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Collegiate & Professional Sports Law Blog

Is ‘Loss of Value’ Insurance Worth The Price For Student-Athletes, Universities??

Disability insurance policies are frequently secured by college football players, especially those who expect to be selected in the early rounds of the NFL draft. These policies are typically secured by the player in one or two forms. One option allows players to secure coverage to protect against “total permanent disability”. Such coverage would only pay the athlete in the event of a catastrophic, career ending injury. Alternative policies can protect the athlete against the potential “loss of value” tied to the player’s projected draft position. This type of insurance coverage provides a player protection in the event his projected draft position drops because of injury. Typically, the policy would make up the difference the projected bonus money and the actual contract amount secured by the player. Unfortunately, ‘loss of value’ insurance policies, may not be as easy to collect on as initially thought.

High-profile players, including 2015 NFL Draft’s No. 1 pick Jameis Winston, have secured the insurance expecting that if an injury causes their draft stock to fall, thus resulting in a lesser contract, they can collect on the policy to recoup some of the lost earnings. Jameis Winston’s premium for “loss of value” insurance was reportedly paid out of the Florida State University’s Student Assistance Fund (SAF). The SAF allows schools to “assist student-athletes in meeting financial needs that arise in conjunction with participation in intercollegiate athletics, enrollment in an academic curriculum or that recognize academic achievement.”

In addition to schools using the NCAA authorized Student Assistance Fund to pay insurance premiums for star athletes, the NCAA issued a waiver after the start of the 2014 football season creating a new avenue for college football players to secure loss of value insurance. While student-athletes had previously been able to secure the loss of value insurance only with their own funds or the use of SAF, purchasing the insurance became easier in October, when the NCAA began granting waivers to student-athletes, allowing them to purchase the insurance by borrowing against their future earnings to secure a loan from an established, accredited commercial lending institution, for the purpose of purchasing loss-of-value insurance. However, despite the increasing popularity of the loss of value insurance, no collegiate student-athlete has been able to collect on a policy, according to ESPN’s Darren Rovell. Former University of Southern California wide receiver Marqise Lee is currently experiencing the challenges of trying to collect on his policy.

Lee, once projected as a first round pick, purchased loss of value insurance in August 2013. He paid a $94,600 premium for $9.6 million in coverage. Lee believed that the coverage protected him if his draft position dropped and he signed a rookie contract worth significantly less than that the projected $9.6 million amount. Lee injured his left knee just two games into the 2013 season. As a result of the injury, Lee’s draft position dropped to the 39th overall pick in the 2014 NFL draft. Ultimately, he signed a contract with the Jacksonville Jaguars for $5.17 million. Lee filed an insurance claim and attempted to collect on the policy, but was unable to do as the insurance company raised a defense that Lee had misled with regard to pertinent medical information. In March 2015, Lee, along with a former USC teammate facing a similar issue, sued the insurance company over their failure to honor the policy.

Lee’s lawsuit highlights the potential challenges of collecting on loss of value policies. While the securing of insurance policies for student-athletes has indeed become a tool for universities to help keep star players remain in school and to temporarily forego the NFL, the possible issues related to collection are apparent. The University of Oregon utilized its SAF to purchase policies for its players, including cornerback Ifo Ekpre-Olomu. Ekpre-Olomu, once projected as a first round pick, likely will attempt to collect on his policy after an ACL injury in December 2014 caused him to fall to the seventh round of the 2015 Draft. The cornerback’s policy, which cost the University of Oregon $40,000, calls for a $3 million payout since Ekpre-Olomu late round selection was well after the coverage threshold of the first picks of the third round of the 2015 Draft.

All athletes that utilize the NCAA waiver to purchase insurance or universities that allocate SAF to purchase loss of value insurance will need to monitor Lee’s lawsuit and Ekpre-Olomu’s attempt to collect on his policy. If student-athletes continue to face difficulties collecting on their policies, both student-athletes and their universities will need to reconsider whether such policies are worth the cost.

