Texas Bar Journal October 2022
Name, image, and likeness compensation for student athletes
Written by Justin B. Jones
On July 1, 2021, Senate Bill 1385 took effect amending the Texas Education Code to allow student athletes at Texas institutions to be compensated for their name, image, and likeness, or NIL.1 SB 1385 amends Subchapter Z, Chapter 51 of the education code by adding Section 51.9246 (“Compensation and Professional Representation of Student Athletes Participating in Intercollegiate Athletic Programs”).2 As such, the education code now provides that a university in Texas cannot prevent a student athlete from earning compensation for the use of their name, image, and likeness when they are not engaged in official team activities. While framed in the negative, the student athlete can now earn compensation from their name, image, and likeness.
The new law creates a framework for approval of NIL contracts, prohibits recruiting relating to NIL, and creates a financial literacy and life skills workshop. And of particular interest to the bar, the school cannot prevent an athlete from obtaining representation, including representation by an attorney.3
NIL Contract Approval
The education code now provides a framework for proposed NIL contracts. Proposed NIL deals are contrasted with the school’s “institutional contracts” (sponsorship contracts between the school or its representative and another party “governing the use of the institution’s trademarks in connection with athletics”) and any “team contract,” which is defined as a contract between a student athlete and a school that requires a student athlete’s compliance as a condition under the contract of participation as a member of the athletic program.4
First, before entering into the NIL contract, the athlete shall disclose the proposed NIL contract to the school.<5>55> Further, there are limitations to the terms, the way the compensation is provided, and duration of the NIL contract. More specifically, the student athlete is prohibited from an NIL contract that conflicts with: (1) a team contract; (2) an institutional contract; (3) an athletic department policy; or (4) the institution’s honor code.6
Moreover, the compensation cannot be provided: (1) in exchange for athletic performance or attendance at the institution; (2) by the institution itself; (3) or in exchange for institution property (or while using intellectual or other property owned by the institution).7 Additionally, the NIL contract cannot endorse alcohol, tobacco, e-cigarettes/nicotine delivery, anabolic steroids, sports betting, casino gambling, a firearm the athlete cannot legally purchase, or a sexually oriented business.8 Some argue these restrictions go too far in limiting the topics of NIL contracts.9
The duration of the NIL contract cannot extend beyond the student athlete’s participation in the intercollegiate athletic program.10 While this safeguards the student athlete from bargaining away their individual NIL rights for a longer time, critics argue the time restriction infringes on the student’s ability to maximize their compensation when they may have the most leverage while playing as a student athlete (compared to after their eligibility expires). Others counter that for athletes that may turn professional, the limitation prevents exploitation as negotiating leverage could later increase.
Framework for a Conflicting Contract
If the institution identifies a provision of the NIL contract that conflicts with the team contract, the institutional contract, an athletic department policy, or honor code, the institution shall promptly disclose the conflict to the student athlete or student athlete’s representative.11 Thereafter, the athlete or athlete’s representative must resolve the conflict within 10 days.12
Some argue the framework is inequitable. For example, an athlete’s NIL contract could be rejected if an institution’s pre-existing contract conflicts with the proposed NIL contract. That is, a proposed NIL contract between an athlete and an athletic beverage company could be theoretically rejected if the school already has a contract with a competing beverage company.13
From a recruiting standpoint, the school cannot provide or solicit a prospective student athlete in relation to NIL.14 Furthermore, an individual, corporate entity, or other organization is prohibited from entering an arrangement with a prospect relating to NIL prior to enrollment.15 Similarly, such individuals and organizations cannot use inducements of future NIL compensation to recruit a prospect.16 Nevertheless, the college sports landscape is now replete with a number of “collectives,” a loosely defined term for groups of fans purporting to aid players in monetizing NIL.17 The NCAA’s Division I Council Working Group issued interim guidance in May 2022 attempting to set forth boundaries on what it defines as “third party entities.”18
Financial Literacy and Life Skills Workshop and Texas
Athlete Agent Prohibitions
Moreover, each institution shall require student athletes to attend a financial literacy and life skills workshop at the beginning of their first and third academic years.19. This workshop must last five hours and include information on financial aid, debt management, time management, budgeting, and academic resources available to the student athlete.20 Additionally, each of the current prohibitions in the Texas Occupations Code Section 2051.351 relating to athlete agents remain unchanged.21
Bill analysis posits that the new law will not change the amateur nature of college athletics and will instead recognize the changing landscape of college athletics.22 Critics argue that NIL will challenge the amateurism distinction.23 Others worry that NIL could lead to inequities between teammates and further delineate large and small school collegiate athletics. At any rate, the new law opens NIL possibilities for student athletes. Federal preemption may eventually change the rules of the game, but for now, Texas student athletes can earn compensation for their NIL. TBJ
Justin B. Jones is a senior associate of Fee, Smith & Sharp in Dallas. He received a bachelor of business adminiatration in marking and a bachelor of business administration in management from Texas Tech Universty and a J.D. and certificate in sports law from Tulane University. He can be reached at firstname.lastname@example.org.