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The landscape of college athletics is entering uncharted territory. On June 6, 2025, final approval of the $2.8 billion House v. NCAA settlement resolved three major antitrust lawsuits and authorized direct revenue sharing between Division 1 schools and their athletes. This development represents a major departure from the NCAA's longstanding model of amateurism and carries significant implications for the legal status of student-athletes.
Direct Compensation and Legal Implications: Johnson in the Era of the House Settlement
The House settlement permits schools to distribute up to $20.5 million annually to athletes and expands their rights to name, image and likeness (NIL) compensation. With the settlement now a reality, schools are actively preparing to distribute significant settlement funds to their student-athletes. This unprecedented shift, from amateur participation to direct compensation, places increased pressure on institutions to reevaluate how student-athletes should be classified within their organizations.
Institutions affected by the House settlement should consider how the Johnson v. NCAA case reframes the criteria for when a student-athlete may be considered an employee. The Johnson decision moves away from the traditional amateurism defense and introduces the "economic realities" test, which requires schools to assess the nature of their relationship with each student-athlete based on compensation, control, and benefit conferred.
Economic Realities Test:
- Whether athletes perform services for another party;
- Whether those services are 'necessarily and primarily' for the benefit of the party;
- Whether the other party controls or has the right to control the athletes; and
- Whether athletes receive express or implied compensation or in-kind benefits.
How Schools Will Implement Direct Revenue Sharing
The Johnson test can be used as a practical model for deciding how to structure and distribute settlement funds. Schools may analyze whether to allocate funds based on sport revenue, participation level, or other factors that could impact the employment classification. These considerations are no longer theoretical, they are essential as schools determine their financial and legal exposure in dividing settlement funds among athletes.
Ultimately, Johnson places the onus back on colleges and universities, requiring them to proactively review whether their compensation practices, post-House settlement, risk shifting athletes into "employee" status under federal law.
The decision explores the distinction between "work" and "play." Plaintiffs argue participation in NCAA sports is "work" due to institutional investment and the commercialization of college athletes. The test focuses on the service provided and who primarily benefits, not simply whether an activity is enjoyable or replicable at the professional level. University investment does not automatically convert "play" into "work." What matters is whether NCAA-level sports constitute economic services for their institution, compared to club sports.
The Third Circuit is clear: the NCAA can no longer rely on "amateurism" as a legal shield. Going forward, it must develop arguments based on the actual economic relationship and realities surrounding student-athletes.
Federal Responses and Regulatory Developments
Amid legislative uncertainty, federal agencies are stepping in to address the legal status of college athletes. On July 24, 2025, the White House issued an executive order directing the Department of Labor, NLRB, and Department of Justice to clarify whether college athletes should be considered employees under federal law. Guidelines are being developed to preserve scholarships, support non-revenue sports, and regulate third-party compensation, aiming to standardize national practices and protect both institutional interests and athlete's rights.
Agency positions have shifted with the administration. Under the Biden Administration, the NLRB's general counsel indicated college athletes could qualify as employees, opening the door to unionization and greater labor protections. In contrast, the Trump Administration's guidance directs agencies to reinforce amateurism and clarify that college athletes are not employees. Reflecting this approach, the current NLRB acting general counsel rescinded earlier memoranda, including those supporting employee status for athletes.
If the NLRB continues its recent pattern, its forthcoming guidance in response to the executive order will likely reinforce the position that college athletes are not employees. This would signal a continued shift away from previous efforts to extend employee status and labor protections to student-athletes. The administration also emphasizes that prioritizing education and amateur competition will maximize the benefits and opportunities student-athletes gain through athletic participation in higher education.
Congressional Responses: The SCORE Act and SAFE ACT
In addition to the forthcoming NLRB guidelines, Congress has also taken action. In response to the House settlement, Congress introduced competing bills addressing athlete employment status. The SCORE Act (Student Compensation and Opportunity Through Rights and Endorsements) sought to standardize college sports rules nationally, offering the NCAA limited antitrust immunity and preempting state NIL laws, while explicitly barring college athletes from employee classification and unionization. Critics argued this would restrict athlete labor and financial rights. The bill also specifically aimed to prohibit athletes from being classified as university employees and would grant immunity to the NCAA, the Commission, conferences, and schools from antitrust and state court lawsuits arising from their rules.
On December 2, 2025 the bill passed a procedural vote, 210-209, but the legislation drew bipartisan backlash as a final vote neared. The SCORE Act was withdrawn from consideration due to insufficient support, reflecting bipartisan concerns about its impact. Many members recognized that the legislation primarily benefited the NCAA and the Power Four conferences, while imposing additional restrictions on student-athletes. Critics noted that the bill failed to address the underlying instability in college athletics and instead would have placed further burdens on athletes.
The SAFE Act (Student Athlete Fairness and Enforcement) takes a different approach, emphasizing athlete protections and broad oversight. The Act proposes a comprehensive federal framework focused on athlete welfare, equitable competition, and long-term medical and educational protections. It addresses media rights, transfer and medical protections, agent regulation, and distribution of revenue, but also maintains a focus on sustaining non-revenue and Olympic sports. Among its provisions, if passed through Congress, the SAFE Act would: provide federal NIL rights, replacing patchwork state-by-state laws; establish health and safety standards for heat exertion, brain injury, asthma; provide five years of post-eligibility medical coverage for sports-related injuries; protect scholarships with a 10-year guarantee; provide NIL contracts that outline what athletes must do under the contract and how much they will be paid; require agents to cap their fees at 5% and to register with a state; and allow students to transfer twice without having to sit out for a year. This legislation is in response to the House introducing the SCORE Act.
Conclusion
As litigation, regulation, and evolving industry regulations converge, direct compensation structures, employee classification, and the potential for collective actions have become central legal concerns in collegiate athletics. Legal counsel and institutions must stay attuned to federal guidance and NLRB decisions to understand and address rapidly shifting risks and duties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
