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With the NCAA’s new interim policy on name, image, and likeness (NIL) for college athletes, companies are able to contract with student athletes to endorse and promote their products and services. Companies benefit by earning publicity and goodwill, and the student-athlete benefits by earning financial or some other form of compensation.
For a fair deal, student athletes should perform due diligence and review each term of an endorsement agreement. Below are some key provisions that all NCAA athletes should become familiar with.
Grant of Rights
The grant of rights provision in an endorsement agreement is vital. It lays out the bundle of rights the student athlete is granting to the company. The first of the “bundle of rights” is the student athlete’s endorsement and intellectual property rights that are being licensed to the company. The second is the media through which the company can exploit the licensed rights.
Some endorsement agreements, for example, grant the company the right to use the licensed rights in any and all media, while others may limit the scope to a single media type, like commercials or social media.
The third is whether the license is exclusive or non-exclusive. Exclusive agreements are more favorable to the company, as they will prohibit the student athlete from entering into other agreements with direct competitors.
Personal Appearances
Undoubtedly, endorsement agreements will include a provision requiring student athletes to appear at events, interviews, and photo shoots for the company. These students juggle schoolwork, practices, team functions and other mandatory team activities. Accordingly, student athletes should ensure the personal appearances provision isn’t in conflict with the athlete’s schedule or team rules.
At the bare minimum, the personal appearances provision should specify the number of personal appearances, the amount of notice the company must provide beforehand, duration of the appearance, and travel arrangements.
Compensation
Endorsement agreements cannot run afoul of NCAA bylaws. The NCAA’s new interim NIL policy prohibits student athletes from entering certain NIL-agreements, such as endorsements without quid pro quo, which means the compensation they receive must be for work they actually performed. Personal appearances are a great example of student-athletes performing work in exchange for the compensation agreed to under the agreement.
Student athletes should be aware and understand the various compensation structures when entering an endorsement agreement. Be on the lookout for compensation structures like flat fee payments, royalties, bonuses, and free services or merchandise.
A bit of advice: If your name or image will appear on a product, you should think royalties.
Also be cautious of the bonus compensation structure, because in professional sports, bonuses are often tied to the achievement of a performance, which is strictly prohibited under NCAA bylaws. Examples of bonuses tied to “achievement of a performance” include: winning the Heisman Trophy, being selected to the Kodak All America Team, earning the title of MVP, making it to the Final Four in basketball, winning an NCAA National Championship, being selected to a USA National Team, etc.
The NCAA’s interim NIL policy prohibits certain actions in bylaw 12, namely compensation for athletic performance or “pay-for-play.” Under NCAA bylaw 12.1.2, a student athlete will lose eligibility to compete in college sports if the individual uses athletic skill for pay. While athletic performance can enhance an athlete’s NIL value, it can’t be the actual “consideration” for NIL compensation.
Free goods and services should be scrutinized. Under several state NIL laws, a student athlete’s compensation for the use of his or her NIL must be proportional with the fair market value of the authorized use.
Representations, Warranties, & Covenants
In an endorsement agreement, the student athlete and company will make certain representations, warranties, and related covenants between both parties. The student-athlete will likely promise they have the authority to enter into the agreement, owns the intellectual property to be licensed to the company, agrees to comply with all applicable laws and rules, and is not violating the terms of any third-party agreements .
Student athletes must ensure there are no conflicts with university policies (eg, can the university’s logo be used for the photo shoot?), team contracts (eg, does the team contract prohibit the student athlete from participating in outside activities on game day? Is the endorsement for a product or service that conflicts with team values such as gambling and marijuana?), and state laws (eg, does the student-athlete have to disclose the endorsement agreement with the university in which he or she attends?).
A Special Note for Female Athletes
Unfortunately, professional and amateur female athletes have been ignored in terms of marketing for nearly a century. Although the NCAA has restored the student-athletes’ rights to benefit from their NIL, women still have to prove themselves to athletic departments that continue to allocate more marketing opportunities to men.
Female student-athletes should consider the strategy implemented by the US Women’s National Soccer Team (USWNT). During the 2017 collective bargaining period, the USWNT successfully negotiated their group licensing rights from the US Soccer Federation. They were subsequently assigned to the NFL Players Association, REP Worldwide, who quickly earned the USWNT numerous group licensing deals, resulting in more revenue.
Female student athletes can gain endorsement opportunities by marketing themselves rather than relying on athletics departments. Female student athletes should use their social media platforms to achieve the recognition they deserve.
The general counsel of the National Labor Relations Board issued a memorandum on Sept. 29, 2021, declaring that private college-athletes should be considered employees under the National Labor Relations Act.
In that end, if student athletes are deemed employees, the opportunity to collectively bargain will likely follow.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
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Iciss Tillis is an associate at Hall Estill in the firm’s Labor & Employment group where she assists employers in workplace matters, including litigation, as well as preventive advice and counselling. Prior to earning her law degree, she was a professional basketball player in the WNBA with the Detroit Shock, New York Liberty, and Los Angeles Sparks.
