Pay for Play: NIL Compensation for Student-Athletes
By: Joe Whalley
Players can now seek contracts which permit them to receive compensation from the use of their NIL, as long as they abide by the laws of the state. Made a day before a Supreme Court decision on the topic, the NCAA detailed a uniform policy which temporarily suspended the NCAA’s rules restricting a student-athletes ability to receive compensation for their name, image, and likeness (NIL). This policy will apply to DI, DII, and DIII, and will last until the federal government or the NCAA develops new rules to govern NIL usage.
Most States Have Similar Rules, Here’s What They Look Like:
As of July 9, 2021, there are 20 states with official and readily available legislation passed by the state government. While there are a couple different and stand-out provisions between states, all of them share a certain series of criteria. For one, all states have adopted rules urging student athletes to disclose potential NIL contracts with their schools. However, most states go further and mandate reporting those contracts. Additionally, all states permit professional representation—typically an athletic agent or attorney—to aid student athletes in navigating the NIL contract process. These representatives must be officially licensed and compliant with the laws of the state. Other near-universal rulings amongst the passed states include the following:
The athlete’s school or athletic association may not prevent or unreasonably restrict an athlete’s ability to gain compensation for that athlete’s name, image, or likeness.
An athlete’s scholarship is not considered compensation. Furthermore, a school or athletic association may not alter an athlete’s scholarship as a response or deterrent for receiving a contract for NIL.
An institution or athletic association cannot make athletic performance or class attendance a required condition for receiving compensation.
Institutions may (enforce mandatory workshops to educate athletes on money management.
An athletic association or conference cannot prevent an institution with NIL-contracted athletes from competing in athletic events for this reason.
Terms of an NIL contract cannot conflict with the terms of a team contract.
e.g. An athlete whose team contract requires her to wear Under Armor apparel during games may not have a separate NIL contract with Adidas to wear Adidas apparel during games.
Student-Athletes are not considered employees of the institution.
Prospective athletes are not eligible to receive compensation.
Most contracts are only allowed to last as long as the student is enrolled in the university.
This means a student at a 4-year university can only have an NIL contract which lasts 4 years at the maximum.
The institution is not required, and sometimes not even allowed, to create, facilitate, or negotiate opportunities for student-athletes to earn NIL compensation.
Along with these general parameters, the institutions themselves received certain powers to limit NIL contracts. Schools are allowed to ban clothing or merchandise of any entity which isn't school gear while competing or at an official team event. Additionally, an athlete’s NIL contracts cannot use any property, physical or intellectual, of the institution/university unless given explicit permission to do so. If the institution does give explicit permission, the institution may receive compensation of their own in exchange for permission to use their property.
The “Average” NIL States:
These are the states with generally similar rules. Note, however, that there are some small idiosyncrasies between them.
Alabama- Alabama set the paradigm for most other states. Their legislation was the first to become active and most states followed their lead. Alabama specifies athletes can only make NIL contracts with 3rd party organizations which are not affiliated with the athlete’s school. Student Athletes may also not contract with companies that negatively portray the school or damage the athlete’s reputation. These include: tobacco, nicotine, alcohol, drugs, adult entertainment, or gambling organizations. Finally, Alabama requires student athletes seeking NIL contracts to conduct workshop classes focusing on financial literacy and life skills.
Arizona- Specifies compensation can be earned up to the amount allowed by the NCAA.
Arkansas- Both the student athletes and his/her representative must disclose their NIL contracts to the institution.
Colorado- Professional representation can only be through a Colorado-licensed attorney, not an athletic agent.
Kentucky- Signed into executive order by Governor Andy Beshear, Kentucky directly specifies that NIL contract rules must also abide with the rules of Title IX. Kentucky also allows schools to place reasonable limits on the dates and times when athletes may perform NIL work.
Maryland- This bill mandates that schools adopt guidelines which aid in the prevention of sports injuries. Athletes may also be prohibited from doing in-person NIL work during official team activities.
Mississippi- Institutions have the ability to limit dates and times for NIL work. Additionally, a student-athlete must give their institution a minimum of 7 days notice before making any agreement with a professional representative.
Montana- This state specifically includes that two-year and four-year institutions are subject to the bill.
Nebraska- A student athlete has the ability to bring an institution to court for violating the NIL laws, and could be subject to damages. Also, a student-athlete may lose eligibility for entering into negotiations or signing with a professional-sports-services contract.
Nevada- Education workshops for NIL contracted athletes are optional in this state.
New Jersey- An institution's team contracts can utilize an athlete’s name, image, and likeness for advertising and marketing without additional compensation for the athlete.
Oklahoma- This bill is very similar to Nebraska’s NIL legislation, including possible court action for NIL rule violations and losing eligibility for professional contracts, with the exemption that NIL legislation can be granted immediately. Additionally, an athlete has 72 hours before their next sporting event to disclose any NIL contracts.
Tennessee- Financial literacy workshops in this state are mandatory for athletes.
