The second thing you need to realize about yesterday’s NLRB ruling

… is that it’s a ginormous wake up call for the NCAA.  Andy Staples summarizes that nicely when he writes,

Ohr ordered an election during which Northwestern players will vote by secret ballot to decide whether they wish to unionize. They may choose not to do that, which would help the NCAA and the schools maintain the business model they’ve built and fiercely protected. Northwestern could win its forthcoming appeal to the NLRB, which also would help. This case probably won’t get resolved before it reaches the Supreme Court or Congress, so nothing drastic will happen immediately.

The O’Bannon case is slated to start this summer, and any judgment there will be appealed to the hilt. It won’t be resolved for years, but it also could smash the business model for major college athletics to pieces. Earlier this month, sports labor specialist Jeffrey Kessler announced he would form a class of athletes to sue the NCAA and the ACC, Big Ten, Big 12, Pac-12 and SEC on antitrust grounds. Kessler isn’t seeking specific damages. He simply wants to blow up the system and start over with a free-market one.

One or all of these challenges will ultimately succeed because the people in charge of college sports didn’t heed the old saw about what happens to pigs and what happens to hogs. The conference commissioners, athletic directors, coaches, and NCAA officials have had a great run of about 15 years in which their revenues have soared while their labor costs remained mostly flat. A lot of that money went into their pockets. And bless the $4 million football coach or the $1 million athletic director. They were only being good capitalists. It’s great that Ohio State athletic director Gene Smith negotiated a contract on the open market that pays him a $940,484 base salary and includes bonuses such as the $18,447.94 he’ll receive because Buckeyes wrestler Logan Steiber won the NCAA title in the 141-pound class this past weekend. It kind of stinks that Steiber doesn’t get a penny extra even though he threw some significant scratch in his AD’s pocket.

If Smith makes $150,000 a year and gets no bonus, no one holds him up as an example. The difference is the money, and not many of these folks have turned it down. But if they believed they could be millionaire CEOs without dealing with some of the same labor issues other millionaire CEOs deal with, they were kidding themselves.

The irony of using Gene Smith as a poster boy is that Gene Smith recognizes the current state of affairs is untenable.

Ohio State AD Gene Smith calls the approval of the extra money a ‘formality,’ despite failed efforts in the past, because the power conferences will likely have voting prowess to push through such issues.

None of this will stave off the Ed O’Bannon lawsuit, which could put the NCAA on trial in June over athletes’ inability to monetize their image and likeness. Notable attorney Jeffrey Kessler has joined the fray, filing an antitrust suit against the NCAA attacking what many consider an an antiquated ‘amateurism’ model.

But Smith wonders whether the recent governance push – which should amplify the players’ voice in the process and enhance health-safety benefits – could have helped curb the lawsuits if done earlier.

“Had new governance structure been in place four years ago, I don’t think these lawsuits would have emerged because we would have addressed a lot of these concerns,” Smith told CBSSports.com last week (yes, before this).

Since the NCAA never wanted players capitalizing on market value, maybe at least some level of litigation was inevitable.

But to Smith’s larger point, being proactive with players’ needs would have urged more dialogue and common ground.

Now it’s almost too late.

Like with player health care: Smith thinks, once governance is done, broader discussions will surface about better health benefits after players’ eligibility is up. This is issue No. 1 for the Northwestern players in their fight to unionize.

Letting students in “allows us to move to the 21st century,” Smith said. The power conferences don’t want weighted voting to increase scholarship limits or change academic criteria — they want to use financial wealth to “more support the student-athletes we have,” he said.

“I’m anxious to pull some of our student-athletes in a room and say, OK, this new governance structure is in place, we’re going to start talking about potential student legislation for student-athlete benefits, guys, tell me, what do you need that you’re missing?” Smith said.

The judge in the O’Bannon case has encouraged settlement talks for both sides, which Smith thinks is a great idea. “I just think it needs to be done,” he says.

