Counting Factors, Not Fumbles: Why the Johnson “Economic Realities” Test Will Become the New Benchmark for Assessing Student-Athlete Employment Protection Claims

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In Johnson v. NCAA, the Third Circuit allowed student-athletes to bring claims for relief under the Fair Labor Standards Act (FLSA), creating a baseline test for employee status in college athletics.[i] The Johnson court rejected the lower court’s use of the Glatt test[ii] (used for employment questions involving unpaid internships),[iii] recognizing that student-athletes are sui generis and requiring a new employment test.[iv] The resulting “economic realities” test involves four factors: (1) whether athletes perform services for another party; (2) whether these services primarily benefit that party; (3) whether the athletes are under the party's control; and (4) whether they receive compensation or benefits.[v]However, the Third Circuit did not decide if student-athletes are employees,[vi] so the Johnson court’s test has not been used in practice, the test unused and its future uncertain. Despite concerns, the Johnson test’s rationale suggests it may become a mainstay in student-athlete employment cases.

I. RATIONALE OF THE THIRD CIRCUIT’S “ECONOMIC REALITIES” TEST

The first factor examines the services student-athletes provide to their respective schools,[vii] acknowledging that players engage in rigorous,[viii] often violent[ix] activities that generate significant university revenue. Student-athletes have highlighted this connection as suggesting a service relationship,[x] as reinforced by the Johnson Court’s finding that athletics are distinct from education and can even negatively impact one’s learning.[xi]

The second factor of the Johnson test assesses whether student-athlete services primarily benefit of their schools.[xii] College sports programs receive substantial revenue through media rights deals, ticket sales, and booster gifts.[xiii]While schools have cited educational and developmental benefits,[xiv] this factor hints that academic compensation is not enough to overcome the massive monetary benefit that schools enjoy (and pre-House, did not have to share)[xv] because of their student-athletes’ work.

The test’s third factor asks whether student-athletes have autonomy at their schools or if they are under university control as players.[xvi] The third factor of Johnson looks at how universities dictate student-athlete training schedules,[xvii] team-mandated events,[xviii] and personal conduct expectations,[xix] which resemble employer-employee relationships and regulations.[xx]

The final Johnson factor asks whether schools compensate their athletes.[xxi] Benefits may come in non-traditional senses, like academic scholarships,[xxii] or more common forms (i.e., cash payments).[xxiii] Universities have pointed to scholarships and stipends as forms of player compensation,[xxiv] but this factor seems to take a wider view, asking whether these benefits can be compared to typical modes of employment compensation.

II. PRACTICAL CONSIDERATIONS OF THE “ECONOMIC REALITIES” TEST

The most important practical consideration in adopting the Johnson “economic realities” test is creating uniformity across jurisdictions. Designating the Johnson test as uniform across the country would standardize how courts analyze student-athlete employment claims, an important notion in a time where courts in several states face student-athlete employment questions[xxv] (and others previously decided against FLSA employment status).[xxvi] While inconsistent results on similar employment questions from state-to-state would undermine student-athlete employment claims overall, having a nationwide standard like the “economic realities” test would help to reduce uncertainty and promote consistent legal outcomes from jurisdiction to jurisdiction, a massive benefit during a time when state Name, Image, and Likeness (NIL) laws have created uncertainty in other areas of college athletics.[xxvii]

Another important consideration of the Johnson test is that it balances university interests (i.e., maintaining amateurism)[xxviii] and athlete rights (i.e., the right to fair compensation for the services they render to schools).[xxix]As discussed supra, the Johnson court did not make a finding of employment status for the student-athletes in the case.[xxx] This finding (or lack thereof) seems to imply that athletes could still be found to be non-employees under the “economic realities” test, allowing for a case-by-case analysis as opposed to broadly classifying athletes as either employees or non-employees.

This premise is underscored by Judge Porter’s concurrence in Johnson, where he suggested that high revenue-generating athletes like college basketball and football players would likely be viewed as employees, but others would not, showing that the “economic realities” test may not be applicable to all student-athletes but can be applied in narrow circumstances.[xxxi]

Finally, the “economic realities” applies broadly across all NCAA sports. The Johnson test’s framework does not favor a particular sport or classification of athlete, instead focusing on objective standards that compare a student-athlete’s relationship with their school to that of an employer and employee.[xxxii] The “economic realities” test appears ripe to be used on a wide variety of college sports, as the test’s factors recognize the diverse nature of college athletics (including the variance among schools’ structure and economic considerations, issues that have been brought to light as schools prepare for a potential House settlement)[xxxiii] and do not favor any one class of athletes above others. This was especially relevant in the case of Johnson, where most of the plaintiffs did not play high-revenue sports and attended small, northeast Division 1 schools.[xxxiv]

III. IS THE JOHNSON TEST THE BEST APPROACH?

While the “economic realities” test is advantageous due to its flexibility, sensitivity to context, and focus on real-world outcomes, it has faced concerns for being subjective, complex, and administratively difficult to implement, leaving the applicability of the test in question. However, the benefits of the Johnson test far outweigh its drawbacks, making the “economic realities” test the best available approach to answering questions of student-athlete employment.

