Berger v. National Collegiate Athletic Ass'n ( 2016 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 16-1558
GILLIAN BERGER, et al.,
Plaintiffs-Appellants,
v.
NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 14-cv-1710 — William T. Lawrence, Judge.
____________________
ARGUED SEPTEMBER 28, 2016 — DECIDED DECEMBER 5, 2016
____________________
Before KANNE, SYKES, and HAMILTON, Circuit Judges.
KANNE, Circuit Judge. Former student athletes at the Uni-
versity of Pennsylvania (“Penn”) sued Penn, the National
Collegiate Athletic Association (“NCAA”), and more than
120 other NCAA Division I universities and colleges alleging
that student athletes are employees who are entitled to a
minimum wage under the Fair Labor Standards Act
(“FLSA”). The district court disagreed. We agree with the
2 No. 16-1558
district court and hold that student athletes are not employ-
ees and are not covered by the FLSA.
I. BACKGROUND
Gillian Berger and Taylor Hennig (“Appellants”) are for-
mer students at Penn who participated on Penn’s women’s
track and field team. Like many collegiate athletic teams
across the country, Penn’s women’s track and field team is
regulated by the NCAA. The NCAA is a member-driven, un-
incorporated association of 1121 colleges and universities. It
is divided into three divisions—Divisions I, II, and III—
based roughly on the size of the schools and their athletic
programs. Penn’s women’s track and field team competes in
Division I, which includes the largest colleges and universi-
ties in the country.
Appellants sued Penn, the NCAA, and more than 120
other NCAA Division I member schools (“Appellees”), alleg-
ing that student athletes are “employees” within the mean-
ing of the FLSA, 29 U.S.C. § 201. Accordingly, Appellants
contend that the NCAA and its member schools violated the
FLSA by not paying their athletes a minimum wage. Appel-
lees moved to dismiss under Federal Rules of Civil Proce-
dure 12(b)(1) and 12(b)(6).
The district court granted Appellees’ motions, holding
that (1) Appellants lacked standing to sue any of the Appel-
lees other than Penn, and (2) Appellants failed to state a
claim against Penn because student athletes are not employ-
ees under the FLSA. This appeal followed.
II. ANALYSIS
The district court first dismissed Appellants’ suit against
all of the Appellees except Penn for lack of standing. We re-
No. 16-1558 3
view de novo a district court’s dismissal of a complaint for
lack of standing. Lewert v. P.F. Chang’s China Bistro, Inc., 819
F.3d 963, 966 (7th Cir. 2016).
In every case, the plaintiff has the burden of establishing
the three elements of standing: that “(1) [he or she] has suf-
fered an ‘injury in fact’ that is (a) concrete and particularized
and (b) actual or imminent, not conjectural or hypothetical;
(2) the injury is fairly traceable to the challenged action of
the defendant; and (3) it is likely, as opposed to merely spec-
ulative, that the injury will be redressed by a favorable deci-
sion.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC),
Inc., 528 U.S. 167, 180–81 (2000) (citing Lujan v. Defs. of Wild-
life, 504 U.S. 555, 560–61 (1992)). To meet this burden and to
survive a challenge to standing under Rule 12(b)(1), a plain-
tiff must plead sufficient factual allegations, taken as true,
that “plausibly suggest” each of these elements. Silha v. ACT,
Inc., 807 F.3d 169, 174 (7th Cir. 2015).
Under the FLSA, alleged employees’ “injuries are only
traceable to, and redressable by, those who employed them.”
Roman v. Guapos III, Inc., 970 F. Supp. 2d 407, 412 (D. Md.
2013). Appellants attended Penn. Their connection to the
other schools and the NCAA is far too tenuous to be consid-
ered an employment relationship: “the only fair reading of
the Amended Complaint is that [Appellants] are alleging
that they are employees of only Penn, not of the other De-
fendants.” (R. 238 at 5.) Thus, Appellants have not plausibly
alleged any injury traceable to, or redressable by, any de-
fendant other than Penn. So they lack standing to sue those
other defendants.