What does it say when the guy who negotiated himself a bonus based on an individual player’s accomplishment is being more realistic than the NCAA’s chief legal counsel?

As Staples’ notes, commercially speaking, the world around the NCAA has changed.  The NCAA stubbornly refuses to recognize that.

Back in the 1950s, when former NCAA director Walter Byers coined the term “student-athlete” in order to help schools dodge worker’s compensation claims, there was little money in the system. Lawyers could have attacked but would have found only a few drops of blood in the stone. In his 1997 book Unsportsmanlike Conduct, Byers described a case in Colorado in which the state supreme court overturned a death benefit awarded to the widow of Fort Lewis A&M player Ray Dennison, who died of a head injury suffered playing football. Unlike today’s players, whose tuition, room and board are covered by their schools, Dennison was given a job to cover his room and board. “…the Supreme Court reversed the Industrial Commission’s award of death benefits to the widow because, it said, there was no evidence of a contract for hire or that his employment by the university would have changed had he quit football,” Byers wrote. “Particularly significant was the court’s argument that the college received no benefit from Dennison’s activities, ‘since the college was not in the football business and received no benefit from this field of recreation.'”

That was probably true of that school in the 1950s or a Division III school now. But at the top of the college sports food chain, schools are very much in the business of football and men’s basketball. Only a fool would argue that Texas A&M received no benefit from the exploits of Johnny Manziel. In fact, the schools of the Big Ten and the Pac-12 are so deep in the business of football and men’s basketball that they partner in (Big Ten) or run (Pac-12) their own cable television networks. In August, the schools of SEC — in partnership with ESPN — will join them when their own network launches. School presidents and athletic directors chose to turn college sports into a multibillion-dollar business. In fact, they sued the NCAA for the right to do it. This made some coaches, ADs and conference commissioners quite rich, and they pocketed a lot of that money before some enterprising attorneys began hinting to the labor force that it should ask for a bigger slice of the pie. Those attorneys didn’t do this out of the goodness of their hearts, of course. The ones who will ultimately win this game are the lawyers.

The world has changed, indeed.  The NCAA – okay, its big school membership – wants to have its commercial cake and eat its amateurism standard, too.  The problem is, sooner or later, the courts aren’t going to let it continue to do that.  So if you’re Donald Remy, do you advise trying to cut a deal now and manage the situation, or do you continue to claim disappointment, let things potentially fall completely out of control and then turn to Congress (as Jim Delany mentioned doing last month) to salvage things?

The answer seems pretty obvious to me.  But, then again, I’m not Mark Emmert.

***************************************************************************

UPDATE:  To put things another way,

People have asked why the NLRB thinks athletes should be employees, and that’s a fundamental misunderstanding of the process. The NLRB isn’t sating football players should be treated like employees. They’re saying that football players ARE employees. The NCAA has been hiding for years behind the theory that because these kids are “student-athletes” (a term the NCAA made up to avoid liability), the normal rules don’t apply. Yesterday’s ruling was a pretty clear indication that those arguments are crap. You have an industry that makes huge amounts of money. You have a labor force that is highly skilled, drawn from a very narrow pool, and that spends more than a full time job worth of time on the job. The company’s income is largely based on the performance of the workers. They are under the complete (and damn-near dictatorial) control of their supervisors. And they are compensated to the tune of $50,000 to $75,000. And you ask people to believe they aren’t employees because you created a useful fiction that lets everyone sleep better at night? Shove it, sir. Shove it hard. When you see the facts on paper, it’s impossible to reach any other conclusion without adding some external consideration; “but think of what it will do to the game?”

We tend to let a lot of things slide because we love sports so much. We like physical sports, so law enforcement doesn’t get involved when a player come up behind a guy from behind, knock him out cold, and whack him in the neck with five foot long wooden stick in front of 6,000 witnesses. We enjoy the NCAA football video games, so we played along with the amusing theory that Michigan’s quarterback just happened to be #16 for a few years. We even try to talk ourselves into the idea that maybe football isn’t as dangerous as it’s being made out to be. But with yesterday’s ruling, at least we can say that the legal system can still see through Mark Emmert’s steaming fiction.