Department of Education Issues New Guidance on Title IX Coordinators

The Department of Education’s Office of Civil Rights (“OCR”) has issued a Dear Colleague Letter (“DCL”) to superintendents, presidents, and other senior officials of educational institutions reminding them of their obligation to designate a Title IX coordinator and to support the coordinator fully in efforts to ensure the institution is in compliance with Title IX.

Recognizing that “some of the most egregious and harmful Title IX violations occur when a recipient fails to designate a Title IX coordinator or when a Title IX coordinator has not been sufficiently trained or given the appropriate level of authority to oversee the recipient’s compliance with Title IX,” the DCL reminds institutions that a Title IX coordinator is essential. Also released with the DCL, dated April 24, 2015, is a letter to Title IX coordinators as well as a Resource Guide for them, outlining considerations in selecting a coordinator, describing the coordinator’s duties, responsibilities, and authority, and reminding institutions of the importance of supporting coordinators by ensuring that they are visible in the educational community and receive appropriate training.

Regarding the selection of a Title IX coordinator, the OCR urges recipients to avoid designating an employee whose other job responsibilities may create a conflict of interest, such as a disciplinary board member or the institution’s general counsel, dean of students, superintendent, principal, or athletics director. The DCL states the coordinator’s role should be independent of other roles within the educational community to avoid any potential conflicts of interest. Rather, the coordinator should have a direct reporting line to the institution’s senior leadership.

Although not required by Title IX, OCR suggests, particularly for larger institutions, designating multiple coordinators – one for each building, school, or campus – with a “lead coordinator” who has ultimate oversight responsibility.

Also, emphasizing that the Title IX coordinator’s primary responsibility is to coordinate the recipient’s compliance with Title IX, the DCL and accompanying Resource Guide specifically outline the coordinator’s responsibilities, duties, and authority. Finally, regarding the need for visibility and training, the DCL and Resource Guide recommend that the contact information for the Title IX coordinator be given in title form with a reference to a general email address to avoid the necessity and expense of updating materials every time a new coordinator is appointed. However, the DCL notes that electronic resources should specify the name and specific contact information for the current Title IX coordinator. Should an institution choose to designate multiple coordinators, the contact information for all coordinators, as well as any instructions for reporting to a specific coordinator, should be included on the notices.

Additionally, recognizing that many students turn to electronic resources for information, the DCL suggests that institutions have a separate webpage, linked from the main website, which includes specific contact information for the Title IX coordinator(s), policies and procedures for filing Title IX complaints, and resources available for complainants. Also, because of the increased use of social media for information, OCR suggests institutions make contact information for the Title IX coordinator(s) available on social media to the extent that social media is used by the institution.

Tampa Bay Buccaneers to Settle Cheerleaders’ Wage-and-Hour Class Action

The Tampa Bay Buccaneers have agreed to settle a class action lawsuit brought by its cheerleaders on May 19, 2014. Pierre-Val v. Buccaneers Ltd. Partnership, No. 14-cv-01182 (M.D. Fla.). The Buccaneers agreed to pay $825,000, with $264,000 of the settlement allocated to attorney’s fees. As a class action, the settlement awaits Court approval after a “fairness hearing,” which likely will take place this summer. The potential class includes approximately 94 current and former cheerleaders who worked for the Buccaneers between June 3, 2009, and May 9, 2014. If the settlement is approved, class members will receive a portion of the $561,000, depending upon how many weeks and hours worked, so long as they do not opt out to pursue their own individual action.

Plaintiffs alleged violations of federal and state wage laws for failure to pay cheerleaders minimum wage. They were paid $100 per home game, as well as additional compensation for corporate events. The Complaint alleged the cheerleaders were required to work unpaid hours including practice time, charity events, clinics, posing for calendars, and for other work performed. Indeed, the Complaint notes the Buccaneers’ website explicitly says that cheerleaders were “consistently busy rehearsing, performing and volunteering for community events and appearances.”

