College sports is a billion-dollar game. In fact, the U.S. Department of Education estimates that college sports generate more than $14 billion dollars of revenue each year from ticket sales, TV deals, and sponsorships. But prior to 2021, only the universities and coaches were able to cash in on this billion-dollar industry. Student athletes, on the other hand, were unable to earn compensation for commercial use of their name, image, and likeness. This meant that student athletes were barred from accepting individual endorsements, sponsorship deals, and compensation for merchandise, memorabilia, and other appearances.
But as of September 1, 2021, California’s Fair Pay to Play Act creates a legal right for student athletes to earn compensation for the commercial use of their name, image, and likeness.
What is Name, Image, and Likeness?
“Name, image and likeness” (NIL) refers to every individual’s right to publicity. This means that every person has a right to control the commercial use of their identity. This could refer to the use of one’s name in an advertisement, their voice, their signature, a photograph of them, their overall likeness, or even an image meant to reasonable them that appears in a video game.
Of course, the public image of a famous athlete, including college athletes, can be immensely profitable. But before 2021, student athletes were barred from controlling and capitalizing their own name, image, and likeness due to long-standing rules from the National Collegiate Athletic Association (NCAA).
What does the new law allow?
Under California’s Fair Pay to Play Act, student athletes at colleges, universities, and even high schools can now earn compensation for the commercial use of their name, image, and likeness. As of September 1, 2021, they can now accept payment for endorsements, sponsorships, appearances, clinics and camps, merchandise, memorabilia, and more, all of which was prohibited prior to this new law. Student athletes are also permitted to hire agents, lawyers, and other professional representation to navigate commercial opportunities and negotiate NIL agreements.
There are some notable restrictions under California law, however. For example, a student’s endorsements and sponsorships cannot conflict with existing team contracts. This means that a student athlete cannot enter into an endorsement deal with Nike if their college team is already sponsored by rival Under Armour or Adidas.
Additionally, prospective college athletes being recruited cannot participate in endorsement deals or NIL activities. Student athletes are also required to disclose their endorsement deals and other agreements to a designated university or college official. Also, agents and attorneys representing student athletes must comply with certain licensing requirements.
It’s also important to note that compensation may not be conditioned on the student athlete’s athletic performance. The Fair Pay to Play Act allows student athletes to earn compensation from use of their name, image, and likeness, but they still cannot be paid by their college or university to perform as a student athlete. As always, students are still entitled to scholarships from their institution, but this new law does not pave the way for student athletes to be paid for performance.
How does California’s law compare to other states?
About 30 states have enacted similar laws so far, though more states are actively working on similar legislation for its college athletes. While many of the state laws are similar, they do vary in some significant aspects.
For example, California allows high school athletes and community college athletes to capitalize on their NIL, while most other states only allow students at four-year institutions to earn compensation. Also, California’s law does not currently restrict what kind of industries student athletes can accept endorsement deals from, whereas several states prohibit student athletes from partnering with certain industries like alcohol, drugs, firearms, gambling, pharmaceuticals, and others.
California also does not address NIL compensation from donors and boosters. Notably, Mississippi has been the only state so far to prohibit donors from providing any NIL compensation to current or prospective athletes as a way to bribe or induce the athlete to attend a particular college or university. Some states also require certain education requirements addressing financial literacy and life skills programming, while California currently does not.
For states that do not have NIL laws, the NCAA recently updated its long-standing policy. As of July 1, 2021, the NCAA now allows all student athletes to be paid for their NIL and provides guidelines for students in states that do not have NIL laws. While student athletes in states with NIL laws, like California, are required to follow their respective state law, students without NIL laws are required to follow the NCAA gap-filler policy. Thus, student athletes in all 50 states have a right to control and cash in on their NIL in some capacity.
This area is quickly evolving, making it difficult for businesses and student athletes to navigate. This patchwork of different state laws may allow businesses to contract with student athletes in one state, but not in another due to state-specific restrictions. Therefore, it’s important to consult an attorney before entering into any agreements involving NIL and publicity rights. Our firm can help navigate this arena. We are your Orange County contract and business litigation attorneys, here to help.