Sports Law Blog
All things legal relating
to the sports world...
Thursday, August 22, 2013
The NCAA Has Never Been Regulated by Congress, So Will Congress Finally Man-Up with Proposed New Legislation?
Going back almost five decades, since 1965, Congress has held about thirty separate formal hearings on the NCAA and/or amateur or collegiate athletics, and Congress has produced no less than seventeen reports regarding the NCAA and these related topics during that timeframe, yet Congress has enacted no legislation to regulate the NCAA.*
On September 19, 2011, in my Sports Business Journal op-ed, I proposed that Congress should adopt the following Collegiate Athlete and Employee Fairness Act, which would essentially solve most if not all of the current problems with college sports by inserting the free market into the system. CAEFA would require that:
1. The athletic conferences, the NCAA, and any related associations, shall no longer be deemed IRS 501(c)(3) charitable entities and shall hereafter be deemed 501(c)(6) trade association entities;
2. Any college or university with an athletic department that derives revenue from its athletic program shall operate from within that institution and not from within any separate entity, and the athletic department’s finances shall be audited according to generally accepted accounting principles and publicly and separately reported with its annual IRS Form 990;
3. Any college or university with an athletic department that derives revenue from its athletic program shall provide disability, health, and life insurance to its college athletes and athletic department employees;
4. Any college or university’s net profit from its athletic department shall be taxed under the unrelated business income tax theory, because making profit on amateur activities is inapposite to amateurism;
5. Any entity purporting to regulate college athletes or athletic department employees shall apply the same rights and privileges to these athletes and employees as it does to its members; colleges and universities shall apply the same rights and privileges to all of their students, whether they participate in athletics or not;
6. Any entity purporting to regulate college athletes or employees shall not make an agreement with any college or university that limits or attempts to limit any rules or regulations or terms of admissions and recruitment or attendance, a grant-in-aid or letter of intent, or athletic department employment;
7. Any entity purporting to regulate college athletics or athletic department employees shall not abridge any rights or privileges afforded by the constitutions and laws of the United States and its several states and territories as may be applicable to that athlete or employee, and no such entity shall attempt to penalize resort to the judicial system via restitution rules, penalties, or otherwise;
8. The Uniform Athlete Agent Act and any federal or state analogs are hereby superseded by this Act, which invalidates or withdraws the same and replaces them with the simple and universal truth that all college athletes and employees are entitled to representation of their choice at any point in time for any reason whatsoever under any terms agreed to by the agent or attorney and college athlete, which shall be deemed confidential and privileged; and
9. Congress shall establish an administrative law system within the Department of Education to adjudicate any enforcement of any rules or regulations of any entities purporting to regulate colleges and universities and their college athletes or athletic department employees, which shall be fully and totally financed by those entities on a yearly basis pursuant to a formula to be determined by the Department, which shall adopt rules and regulations to carry out this Act, including rules and regulations as to when the entity must provide counsel for athletes and employees, who cannot otherwise afford to retain the same. Appeals shall be heard by the Federal Circuit Court of Appeals, and certiorari may be entertained by the U.S. Supreme Court.
On October 19, 2011, Representative John Conyers, Jr., Ranking Member of the House Committee on the Judiciary, called for hearings regarding antitrust and due process violations by the NCAA.
On November 17, 2011, Representative Bobby L. Rush, Member of the House Committee on Energy & Commerce, Subcommittee on Commerce, Manufacturing and Trade, along with sixty other members of Congress, called for hearings to evaluate those circumstances under which the NCAA would decide—along with what is the NCAA’s capacity—to independently investigate recurring student-athlete and administrative misconduct and violations of NCAA and member conference regulations.
To date, nothing has come of my proposal or of these calls for hearings on the NCAA by about ten percent of Congress, which is not an insignificant number at the hearing stage.
