide how lax or rigid they will be when it comes to union formation. Currently, 27 states have taken a very rigid approach, which deprives unions of funding and bars them from compelling everyone under their contract to join. Athletes in these states will likely have a much more difficult time forming a union.
• Universities – Universities themselves could also be a hurdle to unionization. Many coaches, directors, and other university staff will not want to deal with unionized athletes. Unions also need a level of secrecy while they are gaining momentum, but this would be difficult considering the close relationship that athletes have with university staff.
• Inexperience – College sports is an industry with no union history. In forming unions, students will have to really work together to make big decisions on things like how to negotiate with management and where to spend their money. Athletes will be starting from scratch, as there are no templates or precedence to follow. This will require a lot of work and as well as comradery to keep members unified.

Looking to the Future

Despite the roadblocks that student-athletes will face in the early days of unionization, it is something that is bound to happen. There are considerable problems within college sports that will give them plenty to fight for. The one issue that will be at the forefront of this is money. Students are realizing that there is so much revenue being generated from their services, but they are not seeing even a fraction of this. Without them, there is no money to be made, and this will be their incentive to organize.

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Tom Brady

Tom Brady, a former NFL football player, is a great example. He filed for numerous trademarks after announcing his initial retirement in February of 2022. Although he changed his mind and returned to the game a month later, only to retire again in 2023, the applications remain pending.

Brady is someone who has given much thought to his post-football earnings. He currently has 130 active trademarks, which is more than some publicly traded companies. These range widely from health and wellness to candles and digital collectibles. Brady also has tied his trademarks to his business TB12, a company focusing on fitness and nutrition. He has one of the most robust trademark and brand strategies of any athlete, which will continue to give back to him long after his football career.

Usain Bolt

Strike a pose, or better yet, trademark one. This is exactly what legendary former Jamaican sprinter Usain Bolt did in August 2022. Bolt is the world record holder in two of track’s biggest events (holding a time of 9.58 in the 100 meters and 19.19 in the 200 meters) and holds eight Olympic gold medals.

At the end of his races, he would stand in the middle of the field with his arms pointing across his body to the sky, mimicking the shape of a lightning bolt (his signature move). Bolt applied for this pose with the United States Patent and Trademark Office (USPTO) to be trademarked as a logo and used on cosmetics, shoes, clothing, jewelry, and at sports bars and restaurants.

LeBron James

Basketball player Lebron James recently filed to trademark the phrase, “Shut Up and Dribble” through his company Uninterrupted, Inc. The phrase became popular in 2018 after a news anchor responded to political comments that James had made during an interview. The news anchor was unhappy with Lebron’s comments and said that the Lakers star should, “keep the political commentary” to himself and “shut up and dribble.” According to the USPTO filing, this trademark would be used on downloadable virtual goods, i.e., computer programs featuring clothing, backpacks, accessories, etc., and entertainment services.

James has filed for many trademarks over the course of his career. His other notable ones include:

• All Things Zhuri – trademarked for James’ youngest child, Zhuri James, who has her own YouTube channel.
• Just a Kid From Akron – used as a hashtag in his social media posts and is filed to use on clothing.
• I Promise – registered for the “I Promise” School, a school supported by the LeBron James foundation.
• LeBron James Family Foundation – used for goods and services, mainly charitable activities.

Serena Williams

Serena Williams has created a strong brand through her business and property investments, partnership and sponsorship deals, and interests in fashion and entertainment. Aside from her skills on the court, Williams attended the Art Institute of Fort Lauderdale where she studied fashion and design. Her most notable registration is for “ANERES,” which was initially used for her clothing line and now extends to cosmetics and skincare. Williams also has applied for other trademarks for companies that she has started. One notable one is “Serena Ventures,” which helps fund start-up companies. She also has trademarked the logo “S” and an image of a globe for her lifestyle brand. Under this brand, she has filed for additional marks including “Serena’s World” and “S By Serena.”

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These are just a few of the hundreds of athletes who have turned their slogans, phrases, names, gestures, and ideas into business opportunities.  While this has been happening for a long time, the rise of the internet and social media has and will continue to fuel its growth. And now, with college athletes being able to earn money off their NIL, they will have the opportunity to build their brand even earlier than those that came before them. Athletes are the new businesspeople, who can create an entirely new career after their professional one ends.

What is taxable income?

Taxable income could be any of the following:

• Monetary compensation, e.g., endorsements, social media partnerships, posts, making appearances, and autograph signing.
• Goods received in exchange for promotion over $600, e.g., free cars, trips, athletic wear, merchandise, and even cryptocurrency.
• Merchandise deal, i.e., a deal that allows a student-athlete to spend a certain amount on a company’s goods.
• Money from the sale of products produced by or for a student-

What taxes will student-athletes have to pay?