Similar lawsuits have been brought against the other teams, including the Oakland Raiders, Cincinnati Bengals, Buffalo Bills, and New York Jets. The Oakland Raiders settled its lawsuit this past fall for $1.25 million. The Raiders’ cheerleaders had earned $125 per game. The other lawsuits are pending.

The lawsuit against the Buffalo Bills has the most at stake. The Bills’ cheerleaders were classified as independent contractors and received no compensation beyond a ticket to the game and a parking pass. They allege that they were misclassified and that they are entitled to compensation at minimum wage for working 20 hours per week. The Bills’ cheerleaders also claim they were subjected to a harassing work environment because, among other allegations, the Bills provided the cheerleaders with a handbook that addressed feminine hygiene and other inappropriate issues.

The Bills’ cheerleaders have even added the NFL to the lawsuit, arguing that NFL Commissioner Roger Goodell approved broadcast rights contracts that required them to sign agreements misclassifying them as independent contractors. Moreover, they argue that the NFL was unjustly enriched by the Bills’ wage violations because of the league’s revenue-sharing arrangement. The NFL is seeking dismissal of the Complaint as against them.

Professional sports organizations that employ cheerleaders are now on notice of potential wage and hour violations. This past season, even before it settled its lawsuit, the Oakland Raiders began paying cheerleaders minimum wage. A number of organizations already pay their cheerleaders minimum wage. The Bills, on the other hand, “suspended operations” of its cheerleading squad.

To lower the risk of being sued for wage-and-hour violations, employers should review their treatment of independent contractors, full-time and part-time employees, and interns and ensure the individuals are properly classified and compensated.

Massachusetts Interscholastic Athletic Association To Implement Background Checks For Officials

Closing one of the last gaps in ensuring the safety of students from school workers in Massachusetts, the Massachusetts Interscholastic Athletic Association (MIAA) has approved an initiative requiring all high school referees to undergo criminal background checks by a unanimous vote of the board of the directors on February 25, 2015. The MIAA has indicated that the plan, which may be amended further, would require all 8,000 officials and umpires to go through an extensive screening process by the spring of 2016. Massachusetts is the 28th state to pass such a requirement.

The MIAA plans to cover the expenses for the new system, estimated at $280,000 to $320,000 for the first year, by charging officials $35 to $40 per screening. Requirements of the new initiative include:

  • An official who is charged with a crime while working in the system may be suspended immediately until the case is resolved;
  • An official who is suspended or disqualified may appeal twice to separate MIAA review panels;
  • Officials will be rescreened every five years.

Athletic Directors across the state have lauded the decision, saying it adds an important level of safety for all student-athletes. “This is a big step in terms of becoming more actively engaged with a group of people who have been working with our kids,” MIAA associate executive director Richard Pearson told the Boston Globe.

Some groups, however, have voiced caution in subjecting Massachusetts officials to excessive screening. The president of the Eastern Massachusetts Soccer Officials Association, Tom Stagliano, told the Boston Globe that a comprehensive system that tracks which officials have already undergone the screening process is needed. “We will support the efforts of the MIAA to conduct across-the-board CORI [Criminal Offender Record Information] checks on all sports officials. However, since well over 40 percent of sports officials are currently school teachers and administrators who are already subjected to a CORI, we believe that the MIAA should work with the school superintendents to arrive at one CORI database for all teachers, administrators, workers, school volunteers, and sports officials across the entire commonwealth. An individual should only be subjected to one CORI process, which is the most cost-effective and efficient method.”

Please contact a Jackson Lewis attorney with any questions about the new requirements.

 

Employers Cannot Apply Tougher Policies Retroactively to Employee Covered by CBA

Sending employers a strong message, a federal court in Minnesota has ruled that even an arbitrator’s award may be overturned where the employer seeks to enforce a disciplinary policy that was not in place when the employee’s alleged misconduct took place. National Football League Players Association (on behalf of Adrian Peterson) v. the National Football League, No. 14-4990 (DSD/JSM) (D. Minn., Feb. 26, 2015).

