Playing by New Rules: Ten Considerations for Universities Implementing NIL Policies
In Short
The Situation: Beginning July 1, 2021, student-athletes are permitted to earn compensation from activities involving their name, image, and likeness ("NIL"). While universities in a handful of states are bound by the provisions of state NIL laws that recently took effect, the NCAA's interim policy provides broad discretion for schools in the vast majority of states to draft and implement their own NIL rules.
The Result: Schools adopting NIL policies must develop a thoughtful approach for handling a plethora of issues, ranging from the degree of university involvement in facilitating student-athlete NIL deals to potential conflicts with university sponsorship agreements.
Looking Ahead: As the new era of NIL compensation unfolds, legal, contractual, and NCAA compliance issues undoubtedly will arise. Universities should stay apprised of emerging best practices and developments, including potential federal NIL legislation and the creation of new NCAA rules that could replace the interim policy's relaxed approach.
On July 1, 2021, the NCAA's interim policy on NIL activities took effect, opening the door for student-athletes at universities across the country to earn income from endorsements, personal appearances, camps and clinics, and a variety of other business endeavors. The NCAA's policy suspends enforcement of existing rules that prevent student-athletes from receiving compensation due to their athletic reputation, with two important caveats: Remaining in effect are NCAA Bylaws that prohibit "pay-for-play" (compensation in exchange for athletic performance or achievement) and improper recruiting inducements (compensation in exchange for commitment to attend a university).
In a handful of states that enacted NIL laws effective on July 1 (e.g., Florida, Alabama, Georgia), universities and student-athletes engaging in NIL activities must follow their respective state laws. In states without NIL laws (or that have enacted NIL laws not yet in effect), however, the NCAA's interim policy affords universities broad discretion to develop their own rules governing NIL activities.
This Commentary identifies 10 considerations for universities drafting their own NIL policies and/or updating those policies as best practices evolve. While the issues outlined below are not intended to be exhaustive, they are among the most important factors universities should address in their efforts to delineate processes and expectations for student-athletes, university employees, boosters, and other stakeholders.
Degree of University Involvement
A threshold issue that any NIL policy should address is the level of university involvement in developing, operating, and promoting student-athlete NIL activities. The desired level of institutional involvement ranges across a spectrum—from providing NIL educational programing, to athletic department administrators helping student-athletes evaluate opportunities, to coaches arranging meetings with third-party sponsors or even actively participating in cobranded student-athlete NIL activities. Schools that assist or work with student-athletes on NIL activities should carefully consider gender equity issues to ensure the university's involvement does not run afoul of Title IX.
Fair Market Value
While the NCAA's interim policy does not expressly contain a "fair market value" requirement for NIL compensation, existing prohibitions against pay-for-play and recruiting inducements remain in place. The compensation a student-athlete receives in exchange for a NIL activity must be reasonable and tethered to the value of services the student-athlete actually performs (i.e., quid pro quo). Significantly, NCAA Bylaws prohibiting student-athletes from receiving preferential treatment or extra benefits continue to apply to arrangements outside of legitimate NIL activities. Accordingly, schools must consider how to ensure that NIL compensation is not an impermissible payment in disguise. Universities should consider adopting enhanced vetting procedures for NIL agreements involving boosters, as well as for NIL agreements entered into by freshman student-athletes and recent transfers, to monitor prohibited recruiting inducements.
Use of University Logos and Marks
Universities should consider whether student-athletes may use university logos, trademarks, and slogans in their NIL activities. This includes wearing uniforms and team apparel, as well as using copyrighted images and videos owned by the university or third parties. Schools should assess existing policies that require licensing of university marks, working with internal departments and their external multimedia rights and licensing partner (where applicable) to define a process for considering student-athlete requests. That process should evaluate whether allowing a student-athlete to use a university trademark in connection with a particular NIL activity conflicts with the terms of a university sponsorship agreement.