For tax purposes, student-athletes will likely be considered self-employed, and independent contractors and will receive a 1099 form documenting their income. There are three main tax categories that athletes should be aware:

1. Self-Employment Tax: As with any other taxpayer, if an athlete makes more than $400 a year, then a tax return must be filed for self-employment taxes, i.e., Medicare and Social Security. This tax is usually in the 10-15% range for income up to $142K.
2. State Tax: An athlete owes state taxes in the state they earn income. However, state taxes can be complicated based on the structure of the NIL agreement. For example, if an athlete from one state attends college in another state, then the athlete could potentially owe taxes in both states due to residency and varying state tax laws. Additionally, if a NIL sponsorship deal involves working in multiple states, then that may mean multiple state filings.
3. Federal Tax: Any amount earned over $12,550 will be subject to Federal income tax for single filers.

Deductions

Athletes should also be aware and keep track of any deductions they can make on their taxes. Deductions are important because they take away from the taxable income to lower the amount that is owed. Some common deductions that athletes should be aware of are the following:

• Travel expenses, e.g., airfare, train tickets, hotel, baggage fees, cabs
• Meal expenses
• Mileage, i.e., if they need to drive somewhere
• Internet and phone expenses
• Office Supplies
• Advertising expenses

Implications and Considerations of Taxation

There are various implications and considerations an athlete must understand when he or she makes NIL income and is issued 1099.

1. Financial Aid & Grants: Since NIL compensation is taxable, it must be reported on FAFSA, a need and financial-based application that provides students with assistance for college fees and expenses. For instance, the University of Georgia informed athletes that the Pell Grant or need-based financial aid could be reduced or cut off based on earnings from NIL deals.
2. Parents Dependents: Another complication arises from whether the parents of athletes can claim them as their dependents. The major factor here is financial support—if parents provide more than half their child’s financial support, then they can claim them as their dependent. However, if the money an athlete is receiving from NIL deals outweighs what they are being provided by their parents, then they may no longer qualify as a dependent.

Athletes should consider creating a sole proprietorship, an LLC, or another entity for their NIL income. Different entities provide different benefits. For instance, an LLC may provide the opportunity for an athlete to write off certain expenses, such as mileage if they drive to an appearance while attributing potential liabilities to the LLC, instead of the individual. Alternatively, while a sole proprietorship also permits pass-through taxes and a deduction of business expenses, the liability is attributed to the athlete. It is important to understand these differences when considering the formation of an entity.

Protection

As students navigate the complexities of taxes on their NIL income, it is likely that the next few tax seasons will be the messiest. Educating students on what is taxable, the different types of taxes, and the various implications of paying taxes is extremely important. While schools are trying to help their students navigate this new space, it is ultimately up to the athletes to get informed and ensure they are well-positioned within the requirements of the IRS.

What Happened?

Currently, there is mostly speculation as to what happened between the Gator Collective and Rashada. The deal was agreed upon on November 7th of 2022, but CEO Ed Rojas rescinded it exactly one month later. Based on sources close to the negotiations, it became apparent that the signed deal was far over Rashada’s NIL market value, so the Collective decided to pull it. As a result, Rashada requested and was granted a release from his signed letter of intent with UF. Now, he is free to enroll at a different school without having to enter the transfer portal. There are rumors that Rashada is meeting with Washington, Arizona State, Texas Christian, and Colorado State.

What’s Next?

Rashada may decide to sue the Gator Collective, the UF Athletic Department, and the University to get compensated for all or part of the deal he was promised. He could even seek additional monetary damages if he can prove that his reputation has been damaged. It is also possible that the NCAA could get involved, as this situation seems to violate their prohibition of “Pay for Play.” Theoretically, Collectives are neither allowed to participate in recruiting conversations with prospective athletes nor promise any deals that are contingent on a prospective student attending a university.

While it is not clear what lies ahead with this situation, the one thing that is clear is that the system is flawed and that change is needed. This will be a highly scrutinized and evaluated saga for athletes, universities, the NCAA, and attorneys in the coming months.

Implications and What Lies Ahead

There are at least three legal issues at play in this case. The first is whether the NCAA’s rule against “Pay for Play” is legally enforceable against the Gator Collective. The second is whether a Collective is legally bound by its promise to a student; this could either be a written or oral promise. Although no written documents have yet to surface in Rashada’s case, it will be of great interest to determine how a promise, if any, was made. Lastly, the University of Miami may have a tortious claim against UF since UF potentially interfered with a contract and convinced Rashada to back out of his original commitment to them.