We now turn to the merits with regard to Penn, over
which no one disputes that we have jurisdiction. The district
4 No. 16-1558
court dismissed Appellants’ suit against Penn for failure to
state a claim. We review de novo a district court’s dismissal of
a complaint for failure to state a claim. Jackson v. Blitt &
Gaines, P.C., 833 F.3d 860, 862 (7th Cir. 2016). In evaluating
the sufficiency of the complaint, “we construe it in the light
most favorable to the nonmoving party, accept well-pleaded
facts as true, and draw all inferences in [the nonmoving par-
ty’s] favor.” Bell v. City of Chicago, 835 F.3d 736, 738 (7th Cir.
2016) (quoting Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143,
1146 (7th Cir. 2010)). Although a party need not plead “de-
tailed factual allegations” to survive a motion to dismiss,
mere “labels and conclusions” or “a formulaic recitation of
the elements of a cause of action will not do.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007). Instead, “To sur-
vive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 570).
The FLSA requires “[e]very employer” to pay “his em-
ployees” a minimum wage of $7.25 per hour. 29 U.S.C.
§ 206(a)(1)(c). Section 203(e)(1) defines “employee” in an un-
helpful and circular fashion as “any individual employed by
an employer.” 29 U.S.C. § 203(e)(1). Section 203(g) broadly
defines “employ” as “to suffer or permit to work.” 29 U.S.C.
§ 203(g). Thus, to qualify as an employee for purposes of the
FLSA, one must perform “work” for an “employer.” 1
“Work” is not defined by the Act.
1 Section 203(d) of the FLSA defines “employer” as “any person acting
directly or indirectly in the interest of an employer in relation to an em-
ployee … .” 29 U.S.C. § 203(d).
No. 16-1558 5
Under the FLSA, the plaintiff bears the burden of estab-
lishing that he or she performed work for an employer and
is therefore entitled to compensation. Melton v. Tippecanoe
Cty., 838 F.3d 814, 818 (7th Cir. 2016). Here, to survive the
motions to dismiss, Appellants had to allege facts, which
taken as true, establish that they were employees and per-
formed work for Penn.
Although “[t]he Supreme Court has instructed the courts
to construe the terms ‘employee’ and ‘employer’ expansively
under the FLSA,” Vanskike v. Peters, 974 F.2d 806, 807 (7th
Cir. 1992) (citing Nationwide Mut. Ins. Co. v. Darden, 503 U.S.
318, 326 (1992)), the Court has also held that the definition of
“employee” “does have its limits.” Tony & Susan Alamo
Found. v. Sec’y of Labor, 471 U.S. 290, 295 (1985). “Because sta-
tus as an ‘employee’ for purposes of the FLSA depends on
the totality of circumstances rather than on any technical la-
bel, courts must examine the ‘economic reality’ of the work-
ing relationship” between the alleged employee and the al-
leged employer to decide whether Congress intended the
FLSA to apply to that particular relationship. Vanskike, 974
F.2d at 808.
To guide this inquiry, courts have developed a variety of
multifactor tests. For example, we have applied a seven-
factor test to determine whether migrant laborers are em-
ployees for purposes of the FLSA. Sec'y of Labor v. Lauritzen,
835 F.2d 1529, 1535–538 (7th Cir. 1987). Similarly, the Second
Circuit created a “non-exhaustive set of [seven] considera-
tions” to help determine when an intern is an employee un-
der the FLSA. Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d
528, 536–37 (2d Cir. 2015). Appellants liken student athletes
to interns and contend that we should use the Second Cir-
6 No. 16-1558
cuit’s test set forth in Glatt to determine whether student ath-
letes are employees under the FLSA. We disagree.
It is true, as Appellants note, that the district court cited
the Second Circuit’s test favorably. But the district court also
declined to follow that test here. Instead, the court conclud-
ed correctly that our approach “to determining who is an
employee under the FLSA is … a flexible one.” (R. 238 at 15.)
