Articles & Publications 10.01.20

Florida’s NIL Legislation: Legal Issues and Implications

Sports Litigation Alert

Cameron Turner and Ian Singer discuss the issues and implications of the new Florida legislation, Intercollegiate Athlete Compensation and Rights, that recognizes the right of college athletes to receive compensation for their names, images and likenesses.

The article, titled "Florida's NIL Legislation: Legal Issues and Implications," was originally published in Sports Litigation Alert.

Read the full article below.

Florida's NIL Legislation: Legal Issues and Implications

On June 12, 2020, Florida Governor Ron DeSantis approved Senate Bill No. 646 related to intercollegiate athlete compensation rights, which will take effect on July 1, 2021 as Section 1006.74 of the Florida Statutes. While Florida’s is not the first legislation to be passed to recognize the right of college athletes to receive compensation for their names, images and likenesses (NIL), as of now it will be the first such statute to take effect when it does next year. The statute itself is a simple read, but many terms within it have yet to be defined. Litigation to flesh out their meanings is inevitable. This article will examine Section 1006.74, provide guidance to athletes, universities, potential athlete sponsors and their respective counsel, and discuss the broader impact of Florida’s statute on intercollegiate athletics.

The policy considerations underlying Section 1006.74 are the legislature’s belief that an athlete participating in intercollegiate athletics should have an “equal opportunity to control and profit from the commercial use of her or his name, image, or likeness, and be protected from unauthorized appropriation and commercial exploitation of her or his right to publicity, including her or his name, image, or likeness.” To that end, the statute’s primary provisions provide that:

  1. An “intercollegiate athlete” — defined as a “a student who participates in an athletic program;”
  2. At a “postsecondary educational institution” — defined as “a state university, a Florida College System institution, or a private college or university receiving aid under chapter 1009;”
  3. “may earn compensation for the use of her or his name, image, or likeness.”

Somewhat circularly, an “athletic program” is defined as “an intercollegiate athletic program at a postsecondary educational institution.”

The statute is not quite as a simple as that, however. The above constitute the entirety of the defined terms within the statute, and there are several caveats and limitations that have yet to be defined or, of course, tested in the courts.

For example, paragraph 2(a) of the statute places restrictions on compensation, providing that it must be “commensurate with the market value” of the name, image or likeness of the involved athlete. That paragraph further clarifies that compensation cannot be tied to athletic performance or conditioned upon attendance at a particular institution. Further, the compensation may only be paid by a third party who is not affiliated with the athlete’s institution. Paragraph 2(c) reiterates this latter point and specifically prohibits postsecondary educational institutions from compensating current or prospective athletes, while the paragraph that precedes it also prevents institutions from forbidding their athletes from being compensated for use of their NIL’s. Furthermore, institutions must allow their athletes to secure representation by a licensed agent or Florida-licensed attorney to negotiate compensation for use of their NIL’s.

Other sections of paragraph 2 outline additional rights and responsibilities of intercollegiate athletes, including:

  1. The right to keep grant-in-aid and scholarship money and not have it reduced because the athlete is receiving compensation for the use of her or his NIL.
  2. The responsibility to ensure that compensation for the use of one’s NIL complies with the statute and does not violate her or his team contract.
  3. The responsibility to disclose a contract for use of the athlete’s NIL to her or his institution.

Educational institutions have responsibilities under paragraph 2 as well, including:

  1. Honoring and not interfering with the athlete’s right to receive compensation for the use of her or his NIL.
  2. Disclosing to the athlete or her or his representative any compensation contract terms that they believe conflict with the athlete’s team contract.
  3. Conducting financial literacy and life skills workshops at the beginning of the athlete’s first and third academic years to address financial aid, debt management, budgeting and time management skills.

Similarly, any prospective sponsors of intercollegiate athletes have explicit and implied responsibilities under paragraph 2 of the statute:

  1. To only offer compensation to the athlete at a value commensurate with the market value of the athlete’s NIL.
  2. To negotiate contract terms that will not interfere or conflict with the athlete’s team contract.
  3. To have any contract negotiated with an athlete under the age of 18 approved under Sections 743.08 and 743.09, which allows a court to approve a contract entered into by a person under the age of 18 where the minor will "endorse a product or service, or in any other way receive compensation for the use of right of publicity of the minor ...."[11] Section 743.09, Fla. Stat. sets forth the procedures and mechanisms for a proceeding before a court to allow for the approval of such a contract.
  4. To limit any contract with an intercollegiate athlete to the duration of the athlete’s participation in intercollegiate athletics.

Negotiating NIL contracts with intercollegiate athletes will involve attorneys on three sides: with the athlete, the prospective sponsor and the postsecondary institution. The role of the attorney (or qualified agent, as the case may be) will be more than just negotiating the terms of the contract, including the “commensurate” compensation term, but also safeguarding the athlete’s rights as outlined in the statute and ensuring that the NIL contract is disclosed to the athlete’s institution and does not conflict with the athlete’s team contract.