All these issues may be a smoking gun for Congress to finally get involved with NIL deals. The amount of money that students are earning from these agreements has gotten so astronomical, there is now a need for congressional regulation and oversight. These issues also have us wondering what the purpose of the NCAA is and what value it provides student-athletes. If the NCAA has hope of retaining its status, it must shift its organizational focus to acknowledge that NIL is here to stay and develop a framework around it. It needs to consider both schools and students in order to develop a mutually beneficial business model.

It was inevitable that we would get to this point with NIL. Although the shift in rules has been greatly beneficial to athletes, it’s time that schools, the NCAA, the Collectives, and Congress all get involved to align on how to best move forward. It is clear that rather than rules, strict regulations are needed so these types of situations do not occur again and disrupt the NIL movement and all it has accomplished.

What is changing in Illinois?

One major change that will affect athletes this year is the recent Illinois amendments to the Student-Athlete Endorsement Rights Act. These amendments will lift select major restrictions that barred students from reaching their full potential when entering NIL deals. The following are some of the major changes to be aware of:

• University Facilitation – Universities can now provide advice to athletes who may have questions on potential deals like what agreements they should/should not enter into and who they should reach out to. Additionally, schools can also facilitate NIL deals between people, businesses, and student-
• Education Opportunities – Previously, universities were barred from providing education related to NIL deals. Now, they are allowed to incorporate time management, financial literacy, and brand management into their programs.
• Cross-Institutional Agreements – Prior to the amendments, the life of a contract that a student entered into with a third party was only for their time at that institution, i.e., the contract was university specific. Now, students can transfer institutions through the transfer portal and keep their contracts. Contracts are for the life that a student is at any institution, not just the institution where they entered into the contract.

Why are these changes important?

While the initial legislation gave college players the green light to benefit from their NIL, it did not give them the resources or the opportunities to do so. Unlike professional athletes, who have agents that facilitate big money opportunities for them, most student-athletes don’t have the same agency relationship since they don’t attract large money-making deals.

Now, schools can involve themselves to create more opportunities for their students, much like an agent would do. For example, if a local burger shop wants to work with an athlete, it can now call the school’s athletic department and ask: “We want a basketball player to come to an event we are hosting, who should we use?” Businesses and people in the community often don’t know who the current players are or how to contact them. The athletic department can now act as an intermediary and facilitate setting up an athlete with the business.

This change is important because it provides the ability to create many more NIL deals. Schools that have snatched the headlines are the ones that have entered into the most deals, and this is primarily done by going through the athletic department.

What’s next?

The NIL space for students is ever-evolving. It initially required a large shift in thinking to allow athletes to be compensated at all, and now requires states to think about how they can take a proactive and progressive approach to embrace this shift. The recent amendments in Illinois are doing just that, and are part of a larger national legislative trend. Allowing schools to get involved provides a better outcome for the student-athletes and the community, and we will likely see a large uptick in the number of deals. Looking to the second year, coaches, schools, and students in Illinois are excited to see what’s next and what will happen with the ever-evolving NIL landscape.

This took a turn in July 2021 in the groundbreaking case of NCAA v Alston, where the Supreme Court upheld a District Court ruling that the NCAA, barring education-related compensation, violated Section I of the Sherman Act. Shortly after this decision, the NCAA voted to adopt interim measures allowing student-athletes to be compensated for their NIL.

What does NIL mean for college athletes?

NIL stands for “name, image, and likeness”—the three elements that make up the legal right of publicity, an intellectual property right that allows a person to license the use of his or her identity for commercial purposes. The interim measures that changed the NCAA’s archaic rules now allow athletes to be paid for many things they were denied in the past, such as signing autographs, representing brands, selling their jerseys, appearing in video games, etc. The possibilities are endless, and now athletes do not have to choose between playing sports or having a lucrative means to make money.

How can athletes profit from their NIL?

There are many ways to profit from NIL. It is important for athletes to be able to identify potential NIL opportunities to monetize on them. Some key opportunities are:

1. Royalties for when their NIL is used in trading cards, video games, jerseys, etc.
2. Public appearances, such as events or paid autograph sessions.
3. Attaching their name to promote their own sports camps or companies.
4. Endorsements/sponsorships from companies, including restaurants, to promote products or services.

Aside from seeking out opportunities, it will be important for athletes to protect their name, nickname, slogan, or logo by applying for trademark registration. Many athletes have already successfully done this. For example, Graham Mertz, the QB at Wisconsin, trademarked his initials as a logo; Paige Bueckers, a UConn basketball player, trademarked her nickname, “Paige Buckets”; and Dontaie Allen, a Kentucky athlete, trademarked his actual name. These are just a few of the many who are taking advantage of their identity to market themselves and create a stream of income.

What issues do athletes need to be aware of?

