On June 28, 2021, Ohio Governor Mike DeWine signed an Executive Order permitting student-athletes in Ohio to earn compensation from the use of their name, image, and likeness (commonly referred to as “NIL”) without punishment by such student-athletes’ schools. This NIL right became effective on July 1, 2021.
Limitations and Restrictions
Like most laws, this too comes with some limitations. A student-athlete cannot enter into a NIL contract that requires the student-athlete to display a sponsor’s product, or otherwise advertise for a sponsor, during official team activities or any other time if the NIL contract conflicts with a provision of a contract to which the school is a party. For example, a school with a Nike apparel contract might be able to prohibit a student-athlete from entering into an apparel contract with Under Armour.
A student-athlete who intends to enter into a NIL contract must first disclose the proposed contract to a school official for review (each school must designate a person to act as such official). If the official identifies a conflict between the proposed NIL contract and any existing provisions of a contract to which the school is a party, the school has to communicate to the student-athlete the relevant contract provision that is in conflict. The student-athlete cannot then enter into the proposed NIL contract as it is currently written, but the student-athlete may negotiate a revision to the proposed contract to avoid the conflict. It is unclear whether the school has to entertain a proposed revision or otherwise negotiate with the student-athlete in order to allow the proposed NIL contract to go forward. The Executive Order does not directly address this, but the answer is likely “no” because the Executive Order makes clear that the law does not require a school to “identify, create, facilitate, negotiate, or otherwise enable opportunities” for a student-athlete to earn compensation for use of his or her NIL.
Additionally, a school may, but is not required to, prohibit a student-athlete from entering into a NIL contract if, under the contract, the student-athlete’s NIL is associated with:
- Any company or brand that manufactures, sells or is associated with a controlled substance, marijuana product, medical marijuana product, alcoholic product, tobacco product, electronic smoking device, vapor product, or other nicotine product or device.
- A medical marijuana cultivator, processor, laboratory, or retail dispensary.
- An adult entertainment business (i.e., one that is characterized by an emphasis on the exposure or display of sexual activity).
- A casino or entity that sponsors or promotes gambling activities.
- Any other category of companies, brands, or types of contracts that are similar to those described above that the school communicates to the student-athlete before the student-athlete enrolls at the school or if the student-athlete is already enrolled, by July 31, 2021.
In addition to Ohio’s current NIL law (which is now effective under the Executive Order but which can be pre-empted by subsequently enacted state or federal legislation), the NCAA has issued a “waiver” whereby it will not punish a student-athlete for profiting from his or her NIL as long as the student-athlete complies with the NIL laws of the state of his or her school. (Under the NCAA waiver, student-athletes attending schools in states without NIL laws have virtually free reign concerning NIL.)
Ohio’s and other states’ new NIL laws provide wonderful opportunities for student-athletes and are long overdue. But these new NIL rights also create the potential for student-athletes to be taken advantage of and the potential for eligibility to participate in school athletics to be jeopardized if the student-athlete does not comply with the applicable rules. For these reasons, it is important for student-athletes with opportunities to earn compensation for the use of their NIL to have proper legal representation. Marketing, endorsement, branding, licensing, etc. contracts can be complicated instruments and may contain restrictions on future activities (such as non-competes) of which a student-athlete may not be aware without the proper guidance by an attorney. Furthermore, a student-athlete should be represented by a skilled negotiator to ensure the student-athlete is maximizing his or her compensation potential. A student-athlete with NIL contract opportunities should further strongly consider legal representation to advise about and assist with:
- Setting up an entity, such as an LLC, through which the student-athlete’s “brand” is managed.
- Trademarking the student-athlete’s brand and marks.
- Using a trust for asset protection.
- Forming joint ventures with other student-athletes.
- Tax compliance and minimization.
- Licensing arrangements.
- Securing proper financial and investment advisors.
The attorneys at Carlile Patchen & Murphy LLP have an abundance of business, contracts, negotiation, tax, and wealth planning knowledge and experience. We can, and are happy to, assist any student-athlete with NIL matters. Please contact any of the following attorneys if you would like to discuss NIL matters further.