Other States Took a Unique Take on NIL, Here’s How:
These seven states took their NIL legislation provisions one step further than the states mentioned above. However, each state took that step in a slightly different direction. For instance, Georgia included a provision which allows institutions to create a pooling agreement of up to 75% of their athlete’s NIL earnings for distribution amongst all previously enrolled student athletes. In practice, that means the University of Georgia football team could add a provision to their team contract which requires athletes with an NIL contract to give 25% of their earnings from NIL activities to the team pool of money. This money would then be distributed to former UGA student athletes who missed out on their ability to earn compensation for their NIL. Georgia also specifies that their education workshops must occur at the 1st and 3rd years of an athlete's college career.
Along with Georgia, these states also have notably unique NIL provisions:
California- NIL provisions may only be applied to 4-year colleges and institutions.
Florida- NIL compensation must be directly proportional to the athlete’s market value. Athletes under the age of 18 may also be eligible for NIL contracts through a special approval process.
Michigan- More power is given to the institutions to impose specific rules. While not allowed to directly ban an athlete from creating NIL contracts, the institution may establish academic requirements, team rules, codes of conduct, standards for the governance of varsity sports, and disciplinary rules so long as they are applicable to all students. Given broad room for interpretation, it is uncertain how much schools will directly affect student athletes’ ability to gain NIL contracts and compensation.
New Mexico- New Mexico specifically writes that institutions of the state cannot “revoke scholarship or punish athletes for receiving food, shelter, medical expenses or insurance from a third party or earning compensation from use of athletes name, image, likeness or athletic reputation.” Additionally, schools in this state cannot stop a student athlete from wearing whatever footwear they want during official team activities, so long as they are not reflective, contain no flashing lights, and do not pose health risks.
South Carolina- This legislation limits an athlete’s NIL contracting capabilities and expands the abilities of the institution. Athletes are only eligible to receive compensation from 3rd party endorsements, non-athletic work products, or activities related to a business. They do not own their athletic performance, which means they cannot use this as a way to gain money. Additionally, an athlete’s contract cannot conflict with the academic or athletic obligations of their institution. On the other hand, the institution may employ a third party administrator to monitor NIL contracts and agents. Other unique rules in South Carolina include limiting agents' compensation to 10% of NIL contracts and specifying that the third parties, not the athletes, must disclose contract proposals to the institution.
Texas - Along with the previously listed company types which athletes are not allowed to endorse (tobacco, nicotine, alcohol, drugs, adult entertainment, gambling, or anything which negatively portrays the school), Texas also specifies “firearms that the athlete cannot legally purchase” as another category of banned endorsements. Additionally, athletes in the state of Texas are allowed to earn compensation for their autographs, provided doing so does not violate the common rules in NIL legislation.
Growing State Map for NIL:
While there is not yet NIL legislation for all 50 states, the first 20 we have today give hints of emerging trends in do’s and don’ts for both collegiate student-athletes and the institutions. It is important to note that not all of these legislations are in effect as of right now, but will soon go into effect. So check the proposed dates for your state. In the meantime, we can only wait and see what other state congresses agree upon and watch the new landscape of name, image, and likeness legislation emerge.
About the Author
Joe Whalley is a law student at Wake Forest University School of Law and athlete at Railroad Athletics. Joe served as a Business Intern for Railroad Athletics in the Summer of 2021 after graduating from the University of Georgia with a BS in Agribusiness/Agricultural Business Operations
*Citations were completed in APA Format. The nature of this software does not allow for footnotes inserted into text. A PDF copy with footnotes is available upon request.
Citations (APA Formatting):
A.B. 404, General Assembly, 2021 Reg. Sess. (Ala. 2021).
SB1296, 55th Legislature, First Reg. Sess. (Az. 2021).
HB1671, 93rd General Assembly, 2021 Reg. Sess. (Ar. 2021).
SB206, General Assembly, 2020-2021 Reg. Sess. (Ca. 2021).
SB20-123, 73rd General Assembly, First Reg. Sess. (Co. 2021).
SB646, General Assembly, Prior Session (Fl. 2021).
HB617, General Assembly, Reg. Sess. (Ga. 2021).
Kentucky Exec. Order No. 2021-418 (Jun. 24, 2021).
SB439, General Assembly, 2021 Reg. Sess. (Md. 2021).
HB5217 & 5218, 100th Legislature, Prior Sess. (Mi. 2020).
SB2313, General Assembly, 2021 Reg. Sess. (Ms. 2021).
SB248.1, 67th Legislature, 2021 Reg. Sess. (Mt. 2021))
LB962, 116th Legislature, 2nd Sess. (Nb. 2021)
AB254, 81st Legislature, Reg. Sess. (Nv. 2021)
SB971, General Assembly, Reg. Sess. (Nj. 2021)
SB94, General Assembly, Reg. Sess. (Nm. 2021)
SB48, General Assembly, Reg. Sess. (Ok. 2021)
SB685, General Assembly, 124th Sess. (SC 2021)
HB1351, 67th Legislature, Reg. Sess. (Tn. 2021)
SB1385, 87th Legislature, Prior Sess. (Tx. 2021)
Hosick, M. B. (2021, June 31). NCAA adopts interim name, image and likeness policy. Retrieved from NCAA: https://www.ncaa.org/about/resources/media-center/news/ncaa-adopts-interim-name-image-and-likeness-policy
STATE NAME, IMAGE, AND LIKENESS LEGISLATION. (2021, July 9). Retrieved from NIL Network: https://www.nilnetwork.com/2021/06/passed-state-name-image-and-likeness-legislation/