Why the NCAA May End Up Embracing College Athlete Unions

Normally when you decide to do nothing, you don't need to issue a press release. The National Labor Relations Board, however, thinks differently. Last week, the NLRB issued a ruling on a petition by Northwestern University football players to form a union, which essentially stated that the NLRB was not issuing a ruling.

As a matter of labor law, the NLRB declined to assert jurisdiction over the dispute between the Northwestern players and their school—and, by extension, between college athletes and the National Collegiate Athletic Association. Yet, as Bloomberg's Kavitha Davidson and VICE Sports' Patrick Hruby noted, by ducking the case the NLRB essentially ruled in favor of the NCAA and its member schools, including Northwestern, which repeatedly have voiced their opposition to athlete unionization.

Here's NCAA president Mark Emmert speaking at a news conference last year:

"To be perfectly frank, the notion of using a union-employee model to address the challenges that do exist in intercollegiate athletics is something that strikes most people as a grossly inappropriate solution to the problem.

"To convert to a unionized employee model is essentially to throw away the entire collegiate model for athletics. You can't split that in two. You're either a student playing sports or you're an employee of a university. It would blow up everything about the collegiate model of athletics."

Grossly inappropriate. Blow up everything. Pretty scary rhetoric! In the long run, however, this opposition may be a mistake. In fact, the history of labor-management relations in sports in the United States suggests that athlete unionization could be in the NCAA's best interest.

The Northwestern case hinged on a simple question: Do "amateur" college football players qualify as school employees? Peter Sung Ohr, the NLRB regional director who initially ruled on the case, applied the following common law definition of an employee: a person who performs services for another under a contract of hire, subject to the other's control or right of control, and in return for payment.

After examining evidence and hearing testimony (full disclosure: including mine), Ohr decided that the Northwestern players are essentially hired by the school, subject to the direction of coaches and paid in scholarships. As such, they qualify as employees. Northwestern appealed his decision to the national NLRB office, and their non-decision last week neither confirmed nor contradicted Ohr's assessment.

This really is the key issue in this case. The national NLRB ruling did not say Ohr was wrong, or that he was right. Instead, the five-member panel passed on the question, which remains open. If a future court case rules that college athletes are employees, then the NCAA would face a significant problem. It's simply illegal for a collection of firms to collude to fix the wages of employees; in the world outside college sports, no one can declare workers "amateurs" and limit their compensation to room, board, and tuition. Without some sort of wage fixing, the NCAA would not be able to stop schools from paying players as much as they like.

How much are we talking about? Let's start with what players currently earn. Consider two schools at each end of the college revenue spectrum (but actually located quite near each other). The first is the University of North Carolina. UNC reported revenues from its men's basketball program in 2013-14 of $20.9 million. The full cost of attendance for out-of-state residents at UNC is currently about $50,000 per academic year. Assuming UNC uses all 13 scholarship slots allotted for Division I men's basketball programs, the school pays its players about $650,000, or a little more than three percent of team revenue.

Just down the road from UNC is North Carolina Central, a much smaller D-1 school that only generated $1.22 million in revenue in 2013-14. NCC, though, costs less than $15,000 to attend, and so, given 13 scholarships on the roster, that amounts to about 16 percent of revenue shared with players.

What would happen if these athletes were declared employees and each school could simply pay the players whatever they wished to secure their services? Europe provides us an example of a free labor market in professional sports. In European soccer, familiar, wage-depressing American institutions like payroll caps, salary caps, and reverse-order drafts are illegal. As a result, athletes in English soccer capture 76 percent of league revenues.

A similar distribution of revenues in big-time college sports would force schools to make very different financial choices. For example, the NBA currently pays about 2 percent of its revenues to its head coaches; meanwhile, the University of Kentucky pays about 22 percent of its basketball revenues to head coach John Calipari. A free labor market would likely result in Calipari getting much less. Perhaps that's why the NCAA, its member schools, and everyone in athletic administration currently receiving the lion's share of the revenues generated by big-time college football and men's basketball do not favor a free labor market for players.

If college athletes are ever determined to be employees, however, that is what the NCAA will face. What could the association do at that point? Well, in North American professional sports, athletes do not get 76 percent of league revenues. Athletes in the NFL and MLB only get about 50 percent of league revenues, and WNBA players only get about 33 percent.

These percentages are possible because all of these leagues have unions. Although it is illegal for employers to restrict wages through unilateral collusion, it is perfectly legal for those same employers to obtain salary restrictions by collectively bargaining with a union.

Would a union result in players getting an overwhelming share of college sports revenues? That seems unlikely. How much the players can capture from a league depends on the ability of players to walk off the job and maintain solidarity through a strike. Baseball players historically have stuck together. By contrast, NBA and NFL players have not. WNBA players have never gone on strike. It's no coincidence that MLB players have the most favorable CBA in American professional sports, while WNBA players arguably have the least favorable.

Now consider a college athlete union. Given that players are very young adults whose careers for the most part only last four to six years, it likely won't be very cohesive. As a result, the NCAA would likely do quite well in collective bargaining. Perhaps a school like UNC won't be able to capture more than 95 percent of men's basketball revenues, but it seems likely to capture more than 50 percent, which is a lot better than a European-style 25 percent.

The bottom line? The NCAA and its member schools probably should cool their anti-union rhetoric, and perhaps view the NLRB non-decision on Northwestern less as a victory than as a warning. At some point, a court or a collection of lawmakers may agree with Ohr that college athletes are employees and, unlike the NLRB, decide to do something about it. If that happens, Emmert may find himself suddenly in love with the athlete unionization movement.