Dawson v. Nat'l Collegiate Athletic Ass'n

• Decision Date: 12 August 2019
• Docket Number: No. 17-15973,17-15973
• Citation: 932 F.3d 905
• Parties: Lamar DAWSON, Plaintiff-Appellant, v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION; PAC-12 Conference, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

932 F.3d 905

Lamar DAWSON, Plaintiff-Appellant,

v.NATIONAL COLLEGIATE ATHLETIC ASSOCIATION; PAC-12 Conference, Defendants-Appellees.

No. 17-15973

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 15, 2018 San Francisco, California

Filed August 12, 2019

Mark C. Rifkin (argued) and Jeffrey G. Smith, Wolf Haldenstein Adler Freeman & Hertz LLP, New York, New York; Betsy C. Manifold, Wolf Haldenstein Adler Freeman & Hertz LLP, San Diego, California; John M. Kelson, The Law Offices of John M. Kelson, Oakland, California; Jerry K. Cimmet, San Mateo, California; for Plaintiff-Appellant.

Daniel S. Volchok (argued) and David M. Lehn, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, D.C.; Kenneth D. Sulzer, Steven B. Katz, and Sarah Kroll-Rosenbaum, Constangy Brooks Smith & Prophete LLP, Los Angeles, California; for Defendant-Appellee National Collegiate Athletic Association.

Kiran A. Seldon (argued), Jeffrey A. Berman, and Diana Tabacopoulos, Seyfarth Shaw LLP, Los Angeles, California, for Defendant-Appellee PAC-12 Conference.

Before: Sidney R. Thomas, Chief Judge, Andrew J. Kleinfeld, Circuit Judge, and George H. Wu,^* District Judge.

THOMAS, Chief Judge:

We consider whether Lamar Dawson and Division I Football Bowl Subdivision ("FBS") Football Players are employees of the National Collegiate Athletic Association ("NCAA") and PAC-12 Conference ("PAC-12") within the meaning of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 – 219, and California labor law. We have jurisdiction pursuant to 28 U.S.C. § 1291. Because the claims fail as a matter of law, we affirm the judgment of the district court.

I

Dawson played football for the University of Southern California ("USC"), a Division I FBS member of the NCAA’s PAC-12 Conference. In this putative class action case, Dawson does not allege that he was an employee of USC, so the pure question of employment is not before us, and we need not consider whether he had employment status as a football player, nor whether USC was an employer. That question is left, if at all, for another day. Rather, the only issue before us is whether the NCAA and PAC-12 were his employers under federal and state law.

The NCAA is an "unincorporated not-for-profit educational organization" comprised of more than 1,100 colleges and universities throughout the United States. NCAA member schools are organized into three Divisions based on the number and quality of opportunities that the schools provide to participate in intercollegiate athletics. Division I consists of approximately 351 schools. Approximately 253 Division I schools have Division I football programs, of which approximately 128 fall within the FBS. The PAC-12 is an unincorporated association which operates a multi-sport collegiate athletic conference, and is a formal conference member of the NCAA Division I FBS.

NCAA member schools "agree to administer their athletics programs in accordance with the constitution, bylaws, and other legislation of the [NCAA]." The NCAA’s constitution and bylaws establish academic eligibility requirements, provide guidelines and restrictions for recruitment, impose limits on the number and size of athletic scholarships, and regulate the scheduling and conditions of practice and games.

The NCAA bylaws also govern financial aid and prohibit compensation for student-athletes. Bylaw 15.1 provides that student-athletes may receive financial aid on the basis of athletic ability, but that the amount of aid must not exceed "the value of his or her cost of attendance." Student-athletes receiving aid in excess of the cost of attendance limitation "shall not be eligible to participate in intercollegiate athletics."

NCAA Bylaw 12.1.4 provides that financial aid is "not considered to be pay or the promise of pay for athletics skill." Bylaw 12.1.2 further prohibits any payment to a student-athlete for athletic services. Student-athletes who accept payments may be subject to revocation of their amateur status and eligibility under seven conditions.¹

In his complaint, Dawson alleged that the NCAA and the PAC-12 acted as an employer of the class members by "prescribing the terms and conditions under which student-athletes perform services." Dawson claims that the NCAA and PAC-12, as joint employers, failed to pay wages, including overtime pay, to Dawson and to class members in violation of federal and state labor laws.

The NCAA and the PAC-12 moved to dismiss Dawson’s complaint for failure to state a claim upon which relief can be granted. The district court granted the motion, and dismissed the complaint without leave to amend.

II

The district court properly concluded that Division I FBS Football Players are not employees of the NCAA or PAC-12 as a matter of federal law.²

A

The FLSA provides that "employers" must pay their "employees" a minimum wage and overtime pay for hours worked in excess of the statutory workweek. 29 U.S.C. §§ 206(a), 207(a)(1). The statute defines an "employee" as "any individual employed by an employer." 29 U.S.C. § 203(e)(1). To "employ" means "to suffer or permit to work." 29 U.S.C. § 203(g).