Use of University Facilities
Universities should assess existing policies governing the use of university facilities and how those policies will operate with respect to NIL activities. Student-athletes seeking to use athletic facilities for their NIL camps and clinics should understand the process for requesting and reserving space, which likely includes execution of standard rental agreements, liability waivers, and the payment of fees. These activities pose unique risk-management considerations ranging from insurance and indemnification requirements that protect universities from third-party claims (e.g., camper injury) to policies governing the presence of minors on campus.
Conflicts with Team Contracts
Most state NIL laws prohibit student-athletes from entering into agreements that conflict with the terms of a university team contract. But the definition of "team contract" varies by state: Some laws specifically refer to university sponsorship agreements with third parties (e.g., athletic apparel and equipment, sports beverages), while others extend this concept to include agreements between universities and student-athletes (e.g., team rules and handbooks, athletic scholarships). Universities drafting their own policies should consider how broadly to define a team contract and how to address situations where a student-athlete seeks to endorse the competitor of a university sponsor outside of official team activities (e.g., wearing sneakers manufactured by a company other than the university's official apparel and equipment partner).
Conflicts with University Institutional Values
Universities should consider whether to restrict student-athletes from promoting certain products or services that conflict with institutional values or community morals. Many state NIL laws identify specific categories of prohibited sponsorships, and universities imposing similar restrictions in their own policies should consider providing student-athletes with a reasonable and defined list. In addition, universities should be sensitive to public perception of rules that restrict student-athletes from engaging in NIL activities with companies in industries where the university itself has a sponsorship relationship.
Timing of Student-Athlete Disclosures
To appropriately vet potential conflicts and NCAA compliance-related issues, universities should consider how student-athletes will communicate with the school regarding potential NIL agreements in advance of their execution. Encouraging student-athletes to disclose opportunities up front could prevent complications that may arise from unwinding impermissible agreements. Any advance notice requirements should, to the extent possible, preserve flexibility for student-athletes seeking to capitalize on unique NIL opportunities that may present themselves on short notice (e.g., appearances following a game-winning score or a significant team victory or championship).
Autographs and Memorabilia
One likely and easily accessible source of NIL income for student-athletes is autograph signings. Universities should consider addressing autograph and memorabilia-related activities in their policies to ensure that student-athletes understand any limitations, including when and where signings may occur, the types of items that may be signed, and whether memorabilia incorporating university marks can be used. In particular, schools should be mindful of NCAA rules that prohibit student-athletes from selling team-issued apparel and equipment, such as jerseys, sneakers, and cleats.
Agents and Other Professional Service Providers
The NCAA's interim policy permits student-athletes to use professional service providers, such as agents, marketing representatives, and attorneys, to help them identify and negotiate the terms of NIL opportunities. Universities should consider how student-athletes will disclose when they have retained the services of an agent or attorney, particularly where required by state law or where licensure issues exist. In addition, universities should encourage student-athletes to seek professional advice for questions relating to their personal NIL activities, such as business formation; taxes; eligibility for need-based financial aid, including Pell Grants; and immigration status.
Dispute Resolution
Given the newness and evolving nature of NIL rules, disputes among universities, student-athletes, and third parties seem inevitable. Universities should consider what internal dispute resolution processes they will use to address such issues, which could include escalating disagreements to a senior athletic department administrator or a neutral third party to mediate disputes. An excellent tool to avoid conflicts and potential litigation, however, is for a university to be thoughtful and proactive in setting forth reasonable rules in a comprehensive NIL policy that is shared with student-athletes and their representatives.
Three Key Takeaways
- Universities should clearly articulate their rules and expectations for NIL activities to ensure that student-athletes, coaches, athletic department administrators, and other stakeholders are equipped with the information necessary to pursue legitimate, permissible opportunities and avoid impermissible activities.
- Universities should proactively implement processes designed to monitor compliance with their NIL policies to manage potential litigation risk and prevent NCAA rule violations that could jeopardize student-athlete eligibility.
- Universities should remain nimble and adjust their NIL policies based on real-world experiences, while remaining vigilant to identify and prevent abuses of this new system through pay-for-play arrangements and impermissible recruiting inducements disguised as NIL compensation.