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The Top Five Immigration Mistakes Made By Foreign Athletes

In 2014, opening day rosters in the National Basketball Association listed 101 players born outside the United States, Major League Baseball boasted 224 players from countries such as Japan, Korea, Dominican Republic, Venezuela, Japan, Cuba, and Mexico, not to mention the many players from other countries in the National Hockey League, Major League Soccer, and the developmental leagues of all of these major sports. As the world of sports continues to become more global, immigration has become even more essential to our professional sports leagues.

The five most common misunderstandings foreign professional athletes have about their immigration status include:

1) Careers are Short and So Are Grounds for Permanent Residence : Players who no longer compete at the highest level in their sports will be unable to obtain permanent residence based upon their abilities. Players no longer playing in their sport will be denied permanent residence for failure to demonstrate the continued ability in their area of extraordinary ability. Similarly, players often are only one bad season or injury away from losing their ability to remain in the U.S. on temporary visas. Therefore, they should consider filing for permanent residence early in their careers.

2) Family Matters, but Working is Another Matter: Families of foreign professional athletes cannot work in the United States unless they have their own basis for work authorization. By filing for permanent residence, however, the families of players can start businesses, seek employment, and have greater travel flexibility. Also, players who eventually become citizens can immediately petition to have parents join them in the United States.

3) Income Flexibility is Not Player’s Lot: Immigrant athletes generally can work only for a single employer. Other active business interests fall outside their authorized status. However, by obtaining permanent residence, the player is free to pursue business and employment opportunities like any other U.S. citizen.

4) Traveling with Ease May Have to Wait : U.S. immigration works on a series of complicated visas categories that often require several filings with the USCIS and DOS Visa limitations cause confusion and delay. Permanent residence, however, frees players from the burden of those filings and allows them to enter the United States faster and with less inspection by border officers.

5) Higher Standard of Behavior Is Expected: Immigration is a civil, rather than criminal, issue. Minor criminal issues or immigration violations can result in the denial of a visa or permanent residence for a player or family member. Immigrants are held to a higher standard. Issues that might result in a monetary fine for a U.S. citizen or permanent resident could mean a permanent bar or removal from the United States for an immigrant.

Working with experience immigration counsel can help players reduce the risks.

Law Professors Raise Concerns With Title IX Procedures

Do certain Title IX procedures abridge the due process rights of the accused for the sake of Title IX compliance? The University of Pennsylvania Law School has become the second law school in recent months to provoke a public response from law professors arguing the University’s new procedures for investigating and adjudicating complaints of sexual assault disregard the due process rights of the accused. In October, a group of Harvard Law School Professors published an open letter pointing out overreach by Harvard University in adopting new procedures for investigations and adjudications which, they argued, “lack the most basic elements of fairness and due process, are overwhelmingly stacked against the accused, and are in no way required by Title IX law or regulation.” Harvard Law School has since drafted its own procedures for investigating and adjudicating Title IX complaints.

Both open letters cited similar concerns regarding the rights of the accused during the investigative process. In particular, both sets of professors argued that their respective universities’ procedures for investigating complaints prevent effective cross-examination of the complainant or other witnesses. They also expressed concern with vesting the power to investigate, make findings of fact, and reach an ultimate decision on responsibility with the same “investigative team” (comprised of a Title IX investigator and another individual from the university), arguing that a more independent body should be used.

While Harvard’s policy provides for a finding of responsibility by the Investigative Unit without a hearing, UPenn’s procedures allow a hearing panel to review the findings of the investigators. In their letter, however, the UPenn professors argued the hearing process lacked fundamental fairness. They highlighted four concerns with the new policy:

(1) the inability of the accused student’s attorney or representative to cross-examine the witnesses against the accused;

(2) the inability of the accused’s representative or attorney to challenge the findings of the investigative report submitted to the hearing panel;

(3) that a finding of responsibility by the panel need only be by majority vote, not unanimous; and

(4) the lack of safeguards to protect the accused’s rights against self-incrimination where there may be criminal prosecution.