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48 Comments

Filed under The NCAA

48 responses to “The second thing you need to realize about yesterday’s NLRB ruling

  1. 202dawg

    If turning to Congress is your last resort you are royally screwed. That goes for anything, not just football…

  2. The other Doug

    Going to Congress has to be their plan.

  3. Tom

    Well then, we will all feel good if Congress is involved. That what they do isn’t it? Pass laws so the populace is happy? Happy football, OH Boy!

    Where does this lead us? Are the schools going to be in bidding wars for the best high school players? How far off is this scenario?

    • mp

      They already are in bidding wars, but they are using non-monetary incentives: (in no order of importance) quality of coaches, facilities, coeds, NFL placement, proximity to home, areas of study, weather, etc… If schools (or more likely booster organizations) could directly appeal monetarily, all it would do would be to remove some of their reliance on using these indirect incentives…just like any other employer.

  4. 81Dog

    The NCAA should have realized the 1950s model of college sports was over when the TV lawsuit filed by Oklahoma and UGA blew up in their faces, but the university presidents and ADs should have, too.

    Basically, the NCAA and college suits seem to be saying, well, we have a free market approach to tv rights, sponsorships, etc. for the folks running the show, but you peons who actually provide the “on field product”? Not so fast, my friends.

    What happens at the bottom of the rabbit hole is anyone’s guess, but my guess is that if it goes full on Adam Smith/let the marketplace dictate benefits, etc., some schools will try to emulate the NFL and some will go back to playing with whoever enrolls and shows up the first day of practice. I can’t wait to see what the SEC salary cap ends up being under the Full On Capitalist model. I’m sure Auburn has boosters standing by ready to pay the luxury tax when they exceed the cap.

  5. Noonan

    If players are employees, they should be taxed for benefits received:
    http://www.irs.gov/pub/irs-tege/eotopicj90.pdf

    • Silver Creek Doug

      Scholarships are specifically exempted, so that takes a big bite out of it right there.

      • Normaltown Mike

        If receiving a scholarship makes you an employee, then it is not a scholarship, it is compensation.

        • From Staples’ piece:

          Huma laughed at the argument that players wouldn’t want to unionize because they might be taxed on their current compensation. “They’re already taxed on room and board,” he said. Huma is confident the IRS would not tax the tuition portion of the scholarship. That could be tricky if the players prevail. According to the IRS, the tuition portion of athletic scholarships are not taxable. (Though a look at the necessary worksheet suggests that if athletes are considered employees, the IRS might consider their situations differently.)

          • This is interesting:

            … under Rev. Rul. 77-263, athletic scholarships are taxable if they can be withdrawn by the universities in the event the athlete quits his chosen sport. So, on a plain text reading, athletes should be paying taxes RIGHT NOW. If Brady Hoke can pull a scholarship from a kid who decides to quit football (and I think that’s a pretty safe bet), Michigan football players should already be counting their scholarships as income. But one thing a union can potentially do is get the school to enforce its four year guaranteed scholarship authorized by the NCAA, which WOULD bring them back within the tax-free zone.

    • Rp

      Holy shit. Our guys cant even keep their DL’s current. Imagine how many of them would be sitting out games due to “tax compliance issues.” Spurrier will stay aound for another 15 yrs to see that.

  6. fatman48

    Tom is right, it would bring out into the open what is going on under the table. Besides we all know that Congress and the NCAA only care about Congress and the NCAA, neither of which could find there ASSES with a road map and a seeing eye-dog…..

  7. Normaltown Mike

    All I know is that those greedy AD’s aren’t going to take advantage of our athletes anymore!

