Q: I am a student-athlete and I just received a NIL contract from a business. What should I be aware of before I sign the contract?
A: As the two and a half year anniversary of NIL approaches, a growing number of student-athletes are being offered NIL contracts, unaware of the particular terms they should be paying attention to before signing the contract. This has led to a number of student-athletes entering into less than desirable, and even harmful, NIL contracts. Even what may seem like a simple contract can have terms that are wider reaching than the student-athlete may be aware of. Thus, it is critically important for every student-athlete to understand the NIL contract they have been offered before signing.
One of the first things a student-athlete should look for is whether the contract conflicts with their school’s NIL policies and/or state NIL laws. Several states have NIL laws, so student-athletes should confirm whether their institution is situated in one of these states and determine whether any laws may be applicable to their contract. For example, some state NIL laws prohibit endorsement deals with cannabis companies. Additionally, even if the student-athlete is not in a state with NIL laws, their school will likely have its own policies regarding what NIL deals are appropriate for student-athletes to sign. For instance, some schools do not allow student-athletes to sign endorsement contracts with companies affiliated with sports gambling or alcohol. Most notably, some schools also prohibit contracts with competing equipment manufacturers, so if the school has a contract with Adidas, it is likely that the student-athlete will not be allowed to sign a contract with Nike. Ultimately, the student-athlete should ensure that the contract they are signing will not get them into trouble with their state’s laws or their academic institution’s policies.
Another highly important item that the student-athlete should be paying attention to is whether the contract is pay for play. While the NCAA does not regulate much around NIL, one rule it does enforce is no pay for play contracts. At the surface, this may seem obvious, but businesses have gotten crafty in how they structure their contracts to reflect pay for play contracts. For example, a business may offer the student-athlete an incentives based contract that states “for every ten passes the student-athlete completes, they will receive another endorsement opportunity, or X amount of dollars.” This is a pay for play contract and can jeopardize the student-athlete’s NCAA eligibility.
Arguably, one of the most important things a student-athlete should be aware of is what the contract says regarding the student-athlete’s right to publicity. The student-athlete’s right to publicity is what allows the student-athlete to sign endorsement deals and determine who is allowed to use their NIL. Unfortunately, many student-athletes have signed NIL contracts that turn over their right to publicity to the business they are signing with. This in turn makes it so that the business now controls what endorsement contracts the student-athlete can sign in the future and who can use the student-athlete’s likeness. If a student-athlete encounters such a term in a NIL contract, they should try to negotiate to have that term in the contract removed or walk away from the contract as signing such a contract can have long lasting implications on who can use the student-athlete’s NIL and the student-athlete’s potential future earnings.
Ultimately, each NIL contract is unique and will likely contain distinct terms not covered here. The best way a student-athlete can protect themselves from signing a bad deal is to consult with an attorney who works with NIL contracts. Alternatively, some law schools have started NIL clinics, in which licensed attorneys supervise law students who provide free or inexpensive review of NIL contracts for student-athletes. Either way, the message to student-athletes is the same: be educated about what a NIL contract says, or seek out someone well-versed in the NIL space who can review that contract, before signing.
Know the Law is a bi-weekly column sponsored by McLane Middleton. Questions and ideas for future columns should be emailed to knowthelaw@mclane.com. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.