Harvard Law School has attempted to address some of the concerns by providing legal representation to students who cannot afford to hire an attorney, incorporating into the procedure a hearing overseen by a panel of individuals who are not affiliated with the Law School or University, and allowing cross-examination of witnesses during the hearing, while still protecting the complainant from direct examination by the accused.

The letters also highlighted the pressure schools face from the DOJ’s Office of Civil Rights, which can levy fines or withhold federal funding if a school is not in compliance with Title IX, and noted such pressure can lead to procedures that compromise due process rights for involved individuals.

Schools’ Title IX policies must comply with Department of Education regulations while preserving due process rights for accused individuals, who ultimately could pursue any perceived violation of such rights in court.

Proposed Connecticut Law Would Empower Certain Student-Athletes to Unionize

A bill has been introduced in the Connecticut General Assembly that would define certain collegiate athletes at public colleges and universities within the state as employees. The proposed law would permit eligible student-athlete employees to join unions and bargain collectively. If the bill is enacted into law, Connecticut would become the first state in the country to permit student-athletes at public universities to unionize.

The bill (No. 5485), introduced by State Representative Matthew Lesser (D-Middletown), has been referred to the state’s Higher Education and Employment Advancement Committee for further consideration.

The bill provides that a student-athlete will be considered an employee when the student-athlete:

(1)   receives a scholarship of not less than 90% of the cost of tuition,

(2)   the scholarship is materially related to the student’s expected participation in intercollegiate athletics, and

(3)   revenues generated in the prior academic year for the athletic program in which the student is expected to participate, when divided by the total number of students expected to participate in such athletic program, exceeds 400% of the value of such scholarship.

Representative Lesser explained that he believes a union would “at least get students a seat at the table.” Inspired by former Connecticut basketball player Shabazz Napier’s complaint that he and some of his teammates had gone to bed hungry, Lesser said that “this is a big industry…we’ve heard from students at UConn and around the country that they feel exploited…so the question is, do we want to give those students the right to negotiate with the schools and the NCAA?”

In March 2014, the Regional Director of the National Labor Relations Board in Chicago ruled that scholarship football players at a private university were “employees” defined by the National Labor Relations Act. He ordered an election to determine if the football players at Northwestern University wanted to be represented by a union. The result of the election has been held in abeyance while the Board reviews the initial determination that the football players were employees of the University.

Representative Lesser also said, “Student athletes in revenue sports are part of a major industry….The NCAA has tried to create a climate of exploitation. The NCAA shouldn’t be able to exploit young, talented athletes who risk career-ending injuries on a daily basis.”

Lesser concluded, “the bill will ensure that, at least in Connecticut, athletes’ voices are heard and their rights respected—that they’re not just used as free labor.”

Women’s World Cup Turf-War Is Over

This summer’s Women’s World Cup will be played on artificial surfaces, rather than natural grass, after a group of international women’s soccer stars withdrew their gender discrimination lawsuit against FIFA and the Canadian Soccer Association.

The players’ lawsuit, filed in the Human Rights Tribunal of Ontario, accused FIFA and the CSA of gender discrimination, arguing that elite men’s teams would never be forced to play on artificial turf.  Every Men’s World Cup since 1930 has been played on natural grass.  The players also noted that artificial turf will increase injury risk and change how games are played

Fighting FIFA was always an uphill battle for the more than 80 players, including U.S. star and all-time international scorer Abby Wambach, who originally brought the legal action.  Beyond having access to greater resources, FIFA and CSA tactics against the players allegedly included threatening players with suspension. A judge found FIFA’s alleged threats credible enough to allow the lawsuit to be amended to add reprisals against FIFA to the complaint.  However, the tribunal refused to expedite the players’ suit and FIFA appeared unwilling to compromise

In order to allow all teams ample time to prepare for the surfaces, the players dropped the lawsuit.  Playing on soccer’s biggest stage apparently outweighed the risks, and, therefore, they never seriously considered a boycott.