The court then discussed our decision in Vanskike, in which
we rejected the strict application of a similar multifactor test
in favor of a more flexible standard. 974 F.2d at 809. 2
We have declined to apply multifactor tests in the em-
ployment setting when they “fail to capture the true nature
of the relationship” between the alleged employee and the
alleged employer. Id. In Vanskike, we considered whether an
inmate at a state prison was an employee under the FLSA.
Id. at 806. Like Appellants here, the inmate in Vanskike urged
us to apply a multifactor test to determine whether an em-
ployment relationship existed. We rejected the application of
that test because it was “not the most helpful guide in the
situation presented.” Id. at 809. Rather than follow a specific
test, we examined the economic reality of the alleged em-
ployment relationship and concluded that the prisoner was
not an employee. Id. at 809–10. 3
2 The multifactor test rejected in Vanskike comes from Bonnette v. Califor-
nia Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983).
3 Similarly, in Callahan v. City of Chicago, we rejected the application of
Lauritzen’s multifactor test when the alleged employee’s suit didn’t “re-
quire a choice between employment and independent-contractor status.”
813 F.3d 658, 662 (7th Cir. 2016). Other courts have likewise rejected the
stringent application of multifactor tests in certain settings. See e.g.,
(continued…)
No. 16-1558 7
The district court followed the reasoning of Vanskike and
held that the “factors used in the trainee and private-sector
intern context fail to capture the nature of the relationship
between the Plaintiffs, as student athletes, and Penn.” (R. 238
at 15). We agree with the district court and decline to apply
the test set forth in Glatt here.
As the Supreme Court has noted, there exists “a revered
tradition of amateurism in college sports.” Nat’l Collegiate
Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85,
120 (1984). That long-standing tradition defines the econom-
ic reality of the relationship between student athletes and
their schools. To maintain this tradition of amateurism, the
NCAA and its member universities and colleges have creat-
ed an elaborate system of eligibility rules. See O’Bannon v.
Nat’l Collegiate Athletic Ass’n, 802 F.3d 1049, 1054–55 (9th Cir.
2015) (outlining the development of these rules). We have
held that these rules “define what it means to be an amateur
or a student-athlete, and are therefore essential to the very
existence of” collegiate athletics. Agnew v. Nat’l Collegiate
Athletic Ass’n, 683 F.3d 328, 343 (7th Cir. 2012). The multifac-
tor test proposed by Appellants here simply does not take
into account this tradition of amateurism or the reality of the
student-athlete experience. In short, it “fail[s] to capture the
true nature of the relationship” between student athletes and
(…continued)
Danneskjold v. Hausrath, 82 F.3d 37 (2d Cir. 1996); Doyle v. City of New
York, 91 F. Supp. 3d 480, 486 (S.D.N.Y. 2015) (“[I]n certain contexts, ap-
plication of a multifactor test can cause a court to miss the forest for the
trees.”).
8 No. 16-1558
their schools and is not a “helpful guide.” Vanskike, 974 F.2d
at 809.
A majority of courts have concluded—albeit in different
contexts—that student athletes are not employees. See gener-
ally Adam Epstein and Paul M. Anderson, The Relationship
Between a Collegiate Student-Athlete and the University: An His-
torical and Legal Perspective, 26 Marq. Sports L. Rev. 287, 297
(2016) (collecting cases and concluding that “the courts have
been consistent finding that student athletes are not recog-
nized as employees under any legal standard, whether
bringing claims under workers’ compensation laws, the
NLRA or FLSA”). For example, most courts have held that
student athletes are not employees in the workers’ compen-
sation context and are thus not entitled to compensation
from their schools for injuries they suffer while playing their
respective sports. See e.g., Rensing v. Ind. State Univ. Bd. of
Trustees, 444 N.E.2d 1170 (Ind. 1983); State Comp. Ins. Fund v.
Indus. Comm’n, 314 P.2d 288 (Colo. 1957); Waldrep v. Tex.
Emp’rs Ins. Ass’n, 21 S.W.3d 692 (Tex. App. 2000); Coleman v.
