Yesterday, November 21, 2022, New York State Governor Kathy Hochul signed legislation (S5891-F/A5115-E) allowing collegiate student athletes to receive compensation for their name, image and likeness (“NIL”) without the risk of forfeiting their scholarships or eligibility to participate.
“Our collegiate student athletes are heroes on the field – and they deserve to be treated like heroes even after the final whistle,” Governor Hochul said. “For too long, collegiate student athletes have not been able to benefit from the extraordinary benefits their hard work has provided to their schools. I’m proud to sign this legislation that will help New York’s collegiate student athletes earn the recognition they deserve.”
This is a monumental step for New York collegiate student athletes, as it establishes law allowing student athletes to share in the economic benefits created by their athletic accomplishments, alongside their colleges and universities, which may generate revenue through media, ticket sales, and merchandise. Prior to this legislation being signed, New York student athletes were relying on the NCAA NIL Interim Policy and various NCAA guidance that had been released since July 2021. This legislation takes effect immediately, but certain provisions of the education law won’t take effect until January 1, 2023.
This new legislation will be known as the “New York Collegiate Athletic Participation Compensation Act” and amends the State’s Education Law by adding a new section, 6438-a. Specifically, it prohibits colleges, conferences and the NCAA from upholding any rules preventing student athletes from earning compensation as a result of the use of the student athlete’s NIL, or from participating in collegiate athletics competition because of such compensation. It also prohibits colleges or conferences from providing compensation to a student athlete for use of their NIL (a scholarship is not considered compensation). In line with other states and the Interim Policy, colleges, conferences and other groups or organizations (i.e., collectives) cannot provide NIL compensation to prospective student-athletes.
This legislation also permits student athletes to obtain professional representation. Said person must be registered pursuant to Article 39-E of the General Business Law and any legal representation shall be by attorneys licensed pursuant to Article 15 of the Judiciary Law.
According to the new law, student athletes must “disclose the [NIL] contract in advance of executing it to an official of the college, as designated by the college.” This is essentially a conflict protection and administerial step that will slow down NIL deals. In fact, most states that had this requirement have already amended their NIL law to remove or revise it. Section 6(d) lays out a non-exhaustive list of situations whereby the college could assert a conflict and the student athlete may not be able to execute and perform the contract. For example, a college can assert a conflict if the proposed NIL contract would cause the student athlete to violate the team contract or if the proposed NIL contract “would reasonably be judged to cause financial loss or reputational damage to the college.” The second example acts as a morals clause that provides colleges with broad discretion to prevent NIL contracts.
One of the most notable additions requires colleges participating in NCAA Division I athletics to provide student athletes services in the form of assistance in degree completion, career development, financial and mental health, discrimination and harassment training and leadership training.
This alert is not a substitute for advice of counsel on specific legal issues.
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