On August 1, 2013, Representative Charles Dent along with eight co-sponsors introduced legislation entitled the National Collegiate Athletics Accountability Act, which has been assigned to the Committee on Education and the Workforce, and which provides in pertinent part as follows:
Section 487(a) of the Higher Education Act of 1965 (20 U.S.C. 1094(a)) is amended by adding at the end the following:
‘(30) In the case of an institution that has an intercollegiate athletic program, the institution will not be a member of a nonprofit athletic association unless such association—
‘(A) requires annual baseline concussion testing of each student athlete on the active roster of each team participating in a contact/collision sport or a limited-contact/impact sport (based on the most recent classification of sports published by the Committee on Sports Medicine of the American Academy of Pediatrics) before such student athlete may participate in any contact drills or activities;
‘(B) prior to enforcing any remedy for an alleged infraction or violation of the policies of such association—
‘(i) provides institutions and student athletes with the opportunity for a formal administrative hearing, not less than one appeal, and any other due process procedure the Secretary determines by regulation to be necessary; and
‘(ii) hold in abeyance any such remedy until all appeals have been exhausted or until the deadline to appeal has passed, whichever is sooner;
‘(C) with respect to institutions attended by students receiving athletically related student aid (as defined in section 485(e)), requires any such athletically related student aid provided to student athletes who play a contact/collision sport (based on the most recent classification of sports published by the Committee on Sports Medicine of the American Academy of Pediatrics) to be—
‘(i) guaranteed for the duration of the student athlete’s attendance at the institution, up to 4 years; and
‘(ii) irrevocable for reasons related to athletic skill or injury of the student athlete; and
‘(D) does not have in place a policy that prohibits institutions from paying stipends to student athletes.’.
The media reported this introduction and noted that essentially it was introduced by proxies for Ohio and Penn State Universities, which have both been dealt severe penalties by the NCAA. According to GovTrack, this bill has only a seven percent chance of making it out of Committee, and only one percent chance of being enacted.
Why new legislation that is not comprehensive was introduced without seeking support from Reps. Conyers & Rush is unclear, but it underscores why any attempt to regulate the NCAA generally fails, and the reasons are litany with just a few being the following: (A) This never makes Congress’ top ten most important things to do; (B) those advocating regulation usually have a bone to pick about their college team being picked-upon, which makes their proposals suspect from the get-go; (C) Congress doesn’t understand the NCAA or how its cabal made up of the conferences, colleges, and universities actually work, which is more an example of modern day fascism; (D) Congress has no idea how much tax revenue it is missing by failing to investigate this pot of gold; and (E) Congress generally doesn’t care, beyond Reps. Conyers & Rush and their group, about the racist impact that the commercialization of men’s football and basketball have had on minorities.
If you are the NCAA, do you really care, when you know that none of this will go anywhere? The obvious answer is no, if history is any example. With all of the hearings and reports on the NCAA, Congress has never regulated the NCAA directly, although it has chosen to regulate agents and gambling, as if those were of paramount importance, which they are only to the NCAA. So, if the NCAA wants legislation to help it, it has gotten its way in the past. But real policing of the NCAA won’t happen unless a movement arises to address the massive inequities of the entire collegiate athletic industry, which must be done on a comprehensive versus piecemeal basis.
Congress should care: College sports generate over $6BB in annual revenue, gambling on college sports is in excess of ten times that amount, neither the states nor the federal government have delegated the regulation of college sports to the NCAA, but by historical accident and Congressional apathy, the NCAA portends to regulate close to a half million college athletes every year, not to mention all the athletic department employees, while not allowing those athletes or employees membership in the NCAA or any say in how they are governed. Insult to injury, the NCAA disclaims any legal relationship with college athletes and employees. Non-profits all, the NCAA and its member conferences, colleges, and universities, this commercial revenue should be taxed under the UBIT theory, but the IRS seems not to care. How does the NCAA maintain its IRS Section 501(c)(3) charitable, nonprofit status, when it is not incorporated as a nonprofit, and when it engages in political lobbying—both of which disqualify it as a 501(c)(3), before we even get to the fact that it spends almost nothing on its tax-exempt purpose?
Where is the Department of Education in all of this, when the President is complaining about the rising costs of college, which can certainly be attributed to some extent to misallocation of resources to athletic departments? According to one of the leading experts in college costs, federal student grants now stand at about $49BB, and federal student loans now stand at about $105BB, annually, and all of this does not count non-student grants from places like NIH. What do we get for this? A national 55% graduation rate over six years! Remember when one was expected to graduate from a four year program in four years?!? Congress should be wondering what kind of Department of Education presides over such a debacle on so many levels. Congress should care a lot about all of this.
* Historical research for this post was provided at my request by and thanks to Kathleen M. Dugan, Esq., M.L.S., Librarian & Chief Administrator, and Sharla B. Johnston, M.L.S., Circulation Services Librarian, at the Cleveland Law Library.