  8. PTC DAWG

    I say if it comes to it, go all walk-ons, no scholarships period. Get back to basics…

  9. Dog in Fla

    “UPDATE: To put things another way,” who moved Pat Fitzgerald’s strawberries

  10. Senator, your ongoing coverage of this has been spectacular and incisive. I find this issue ulcerative, particularly the lack of leadership from the NCAA, conferences, or school administrators, all of whom, as you point out, were incentivized by what student-athletes produced, none (or way to few, and only those recently) of whom felt the need to get out ahead of this that could drastically (and for the worse) affect college athletics.

    My grumbling aside, and with the understanding that ‘anything is possible’ particularly if this falls to Congress… I’m curious as to your or others’ thoughts on if players are to be monetarily compensated, are any of the involved parties considering that compensation be deferred until after college eligibility expires [graduation or early exit to the league(s)] and would that do anything to help stave off a bidding war during the recruiting process?

    Further, could a system of fines be instituted to address discipline issues e.g. check-gate, etc. and do you see such an incentive structure as a viable behavior modifier, or would it just be fodder for negative recruiting if UGA fined for misbehavior, but UT, for example didn’t?

    I’ll hang up and listen,
    ~gh
    P.S. Go Hoos. UVa ’98

    • Wahoowa, brother.

      Honestly, I have no idea how this plays out monetarily. I’m skeptical that schools are going to wind up cutting big paychecks to football players, but much less so about players eventually being able to monetize their names and likenesses.

      Discipline… well, that’s an interesting issue. That’s what I was getting at to some extent in my other post. CAPA’s goal is to wrest away some part of the absolute control schools have over student-athletes and that’s going to be a bitter pill to swallow for some, even if money isn’t involved. For all of the NCAA’s noble talk about doing more (Emmert blathered about that on Sunday’s Meet the Press), little has been discussed and even less has been done.

      • Thanks for the follow-up and a big Wahoowa to you, too! Again, my appreciation for your work creating a practicable clearinghouse on the matter, for the voice of reason and intelligence you contribute to a discussion sorely lacking it, and the untold hours and requisite mire slogging doing so requires.
        all the best,
        ~g

  11. Scorpio Jones, III

    “Wednesday’s ruling likely will have zero immediate effect. Northwestern can appeal, and the ruling only affects players at private schools because the NLRB has no power over state-run institutions.”

    So this means Vandy is in trouble?

    “School presidents and athletic directors chose to turn college sports into a multibillion-dollar business. In fact, they sued the NCAA for the right to do it.”

    And yes, Georgia is one of the “they” mentioned.

    Its been quite a while since this happened. I would guess I may not get to see the Georgia legislature creating right to work laws for college football players, and I guess I better not start spending my grandson’s royalty checks just yet.

    This is a big fan for the stuff to hit…stuff gon be spread everwhar, everwhar.

  12. The side note here is that if players have to be paid because they are employees, how do you account for the walk-ons? Unpaid internships?

  13. Mayor of Dawgtown

    This is perhaps the most critical time for the NCAA in its history. A time when it needs leadership most. And at the current helm of the NCAA is the worst President it has ever had. The very first thing that the NCAA has to do in order to successfully weather this storm is……replace Mark Emmert.

    • Dog in Fla

      And there can be only one man who has the superpowers to replace him and that man is……Michael F. Adams

  14. TEXAS DAWG

    IF the scholarship is to become a taxable item, won’t that put old State U in a competitive advantage for in state athletes vs the next door neighbor or certainly a private school.(All dollar amounts are fictitious just for the sake of argument) Say UGA cost $9000 a year in state tuition, vs Alabama $15000 a year for out of state vs $25000 a year for Miami (private). Now Joe Jockstrap has to pay taxes on that amount. Won’ t that make the instate tuition rate a recruiting tool? Just wondering.

  15. Chuck

    Does anyone see a true minor-league football system similar to MLB coming out of this? A kid says, “Hmm, get paid to go to class and play ball, or get paid to play ball only…I’ll take #2.”

