Author: Michael Clouser, Esq. (Title: Partner)
NIL has forever changed college football by allowing amateur athletes to be compensated in business ventures and for their Name, Image and Likeness. While this is great news for amateur athletes, it has come with many questions and again leaves the amateur with a host of potential land minds, if not adequately represented.
Everyone is focusing on the potential financial gain for these teenage athletes and entertainers. However, these kids and their families need to focus on mitigating the potential legal and financial risks in this new NIL market. For that reason, prospective and current NIL clients should eschew the mostly unqualified or self-appointed NIL marketing agent and retain the expertise of a qualified law firm with experience in the sports and entertainment industry.
For example, these kids need to set up an LLC to limit liability, makes sure they have adequate liability protections, and ensure that they have financial controls in place so they are not subjecting themselves to potential IRS tax fraud claims for failure to properly report NILs income.
In addition to the business and legal risks facing the prospective or current NIL client, inconsistency in state NIL laws has created an unfair advantage in recruiting for states with favorable NIL laws. This will have a major impact in college athletics as amateur athletes focus on the NIL compensation offered by the schools in making commitment decisions. Despite the obvious reality that the offer of NIL money by schools is clearly serving as an inducement for these kids to sign with that school, the law prohibits a school from using NIL opportunities as an inducement for an athlete to commit to their school. Simply stated, it is nonsensical to think that this NIL money is not an inducement. Just ask Florida commit Jaden Rashada who flipped to Arizona State after the Gator Collective would not stand behind their promise of $13 million NIL opportunities.
Finally, whether intended or not, the Florida NIL Amendment has set the stage for the National Labor Relations Board’s General Counsel to again pursue its claim that these amateur athletes should be classified as employees under the National Labor Relations Act. This classification will allow the athletes to unionize and finally have a seat at the table to set terms and conditions of their employment.
For example, Florida’s latest NIL amendment signed by Governor DeSantis last week, allows the universities and their coaches to secure NIL deals for both prospective and current athletes. It also removed the provision that grant-in-aid and scholarships are not compensation which leads to the only conclusion that athletic scholarships may now be considered “compensation” under Florida law. As a result, Florida “amateur” athletes are now potentially receiving compensation directly from their school in the form of scholarships and NIL deals.
These compensation arrangements along with the control exerted over these amateur athletes by the schools, conferences, and NCAA, will likely lead to further action by the NLRB in finding that these entities will ultimately be deemed to be joint employers of these athletes.
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