Currently, there is no federal regulation that provides overarching rules to athletes when entering in NIL deals. This means it is very important for athletes to know and follow the college and local state laws where their college is located.

Many colleges have set restrictions for athletes, such as banning endorsements with companies that promote gambling, alcohol, and tobacco. Others have banned athletes from entering into deals that conflict with the school’s sponsorship agreement, i.e., if a school has an apparel agreement with Nike, the athlete may not be able to enter into a deal with Adidas. Additionally, athletes need to report NIL activities within a certain time frame to their school or state for approval.

Athletes should also be wary of contract issues with companies that may arise when entering into NIL deals. Companies will often not have an athlete’s best interest in mind and may attempt to slip in fine print that can negatively affect the athlete’s position. For instance, the gaming company YOKE offered to pay several members of the Iowa football team $20 for an endorsement on social media. When signing the contract, these players did not realize they were making a deal that would grant YOKE perpetual, royalty-free, and irrevocable rights to use the content. As a result, instead of being paid every time YOKE used their NIL, the athletes were paid once. If athletes do not carefully read and vet these complex contracts, it is likely that many will fall prey to similar situations.

What’s next?

NIL deals with college athletes are likely to see a boom this upcoming year. Out of 300 brands surveyed in 2021, over half said they are planning on spending between $50K-$500K on student-athletes in 2022. Additionally, companies like Opendorse (an athlete marketing clearinghouse that serves as a one-stop shop for athletes and people who would like to pay them), have made it even easier for players to find deals.

Student-athletes will have major opportunities ahead of them and it is imperative they hire a legal professional to help with the process. Attorneys can help athletes by doing the following:

1. Protect the athletes’ NIL and intellectual property in the form of trademarks and copyrights.
2. Review complex agreements with brands to ensure that athletes are getting the best deal possible.
3. Ensure that the sponsorships/partnerships they enter into follow the laws of their local state and school.

If done correctly, NIL deals can be a huge win for athletes. By hiring an attorney to help, athletes can be confident in knowing they are being represented by an experienced legal professional and simply enjoy the ride.

But the rule clarification focuses a spotlight on booster organizations and how they operate. Some, like NIL-Auburn, LLC, allow athletes to create content that is distributed to subscription members of the collective. Others, like NIL Management (The Ohio State University), operate more or less like brokers to match student-athletes with businesses looking for paid endorsers.

What’s the common thread?

It should come as no surprise that most of these booster organizations are designed to make money off of your name, image, and likeness as a student-athlete. If you’re not already rolling your eyes and thinking, “I’ve heard this story before,” well you should be. Large organizations making bank off of your hard work as a student-athlete is the whole reason the NCAA was sued and ultimately agreed to let you monetize your name, image, and likeness in the first place.

Is there a place for these booster organizations?

Yes, of course. As a student-athlete, you probably don’t have time or the expertise needed to market yourself as an individual student-athlete or to negotiate endorsement deal opportunities.

And yes, you will likely get paid… at least a bit.

But before you agree to work with one of these booster organizations, you should first fully understand how much of the endorsement money the organization will keep out of each deal involving your name, image, and likeness.

What are the other risks of booster organizations?

Each booster organization—and potentially each endorsement deal—may have different terms for how much control you have after you leave the school (draft, graduation, transfer, etc.). In some cases, you may only get paid once while the endorsement content continues to make money for the booster long after you move on to other opportunities.

Also, booster organizations aren’t lawyers or law firms. They don’t necessarily have your best interests in mind. Instead, you’ll be signing a contract that unknowingly puts you in an adversarial relationship with booster organizations from day one.

How can I better control use of my name, image, and likeness?

One way to increase how much control you have over a booster organization’s use of your name, image, and likeness is to obtain protection for your name, image, and likeness before you enter into any agreements for group endorsements through your school or through a booster organization.

We can help you with that. And unlike booster organizations, your athletic department, or your university, we are lawyers whose only task is to help you obtain that protection and own it yourself. We aren’t marketers; we aren’t boosters. We aren’t collaborating with any school or university, and literally cannot tell anyone about what work we’re doing for you unless you give us the OK first.

We’re more than just lawyers though. We established Coach NIL to help you understand how this new playing field is built and how the referees are monitoring things (or not). We’ve bundled our most popular services together to empower you to understand what your school and its booster organizations are up to so that you can avoid agreeing to an endorsement opportunity that yanks all that control away from you. And each bundle is designed to be affordable for students—low down payment, low monthly payment, no interest—all because we care about you getting what the NCAA says it wants for you: fair compensation for use of your name, image, and likeness.

Don’t let your school or its booster organizations take advantage of you. Fill out our easy, no-obligation intake form today to find out more.