The NCAA hates it, and so do schools and athletic directors in the state, but that didn't stop the California Legislature from unanimously approving Senate Bill 206 — formerly known as the Fair Pay to Play Act — and Gov. Gavin Newsom from signing it.
The bill paves the way for student-athletes at California colleges and universities to earn money for the use of their name, image and likeness, and should it actually go into effect as planned Jan. 1, 2023, it would represent a complete sea change for collegiate sports.
"This bill is very powerful in terms of what it says and what the implications would be," says Gregg Clifton, principal with the law firm Jackson Lewis and co-chair of its sports practice group. "The bottom line is it just opens up this whole Pandora's Box of negativity from the NCAA's perspective, and from the [bill] sponsors' point of view, it opens up a whole bunch of tremendous opportunity and fairness for these student-athletes."
Clifton's firm represents a number of colleges and athletic conferences throughout the country, and he's been tracking the legislation's progress because of its potential for nationwide consequences. "Obviously, schools around the country have been watching this very closely, because there's been a number of states that have certainly talked about, from a legislative point of view, mimicking this California legislation," he says.
Already legislators in Colorado, Florida, New York and South Carolina have discussed the possibility of pursuing their own version of a name, image and likeness law — and as Clifton points out, some federal legislators, including presidential candidates Andrew Yang and Bernie Sanders, have voiced support.
As the NCAA confronts these challenges to its authority, it's worth assessing the current situation and the potential consequences of the law.
Effects on colleges
Colleges in California and in other states that pass similar legislation will find themselves in uncharted territory. "It would put them in a very, very difficult spot of either complying with state law and being in violation of an NCAA bylaw, or complying with NCAA bylaws and putting themselves in direct violation of a state law," Clifton says. "So they're in a very tough, can't-win position."
A letter sent to Gov. Newsom by the NCAA Board of Governors in September suggested that the bill would "erase the critical distinction between college and professional athletics and, because it gives those schools an unfair recruiting advantage, would result in them being unable to compete in NCAA competitions."
Once Newsom signed the law, the NCAA seemed to concede that changes are necessary, but that the process should be negotiated within the NCAA membership.
"Improvement needs to happen on a national level through the NCAA's rules-making process," a statement by the NCAA reads.
Gene Smith, athletic director at Ohio State and co-chair of an NCAA-appointed working group studying the issue of name, image and likeness legislation told USA Today in September that he would avoid scheduling California schools because "they won't be members of the NCAA." Wisconsin's Barry Alvarez likewise said his athletic department would stop scheduling teams from California.
Apart from running afoul of the NCAA, schools face an additional threat: added competition for sponsorship dollars from their own student-athletes.
Clifton paints a scenario in which a sponsor has an agreement with a university, but instead of the sponsor committing 100 percent of its budget for that sponsorship to the school, in a post-SB 206 world, it might split that pie between the school and prominent student-athletes.
"These sponsors are not going to all of a sudden start printing more money and then say, 'Hey, instead of spending $200,000, we're going to spend $300,000, because we want the student-athlete,' " he says. "No, they're going to keep spending $200,000 and just cut the pie up a little bit as to where those dollars go."
Given the fact that there aren't many collegiate athletic departments that are "rolling in the dough," as Clifton puts it, that could present a stark problem.
"You have a lot of schools that need that revenue from revenue-generating sports to help pay for winter track and swimming and some of these other sports, which are wonderful, but they don't generate any revenue — they just generate expenses," he says. "But the response on the flip side of that is 'We're not asking the schools to pay any money, this is only from the outside, this will not cost the school anything.' "
Public opinion has been shifting on allowing student-athletes to earn money, in part because of coaching salaries and the stunning financial windfall brought in by events such as the NCAA men's basketball tournament and College Football Playoff.
"The ridiculous amounts of money that are involved, the amount of money that these coaches are all of a sudden being rewarded — multi-year contracts for tens of millions of dollars — has really, I think, presented a challenge," Clifton says, "because now there's so much greater public awareness and, frankly, people speaking out in public saying, 'That's not fair. Something needs to be done about this.' "
Predicting the legal fight to come
At this point, the only thing that seems certain with regard to California's name, image and likeness legislation is that it'll wind up in court.
"The question really becomes when do these litigations commence?" asks Clifton. "Do they start fairly quickly? Do we wait until a year before the effective date to provide an opportunity to create an injunction to try and stop it?"
One legal argument circulating among the legislation's opponents is centered on the so-called Commerce Clause of the U.S. Constitution, which gives Congress the sole authority to regulate interstate commerce. The legal theory suggests that because the California schools cross state lines, either physically when they play teams from other states, or via the internet or broadcasting channels, the law could be deemed unconstitutional.
On the other side, there's the familiar term antitrust, which has been wielded against the NCAA in previous legal battles.
"There's no guarantee here that the NCAA will not be successful in arguing against the implementation of this law," Clifton says, "but I think everyone hopes there is so much public pressure that's going to force the NCAA to act and essentially pre-empt a lot of these fights by coming up with a rational alternative that would be a compromise between where they're at right now and the California legislation."
It remains to be seen how the shockwaves from SB 206 ripple forth from California throughout the country, and whether a fault line will separate certain NCAA member schools from others. For now, it does seem that state houses have recognized their power and are willing to leverage it in ways that could force the NCAA to the bargaining table. Clifton ultimately predicts some kind of "fair proposal" that addresses the concerns of all stakeholders in a way that the NCAA and its membership finds amenable. Says Clifton, "Time will tell as it plays out."
This article originally appeared in the November | December 2019 issue of Athletic Business with the title "State of play: An update on California's name, image and likeness law." Athletic Business is a free magazine for professionals in the athletic, fitness and recreation industry. Click here to subscribe.