The FLSA definition of employee is "exceedingly broad," but "does have its limits."

Tony & Susan Alamo Found. v. Sec’y of Labor , 471 U.S. 290, 295, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985). "An individual may work for a covered enterprise and nevertheless not be an ‘employee.’ " Id . at 299, 105 S.Ct. 1953. For example, an individual "who, ‘without any express or implied compensation agreement, might work for their own advantage on the premises of another’ " falls outside the FLSA definition of employee. Id . at 300, 105 S.Ct. 1953 (quoting Walling v. Portland Terminal Co ., 330 U.S. 148, 150, 67 S.Ct. 639, 91 L.Ed. 809 (1947) ).

Ultimately, "[t]he test of employment under the [FLSA] is one of ‘economic reality.’ " Id . at 301, 105 S.Ct. 1953 (quoting Goldberg v. Whitaker House Cooperative, Inc. , 366 U.S. 28, 33, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961) ). Economic reality accounts for "the circumstances of the whole activity" rather than considering "isolated factors" determinative. Rutherford Food Corp. v. McComb , 331 U.S. 722, 730, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947).

The Supreme Court has found a number of circumstances relevant in evaluating economic reality, including: (1) expectation of compensation, Portland Terminal , 330 U.S. at 152, 67 S.Ct. 639 ; (2) the power to hire and fire, Goldberg , 366 U.S. at 33, 81 S.Ct. 933 ; (3) and evidence that an arrangement was "conceived or carried out" to evade the law, Portland Terminal , 330 U.S. at 153, 67 S.Ct. 639. We apply these guiding principles in our analysis, and conclude that the economic reality of the relationship between the NCAA/PAC-12 and student-athletes does not reflect an employment relationship.

We need not address whether Dawson’s scholarship engendered an "expectation of compensation" or whether his scholarship amounted to compensation because he did not receive the scholarship from the NCAA or the PAC-12. The NCAA Bylaws reveal that member schools themselves award and distribute the financial aid Dawson alleges constitutes expected compensation. See 2015–16 NCAA Division I Manual, NCAA Bylaw 15.01.6 (prohibiting "institutions" from awarding aid to a student-athlete in excess of cost of attendance).

Dawson’s theory is that NCAA regulations prohibit NCAA student-athletes from accepting compensation beyond scholarships limited to cost of attendance. He does not claim that the defendants provide scholarships; whether "compensation" or not, scholarship funding comes from his school. The limitation on scholarships does not, as a matter of law, create any expectation of compensation from the NCAA/PAC-12.

Thus, on the undisputed facts, neither the NCAA nor PAC-12 provided Dawson with a scholarship or any expectation of a scholarship.

Similarly, on this record, Dawson cannot demonstrate that the NCAA or the PAC-12 had the power to fire or hire him. Dawson alleges that the NCAA/PAC-12 assert complete control over the lives of student-athletes, on and off campus, including a student-athlete’s: "(a) living arrangements; (b) athletic eligibility; (c) permissible compensation; (d) allowable behavior; (e) academic performance; (f) use of alcohol and drugs; and (g) gambling." Dawson alleges that the penalties for violating these rules include "loss of financial aid and eligibility for sports." Dawson also alleges that the NCAA/PAC-12 control and regulate student-athletes’ "training and game schedules, academic schedules, and other collegiate activities."

The NCAA Bylaws pervasively regulate college athletics. The complaint, however, does not allege that the NCAA/PAC-12 "hire and fire," or exercise any other analogous control, over student-athletes. The complaint does not allege, and moreover, the record does not demonstrate, that the NCAA and PAC-12 choose the players on any Division I football team, nor that they engage in the actual supervision of the players’ performance. Rather, the allegations of the complaint, taken as true, demonstrate that the NCAA functions as a regulator, and that the NCAA member schools, for whom the student-athletes allegedly render services, enforce regulations.

In sum, on this record, Dawson cannot demonstrate that the NCAA or the PAC-12 had the power to fire or hire him.

Finally, there is no evidence tendered by Dawson that the NCAA rules were "conceived or carried out" to evade the law. The relevant rules were first promulgated in the early 1920’s, and some version of them has "existed for a long time." Hale v. State of Ariz. , 993 F.2d 1387, 1398 (9th Cir. 1993). In contrast, Congress enacted the FLSA in 1938. Rutherford , 331 U.S. at 723, 67 S.Ct. 1473. Even though "economic reality" in college sports is much different today, there is no evidence on this record that the NCAA rules were "conceived or carried out" to evade the law.

The Supreme Court has also considered more specific factors when helpful to...