  16. Cojones

    John Pennington explains it well at Mr.SEC. Pandora’s Box be here.

    The reach of the decision will involve every college sport. An open market for CFB players will now be chaotic until the sport loses our interest after becoming litigious and court-bound. Yep, we have time while this is going through a court process, but the day it is acted upon(couple of years?) will show how much those extra employees that Saban has will earn their pay (- court-challenged nefarious recruiting leading the way).

    The situation can become much sadder than we can speculate in similar fashion to the “ghost plane” now being pursued. You know the sport is there, but the modifications thru it’s court journey only gives fading hope that CFB will ever exist or rise to the prominance we now enjoy.

    • Dog in Fla

      “The situation can become much sadder than we can speculate in similar fashion to the ‘ghost plane’ now being pursued.”

      Balls, don’t despair because walking with a ghost looking for a plane can be a fun trip

    • Macallanlover

      +1 Mr. Pennington gets it, chaotic is a definite. No end to the twists and tangled directions this will be take as it plays out. Lawyers win big, CFB……not so much.

  17. Macallanlover

    I wish there were some way to view the recent developments in a positive light, but there just isn’t (except that it will take a few years to make the sport unsupportable, if not extinct). Mixing the NLRB, attorneys, a “union mentality”, the US judicial system, the academic community, the NCAA leadership team, and possibly/probably Congress together is a formula for disaster. Like so many things that unions touch, decline is inevitable. There were times, and some situations, where unions helped solve problems in this country, but those positive examples are in our distant past. This will not end well for the sport. I realize there are some on this blog who view this differently, and that is no surprise, but my “not too early enough” call is CFB fans will all rue this sad day. Our sport definitely needed to make changes, but this is the worst possible way to go about improving things.

    For several decades I have supported a reasonable stipend for athletes (say $500 a month) because at the highest levels football and basketball players generate profits to the university, and are required to spend a large amount of their “spare” time in training/preparation. This precluded them from having part-time jobs normally available to other scholarship students. I just wish the decision makers had not waited so long to move on this subject before embracing it broadly last year because now the Barbarians are inside the gate. Indecisiveness and incompetence led to bringing out the nuclear solution. Leaders and decision makers throughout the collegiate sports nation allowed it to happen.

    • Dog in Fla

      “Like so many things that unions touch, decline is inevitable.”

      I tell you what, these unions that are taking over America need a barometer up their ass:

      “Last week came news that the share of America’s workforce that’s unionized hit a 97-year low. A mere 11.3% of workers now belong to a union, and a great chunk of those are in the shrinking public sector. In the private sector, unionization fell to an abysmal 6.6%, down from a peak of 35% during the 1950s.

      Most Americans yawned at this news. On one level that’s understandable. After all, most Americans aren’t in a union. It’s a vicious cycle: as unions decline, fewer people see their fates as bound up with unions, which just accelerates the decline.”

      http://ideas.time.com/2013/01/29/viewpoint-why-the-decline-of-unions-is-your-problem-too/

  18. C.S.

    Our sport definitely needed to make changes, but this is the worst possible way to go about improving things.

    Ah, that’s an oldie but a goodie, isn’t it? Why, it’s like it was yesterday that I heard it — not for the first time, of course — when they passed the Civil RIghts Act. Or was it when Loving v. Virginia got decided? I forget, And then it was a hit again with Kurt Flood and the Free Agents. And of course, it’s made something of a retro comeback in response to the legal attempts to get gay marriage recognized.

    Of course, once the new paradigm is in place, everyone will claim that they, at least, had always been for change — just like Macallanlover! — but will nevertheless look whistfully back on the days when a grown man making millions of bucks could yank some poor kid’s scholarship just for looking at him funny.

    And the world goes ’round.

  19. AlphaDawg

    Freedom to orgy will be the Dawg Unions 1st demand.