A lawyer for the players, Hampton Dellinger, said the case “highlighted continuing gender inequity in sports and lessened the chance that such wrongdoing will occur in the future.”
“The players’ united, international effort to protest discrimination has had a positive impact,” Dellinger stated. “The deplorable artificial surface at BC Place, the site of the final, will be replaced. Goal-line technology will be used for the first time in a Women’s World Cup and we know that the 2019 World Cup will be held on grass.”

“Our legal action has ended,” Abby Wambach said in a statement. “I am hopeful that the players’ willingness to contest the unequal playing fields — and the tremendous public support we received during the effort — marks the start of even greater activism to ensure fair treatment when it comes to women’s sports.”

The tournament is scheduled to kick off on June 6.

 

Major League Baseball Players Association Amends Agent Regulations To Require Written Exams For Applicants

For the first time since October 1, 2010, the Major League Baseball Players Association (MLBPA) has enacted a series of amendments to its regulations governing player agents. Approved during the MLBPA’s recent annual Executive Board meeting in Orlando, the amendments address the union’s ongoing effort to improve the quality and knowledge of agent applicants. Each applicant must possess basic knowledge about the terms and conditions in the Basic Agreement (the collective bargaining agreement), the Major League Rules, the Joint Drug Agreement, and the MLBPA Agent Regulations prior to being approved to become a member of the MLBPA’s certified agent pool.

All agent applicants must pass a written exam before they can be certified. In addition, agent applicants will be subject to a detailed background check. The background investigation will focus on the applicant’s conduct relevant to the fiduciary duties of an Agent and the additional responsibilities required by the MLBPA to bargain on behalf of players. The MLBPA’s introduction of the written testing procedure prior to certification is similar to the process utilized by the National Football League Players Association (NFLPA).

The MLBPA has stated that it will offer a preparatory course for the test. Applicants will be able to take the certification test in either January or August of each year, depending upon when the applicant’s formal application is submitted.

Additionally, the MLBPA Executive Board adopted stricter reporting requirements and increased fees for both agent applicants and current MLBPA-certified agents. Current certified agents will be exempt from the written exam requirement and will not be subject to a background check as long as they maintain their certification. However, an annual fee of $1,500 will be imposed on current certified agents, a drastic increase from the current bi-annual fee of $250.  The MLBPA also increased fees for new applicants seeking certification to $2,000 (a $1,500 increase). The increased fees will offset the new anticipated costs to perform background checks on each applicant and the costs of administration for all certified agents.

The amendments also created a Certification as an Expert Agent Advisor. Previously, an individual could be certified as an agent with General Certification or Limited Certification.

A General Certified Agent may represent, assist, or advise a Player in negotiating terms to be included in a Major League contract or “side letter” concerning terms to be included in a Major League contract, and represent that Player in dealings with any Major League Club or the Commissioner’s Office concerning the administration or enforcement of that Player’s Uniform Player’s Contract, the Basic Agreement or the Major League Rules. A Limited Certified Agent is permitted to recruit or provide client maintenance services on behalf of a General Certified Agent, but may not communicate with a Major League Club on behalf of a Player. The new certification of Expert Agent Advisor may represent, assist, and advise a General Certified Agent on behalf of a Player.

An Expert Agent Advisor is an individual designated by at least one General Certified Agent to engage in the representation, assistance, or advising of that Agent, on behalf of a Player, in the negotiations of terms to be included in a Major League Uniform Player Contract or in any other agreement. An Expert Agent Advisor is prohibited from engaging in recruiting or Client Maintenance Services, as defined by the Agent Regulations.  

An individual is eligible to be certified as an Expert Agent Advisor if he or she (i) is a member, partner or employee of a business entity that is not a sports agency and does not include other General or Limited Certified Agents, (ii) has not been designated on a Player Agent Designation form from a Player who satisfies the definition in §2(B) of the regulations, and (iii) has an undergraduate degree from an accredited four-year college or university, and either a post-graduate degree from an accredited college or university or at least four years of appropriate negotiating experience.