Texas Joins NIL Fray With College Athlete Pay Law Effective July 1

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The legal landscape for name, image and likeness grew considerably—both in geography and impact—on Monday when Texas Gov. Greg Abbott signed SB 1385 into law. The bill passed overwhelmingly in the Texas House and Senate. Absent President Joe Biden signing a preempting federal NIL bill into law or the NCAA either obtaining restraining orders in NIL states or announcing its own rule, the Texas statute will go into effect on July 1.

Texas becomes the 19th state to adopt an NIL statute and the sixth—joining Alabama, Florida, Georgia, Mississippi and New Mexico—to have it go into effect on July 1. Schools in these states will be in a superior position to recruit. How long that advantage lasts, however, will depend on which actions, if any, Congress or the NCAA take to establish national NIL rules.

Texas’ statute is generally similar to NIL statutes in other states, though it does contain some unique features.

The statute ensures that athletes at Texas schools can use their right of publicity—the right to control the use and profit from one’s own name, image, likeness and related aspects of one’s identity. To that end, Texas colleges will be barred from preventing their athletes from capitalizing on their NIL, such as when they sign endorsement deals, sponsor camps for payment or are paid to engage in social media influencing. Athletes will also be able to retain agents for NIL purposes.

These pending changes mean that Texas schools will be barred by state law from complying with their contractual obligations to the NCAA. That scenario assumes NCAA obligations remain in effect on July 1 (the NCAA Division I Council could pass a national NIL rule before that date).

At the same time, the Texas NIL statute contains numerous elements that will significantly restrict how athletes pursue NIL opportunities. These restrictions, dubbed “guardrails” by the NCAA, are designed to prevent NIL from morphing into pay-for-play.

First, Texas athletes will face a transparency/disclosure requirement. They will be required to disclose to their school, in the manner prescribed by their school, “any proposed contract” related to NIL.

Second, similar to athletes in other states, Texas athletes will be barred from signing a deal that (1) conflicts with their school, including with an athletic department contract or their school’s expressed principles and values, (2) calls for compensation while the athletes are “engaged in official team activities,” as that phrase is defined by their school, and (3) draws on intellectual property, such as logos and other trademarks, owned by the school.

Fourth, in addition to prohibiting NIL deals that undermine a school’s principles, certain categories of endorsements are expressly outlawed. Alabama’s NIL statute has a comparable limitation. Texas’s statute will block any athlete endorsements of:

  • Alcohol

  • Tobacco products

  • E-cigarettes or any other type of nicotine delivery device

  • Anabolic steroids

  • Sports betting

  • Casino gambling

  • Firearm if athlete cannot lawfully purchase it

  • “Sexually oriented businesses”, a statutory term defined by the Texas Government Code to include “modeling studios,” “adult bookstores” and other commercial enterprises where the primary business is the offering of a service or good “intended to provide sexual stimulation or sexual gratification.”

Fifth, as in other states, the statute will prohibit any compensation portrayed or labeled as NIL that could, in reality, constitute pay-for-play.

Sixth, similar to Georgia, Texas will require colleges to offer financial literacy and life skills workshops at the beginning of an athlete’s freshman and junior years. Texas’s statute indicates that athletes are “required” to attend these workshops, which will last at least five hours and cover such topics as financial aid, debt management, time management and budgeting. Given that athletes who sign endorsements and sponsorships will likely become independent contractors of a third party (e.g., a sneaker company or a camp), such training could cover tax issues and, for international athletes, immigration/visa complications.

The Texas statute also wades into waters beyond NIL by stipulating that athletes aren’t employees of their schools. The possible employee status of college athletes ordinarily involves different laws—the National Labor Relations Act for athletes at private colleges and state labor laws for those enrolled at public universities.

As alluded to above, whether state NIL statutes set for July 1 actually go into effect remains uncertain. Congress is exploring a final, last-minute attempt at crafting a federal NIL bill that would likely preempt state NIL laws. Meanwhile, the NCAA could announce its own rules or seek restraining orders in NIL states by arguing these laws violate the Contract and Commerce Clauses of the U.S. Constitution (a complicated topic explained here).

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