University Pay for Play Policy Questioned

By Herb Appenzellar

Herb Appenzeller is the pioneer in the field of  Injury, Liability, and Litigation in Sports.  He is a true authority in the area of risk management in sport and publishes the newsletter,  From the Gym to the Jury,

There has been much discussion regarding the “pay for play” policy by both sides — proponents and critics of the controversial issue.  With all the attention given to the controversy, little, if anything has been said about the possibility that payment beyond that typical full athletic scholarship will make the recipient an employee with the institution the employer. As such, the athlete, now an employee, will have the opportunity to seek workers’ compensation when injured.  Several cases have been decided by the courts – some favoring the injured athlete and others upholding the institution. Also, if the athlete is paid to play, sport law experts believe, he/she will be required to pay taxes just as teaching assistants are required to pay.

Another dilemma confronting college officials is who can receive pay for play.  When the golf program at Guilford College became strong in both the NAIA and in Division III NCAA, as the athletic director, I had a problem that was real.  Do you give one program full athletic (golf) scholarships while 19 other sports do not have any athletic grants?  Consider the morale of the excluded athletic teams as a matter of principle of equity or fairness.  Add to the dilemma Title IX compliance.  It appears that these issues need immediate attention before any action is taken.

In 1971, Gregg Taylor graduated from Wake Forest University after having not attended football practice after his freshman year so he could concentrate on academics..  In 1972 Taylor sued Wake Forest (Taylor v. Wake Forest University, 191 SE 2d 379 (NC App.1972).  Taylor wanted expenses he incurred after his athletic scholarship was terminated.  As required by the NCAA, Wake Forest gave Taylor the opportunity to appeal his termination of his scholarship and the committee upheld the athletic department. Judge Robert Campbell disagreed with Taylor’s complaint that the university’s withdrawal of his athletic scholarship was a violation.  Judge Campbell said:

Participation in and attendance at practice were required to maintain his physical eligibility.  When he refused to do so in the absence of any injury or reason other than his attention to devote more time to his studies, he was not complying with his contractural obligations.

Mark Begley had signed a basketball scholarship at Mercer University when it was discovered that he had been awarded the scholarship under “incorrect assumptions.”  Begley v. Corporation of Mercer University, 367 F. Supp. No 8 (E.D. Tenn, 1973).  The court held that Begley was unable to meet the conditions for scholarship and therefore the contract was void.  In addition to these two cases, several cases have ruled that an employee-employer relationship existed and several involved workers’ compensation legislation.

In University of Denver v. Nemeth, 257 P.2d 423 (Cal.1958), Ernest Nemeth, was injured during spring football practice.  He was receiving $50.00 per month for his services to the University.  The court held that his monthly stipend was his pay as an employee of the University. David Stotlar, a sport law expert at Northern Colorado University wrote in Sport and Law: Contemporary Issues (1985), “The tax court has had little trouble holding that teaching assistants must pay taxes on the monies.” He believes athletic scholarships are analogous to teaching assistants although the Internal Revenue Service (IRS) said nothing.

Before the NCAA and others discussing “pay for play” policy decide on a policy, these potential problems should be thoroughly investigated.  Other problems are:

  1. Employee v. employer contract
  2. Property interest
  3. Liberty interest
  4. Workers Compensation
  5. Title IX
  6. Fair play or equity if only revenue sports are considered
  7. Taxation of athletic scholarship
  8. State action

In Van Horn v. Industrial Accident Commission 38 Cal. Rptr. 109 (Cal. App. 1963), Edward Van Horn was returning home from a football game in Ohio when the airplane crashed killing him.  His widow sued under workers’ compensation.  The court raised the question whether Van Horn was an employee because he received an athletic scholarship.  The courts in Van Horn and Nemeth found a contractual relationship between the athletes and their institutions.  (Sports and the Courts 1980).

Pell Grants Aiding Athletes

Randy Peterson, in the Des Moines Register questions the need-based  Pell Grants for athletes with athletic scholarships.  Peterson reports that Iowa State had 40 players who received Pell Grants worth a total of $180,121 for an average of $4,503. In comparison, 423 scholarship football players from eight responding schools in the SEC received an average of $4,602.           USA Today, August 29, 2011.

NOTE:   In 2012 the federal government will increase Pell Grants by $10 billion and $7 billion in 2013.