The Johnson test should be adopted due to its ability to adapt to a variety of different facts and contexts, as well as its focus on practical decisions. This “economic realities” test is highly flexible, given its lack of favoritism towards a particular sport, discussed supra. The ability to use this test in different types of employment cases is essential, given the wide variety of sports and schools across the NCAA.[xxxv]

Further, nationwide application of the Johnson test would help to reduce concerns over a lack of jurisdictional reach (i.e., how a court in the Eastern District of Pennsylvania, like Johnson, would be able to control the employment status of a student athlete in California).[xxxvi] Lastly, because this test focuses on the economic relationship between the parties[xxxvii] (as opposed to traditional definitions of ‘student-athlete’ titles), the test seems to match the FLSA’s purpose of protecting workers that depend economically on their employers,[xxxviii] making it a strong fit to be the benchmark test in college athletics employment cases.

However, the “economic realities” test (like any other test) is not without its pitfalls. Analysis of the Johnson test’s factors involves subjective judgment, which may lead to inconsistent outcomes if the factors are weighed differently from court to court.[xxxix] In addition, recognizing student-athletes as employees (even in small numbers) would cause significant changes to the college athletics landscape, serving as a strong challenge to the NCAA’s beloved amateurism model.[xl] Student-athlete employment recognition could also lead to player strikes (or lockouts),[xli] a reduced number of college sports being offered,[xlii] or increased pressures to further commercialize the industry.[xliii]

Further, the test seems to lack clarity as to how international players (who largely play under F-1 academic visas)[xliv] would be treated if granted employee status (potentially requiring an employment visa with different restrictions and considerations).[xlv]Lastly, to recognize players as employees would place a significant administrative burden on universities in reclassifying their athletes. Schools would now be faced with concerns over labor laws, taxation, and benefits for a large new subset of employees, which could pose challenges for smaller institutions that typically generate less revenue.[xlvi] These concerns will lead opponents (mainly universities and the NCAA itself) to argue that Johnson is a low bar for determining employment, asking courts to ignore this test in answering student-athlete employment questions.

Despite these concerns and potential challenges to the “economic realities” test (including those from Congress),[xlvii] it remains the best approach for both sides in facing future student-athlete employment questions. While Johnson does not offer lofty standards for determining employment, this should not be viewed as a negative: more employee findings will enable the potential for collective bargaining (including potential no-strike and no-lockout clauses, which are used in many collective bargaining agreements, or CBAs),[xlviii] allowing schools and athletes to be clear on their rights and privileges and helping to quell the unrest fueled by the NCAA’s near-constant litigation over player rights since 2021.[xlix] If a school and its unionized players agree to a CBA, future student-athlete claims against their university (or the NCAA) would also be governed by the non-statutory labor exemption (NSLE),[l] thus preventing the types of antitrust claims the NCAA faced in House,[li] O’Bannon,[lii] and Alston,[liii] among others — an especially important notion in light of Justice Kavanaugh’s Alston concurrence, which foreshadowed a willingness for additional college athletics compensation changes in the future.[liv] Even without union status, players who are found to be employees will have their claims governed under labor and employment law (as opposed to antitrust law),[lv] allowing the NCAA and its member institutions to narrow their litigation focus.

In addition, while considerations for international players are important, they were not addressed in House,[lvi] so it appears that international student-athletes will need additional litigation/legislation to address their specific needs. However, a lack of international student-athlete protection should not bar a much larger class of athletes from employment status findings by preventing the Johnson test from becoming a nationwide standard.

Finally, while potential school administrative challenges in reclassifying student-athletes may be relevant, these same universities eagerly announced new plans and proposals following the news of a potential House settlement,[lvii] so it appears that many institutions are willing and able to handle massive structural changes — so long as they stand to benefit from them.[lviii]The mere fact that employment status will grant additional rights to student-athletes should not allow schools to avoid change in one area only to promote it in another. Johnson should be the mainstay test in determining future questions of student-athlete employment, helping to provide clarity and equitable outcomes for both players and their universities amidst a shifting landscape.