W. Mich. Univ., 336 N.W.2d 224 (Mich. Ct. App. 1983).
Although two courts reached the opposite conclusion
over fifty years ago, they did so, at least in part, because the
student athletes in those cases were also separately em-
ployed by their universities. See Univ. of Denver v. Nemeth,
257 P.2d 423 (Colo. 1953); Van Horn v. Indus. Accident
Comm’n, 33 Cal. Rptr. 169 (Cal. Dist. Ct. App. 1963). Moreo-
ver, in 1965, the California legislature, in apparent disagree-
ment with the California District Court of Appeal in Van
Horn, amended the state’s labor code to explicitly exclude
student-athletic participants as employees for purposes of
worker’s compensation. See Shephard v. Loyola Marymount
No. 16-1558 9
Univ., 125 Cal. Rptr. 2d 829, 832–34 (Cal. Ct. App. 2002) (dis-
cussing the legislature’s amendment).
The Department of Labor, through its Field Operations
Handbook (“FOH”), has also indicated that student athletes
are not employees under the FLSA. The FOH “is an opera-
tions manual that provides Wage and Hour Division … in-
vestigators and staff with interpretations of statutory provi-
sions, procedures for conducting investigations, and general
administrative guidance.” Field Operations Handbook (FOH),
United States Dep’t of Labor, https://www.dol.gov/Whd/FO
H/index.htm. Appellants argue that the FOH “cannot form
the basis for any dismissal.” (Appellants’ Reply Br. at 11.) We
agree with Appellants that the provisions in this handbook
are not dispositive, but they certainly are persuasive. In fact,
we have cited this handbook as persuasive authority several
times. See Driver v. AppleIllinois, LLC, 739 F.3d 1073, 1075 (7th
Cir. 2014); Yi v. Sterling Collision Ctrs, Inc., 480 F.3d 505, 508
(7th Cir. 2007).
Chapter ten of the FOH “contains interpretations regard-
ing the employment relationship required for the [FLSA] to
apply.” Field Operations Handbook (FOH), § 10a00. Section
10b24 specifically addresses the employment status of uni-
versity or college students. This section is broken into two
subsections—subsection (a) and subsection (b).
Subsection (a) discusses situations when university or
college students are not treated as employees under the
FLSA. Under this subsection, “University or college students
who participate in activities generally recognized as extra-
curricular are generally not considered to be employees with-
in the meaning of the [FLSA].” § 10b24(a) (emphasis added).
10 No. 16-1558
This subsection then cross-references another section,
§ 10b03(e), which states the following:
As part of their overall educational program,
public or private schools … may permit or re-
quire students to engage in activities in connec-
tion with dramatics, student publications, glee
clubs, bands, choirs, debating teams, radio sta-
tions, intramural and interscholastic athletics and
other similar endeavors. Activities of students
in such programs, conducted primarily for the
benefit of the participants as a part of the edu-
cational opportunities provided to the students
by the school or institution, are not work of the
kind contemplated by [the FLSA] and do not
result in an employer-employee relationship
between the student and the school … .”
(emphasis added).
Subsection (b), “[o]n the other hand” discusses situations
in which “an employment relationship will generally exist
with regard to students … .” § 10b24(b). Under this subsec-
tion, students who participate in a work-study program and,
for example, “work at food service counters or sell programs
or usher at athletic events, or who wait on tables or wash
dishes in dormitories in anticipation of some compensation”
are “generally considered employees under the [FLSA].” Id.
Appellants compare NCAA-regulated athletes to the
work-study participants of § 10b24(b) and argue that these
athletes should be deemed employees under the FLSA. In so
doing, Appellants contend that § 10b24(a)’s reference to “ex-
tracurricular” activities and § 10b03(e)’s reference to “inter-
No. 16-1558 11
scholastic athletics” refer only to “student-run, interscholas-
tic club sports,” and not to NCAA-regulated sports. (Appel-
lants’ Br. at 18). To support this argument, Appellants point
to the many differences between club sports and NCAA-
regulated sports—the most obvious of which being that club
sports are largely student-run, whereas NCAA-regulated
sports are heavily supervised by university-employed staff.