Attorneys for potential sponsors will also be involved in negotiating the terms of the contract, including the “commensurate” compensation term. They will also need to ensure that any contract with a minor athlete is approved as required and that all contracts with athletes terminate upon the end of the athlete’s participation in intercollegiate athletics. Importantly, as well, attorneys for sponsors will want to ensure that the contract terms for which they advocate do not conflict with athlete team contracts.

While attorneys for the postsecondary institutions seem like the outsiders in all of this, they do have a role in ensuring that team contracts do not undermine or interfere with their athletes’ rights to enter into NIL contracts. They will also be tasked with reviewing all athlete NIL contracts against team contracts to ensure there are no conflicts and then bring any purported conflicts to the attention of the attorneys for both the athlete and the sponsor. Finally, postsecondary institution attorneys will want to ensure their client’s athletic programs comply with the financial literacy and life skills requirements outlined in the Florida NIL statute. Attorneys for postsecondary institutions would be wise to include language in team contracts that reiterates that athlete NIL compensation must be “commensurate” with market value. This would give the university a basis for challenging any compensation that it believes is not “commensurate” as a conflicting term with the athlete’s team contract and would further confer standing upon the postsecondary institution to litigate over this issue if it needs to.

Of course, the biggest unanswered question arising from the Florida intercollegiate athletic NIL statute is what constitutes “commensurate” compensation, since it is not defined at all by the statute. Seemingly, however, if a sponsor can tie compensation directly to increased revenue that results from the use of the athlete’s NIL, then the compensation should be considered commensurate. Of course, this would suggest that the value of the compensation may be directly tied to the popularity of the athlete and the sport she or he participates in. A well-known athlete playing a sport in a high-profile program will almost certainly justify greater compensation than an athlete who plays a less popular sport, whether that is a good policy or not. That disparity alone might make postsecondary institutions nervous about potential Title IX litigation to the extent they allow certain athletes to receive significant compensation and others not to. A related unanswered question is whether compensation must be monetary. If, for example, an intercollegiate athlete’s NIL is used by a local car dealership, could the athlete be given a new car every year that she or he is enrolled in their postsecondary institution? Nothing about the statute suggests that this would be improper, provided of course that the value of the new car is commensurate with market value. Ultimately, assessing whether NIL contract compensation is appropriate will require the affected parties to review similar contracts in the marketplace to justify the appropriateness of the compensation.

The unanswered questions do not end there. For example, the statute requires that any NIL contract entered into by an athlete end at the termination of the athlete’s academic tenure. This would suggest that athletes must end their contracts should they decide to enter a professional draft early and leave the postsecondary institution. However, questions as to royalties earned on an ongoing basis from the use of the athlete’s NIL (e.g. a picture on a video game box) are not addressed by the statute. The NIL rights must end with the contract, but no such limitation is placed on royalty rights.

Also undefined is what constitutes a third party unaffiliated with the university who is permitted to compensate an athlete for use of her or his NIL. For example, can a major university donor enter into an NIL contract with an athlete? Would it be more permissible if the donor only donated a nominal amount to the postsecondary institution? Could a company that advertises at university sporting events or provides equipment to a team also sponsor an athlete? Postsecondary institutions will need to review their team contracts to better define who are and are not permissible athlete sponsors, particularly given the lack of guidance provided by the statute. The challenge for institutions, however, will be to define impermissible sponsors in a narrow enough way so that it does not interfere broadly with the athlete’s right to receive NIL compensation.

Additionally, while educational institutions tie grant-in-aid awards (i.e. athletic scholarships) to academic performance, the statute does not directly address academic issues, other than by requiring postsecondary institutions to conduct life skills workshops for athletes. Student athletes who perform well on the field without a grant-in-aid scholarship may be more incentivized to focus on their athletic performance rather than academics to try to attract NIL contracts. This might jeopardize their academic performance, their eligibility to participate in athletics, and ultimately any NIL contracts they have secured.

Section 1006.74 leaves enough questions open that litigation is inevitable. All parties involved — athletes, potential sponsors, and postsecondary institutions — will need to work diligently with their counsel not only to ensure compliance with the statute, but also to anticipate potential areas of litigation and try to resolve them in advance through the terms of both team and NIL contracts. Florida, as likely the first state to have college athlete NIL legislation go into effect, may be the bellwether jurisdiction for the issues discussed in this article and likely many others that the statute does not even contemplate. What Florida’s statute inevitably does is force the NCAA and other jurisdictions and institutions to grapple with the issue of NIL compensation for intercollegiate athletes. Until the issue is universally addressed, institutions in jurisdictions that allow NIL compensation will have a leg up in recruiting athletes to their schools, and this could greatly impact parity in college athletics.

[11] §743.08(3)(a) precludes this type of contract from being disaffirmed by the minor on the grounds of minority or the assertion that the parent or guardian lacked the authority to make the contract.