We agree that NCAA-regulated sports are very different
from club sports, but we disagree that this warrants different
treatment under the clear language of the FOH.
Section 10b24(a) categorically states that students who
participate in “extracurricular” activities are generally not
considered employees. Section 10b03(e) includes “interscho-
lastic athletics” in a list of activities that do not constitute
“work.” These references are not limited to activities that are
entirely student run. In fact, most of the activities included
in § 10b03(e)’s list are not student run. Appellants have not
presented any persuasive argument to suggest that the De-
partment of Labor intended to limit this language to student-
run activities. We therefore reject Appellants’ linguistic limi-
tation.
Because NCAA-regulated sports are “extracurricular,”
“interscholastic athletic” activities, we do not believe that the
Department of Labor intended the FLSA to apply to student
athletes. We find the FOH’s interpretation of the student-
athlete experience to be persuasive.
Appellants in this case have not, and quite frankly can-
not, allege that the activities they pursued as student athletes
qualify as “work” sufficient to trigger the minimum wage
requirements of the FLSA. Student participation in collegiate
athletics is entirely voluntary. Moreover, the long tradition
12 No. 16-1558
of amateurism in college sports, by definition, shows that
student athletes—like all amateur athletes—participate in
their sports for reasons wholly unrelated to immediate com-
pensation. Although we do not doubt that student athletes
spend a tremendous amount of time playing for their respec-
tive schools, they do so—and have done so for over a hun-
dred years under the NCAA—without any real expectation
of earning an income. Simply put, student-athletic “play” is
not “work,” at least as the term is used in the FLSA. We
therefore hold, as a matter of law, that student athletes are
not employees and are not entitled to a minimum wage un-
der the FLSA.
We briefly conclude by addressing Appellants’ argument
that employment status is an inherently fact-intensive in-
quiry and thus should not be decided at the motion-to-
dismiss stage. We reject this argument. Because we con-
clude, as a matter of law, that student athletes are not em-
ployees under the FLSA, no discovery or further develop-
ment of the record could help Appellants. Appellants did
not and could not allege facts, even taken as true, that give
rise to a cause of action. See Vanskike, 974 F.2d at 813 (affirm-
ing the district court’s grant of a motion to dismiss because
plaintiffs had failed to establish the existence of an employ-
ment relationship).
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
grant of Appellees’ motions to dismiss.
No. 16-1558 13
HAMILTON, Circuit Judge, concurring. I join Judge Kanne’s
opinion for the court but wish to add a note of caution. The
plaintiffs in this case were students who participated in track
and field at the University of Pennsylvania. Like other Ivy
League schools, Penn does not offer athletic scholarships.
Also, as far as I know, track and field is not a “revenue”
sport at Penn or any other school. In this case, therefore, the
economic reality and the sometimes frayed tradition of ama-
teurism both point toward dismissal of these plaintiffs’
claims. See generally, e.g., O’Bannon v. National Collegiate Ath-
letic Ass’n, 802 F.3d 1049, 1054–55 (9th Cir. 2016) (holding
that NCAA compensation rules for Division I men’s basket-
ball players and Football Bowl Subdivision football players
violated federal antitrust laws).
Because the plaintiffs in this case did not receive athletic
scholarships and participated in a non-revenue sport, they
pursued a broad theory. The logic of their claim would have
included not only any college athlete in any sport and any
NCAA division, but also college musicians, actors, journal-
ists, and debaters. That broad theory is mistaken, as Judge
Kanne’s opinion explains. I am less confident, however, that
our reasoning should extend to students who receive athletic
scholarships to participate in so-called revenue sports like
Division I men’s basketball and FBS football. In those sports,
economic reality and the tradition of amateurism may not
point in the same direction. Those sports involve billions of
dollars of revenue for colleges and universities. Athletic
scholarships are limited to the cost of attending school. With
economic reality as our guide, as I believe it should be, there
may be room for further debate, perhaps with a developed
factual record rather than bare pleadings, for cases address-
ing employment status for a variety of purposes.