I am certain most people reading this column do not employ college athletes, but bear with me.

The college football season recently ended, but the business of college sports grinds on.

During the previous presidential administration, efforts to have student athletes classified as employees both for the payment of wages under the Fair Labor Standards Act (FLSA) and for collective bargaining under the National Labor Relations Act (NLRA) gathered steam. Some advocacy groups already have withdrawn efforts as the new administration is shaping a new National Labor Relations Board (NLRB) and Department of Labor (DOL).

But a current court case on the classification of student athletes as employees continues to wind through the courts. This case illustrates the questions all employers should ask when determining whether workers are employees or independent contractors and how the rules governing those questions may soon change.

In Johnson v. National Collegiate Athletic Association, several college athletes brought claims for unpaid wages under the FLSA and several state wage and hour laws. The District Court for the Eastern District of Pennsylvania analyzed the students’ claims largely under the test for distinguishing between unpaid interns and employees. The District Court determined the students derived less benefits from their relationship with the school than did the schools. Therefore, the student athletes are employees of their respective schools.

Of course, the NCAA and member schools appealed this decision to the Third Circuit Court. In a decision published on July 11, 2024, the Third Circuit rejected the NCAA’s assertion that the “revered tradition of amateurism” in NCAA Division I athletics justified treating Division I student athletes as non-employees. The Third Circuit held that college and university athletes could be employees under FLSA, but it rejected the District Courts use of the test for determining whether interns should be treated as employees.

The Third Circuit remanded the case to the District Court, where it remains at this time.

The Third Circuit applied the basic “economic realities” common law test used to determine whether workers are employees to provide direction to the District Court. College athletes, as well as any workers, may be employees when they (1) perform services for another party, (2) necessarily and primarily for the other party’s benefit, (3) under that party’s control or right of control, and (4) in return for express or implied compensation or in-kind benefits.

Courts across the country have long applied some version of this test.

The Tenth Circuit, in which we reside, considers six factors when determining employee or independent contractor status:

1. The degree of control exerted by the alleged employer over the worker.
2. The worker’s opportunity for profit or loss.
3. The worker’s investment in the business.
4. The permanence of the working relationship.
5. The degree of skill required to perform the work.
6. The extent to which the work is an integral part of the alleged employer’s business.

For purposes of unemployment and workers’ compensation insurance, Colorado law applies numerous factors, best enunciated in the Colorado Supreme Court case of Industrial Claim Appeals Office v. Softrock Geological Services Inc., to answer two basic questions:

• Is the worker free from the control and direction of the employer?
• And is the worker customarily engaged in an independent trade, occupation, profession or business related to the service performed?

The employment status of student athletes will almost certainly end up in the U.S. Supreme Court unless Congress intervenes by prohibiting student athletes from being considered an employee. In the last session of Congress, House Resolution 8534 would have done so. With the new composition of the current Congress, it is highly likely this resolution will be revived.

It is also highly likely the DOL and NLRB will relax standards defining independent contractors, but that Colorado state agencies will continue to apply stringent standards that favor designating workers as employees.

All employers should regularly examine their relationship with workers who they treat as independent contractors.

All courts and agencies examine the degree of control an employer exerts over a worker. The more an employer treats contractors like its regular employees, the more likely it is that the worker is an employee.

Does the employer control the manner in which the contractor performs their work? Does the employer require the worker to work a specific schedule or follow the employee handbook? Does the worker’s “supervisor” attempt to discipline the contractor as it would an employee?

The Colorado Division of Labor and Employment examines whether the worker engages in a business or trade separate from that of the employer, as do most courts applying the economic realities test.

Does the worker provide services under a trade name? Does the worker have the freedom to offer their services to other entities, even if the worker chooses to do so? Does the entity pay its contractors on a set fee for the completion of a defined project, or does it pay its contractors to perform work similar to what the entity’s employers perform?

Colorado courts even look to factors as seemingly insignificant as whether the employer issues the purported contractor business cards in the name of the employer.

I advise employers to compare their contractors to how they engage service providers. When the heating system goes out, the entity calls someone with HVAC expertise because the entity is not in the business of repairing heating systems. The HVAC company sends out an individual on its schedule. It pays the HVAC company a set amount to complete the repairs even though the amount may vary depending on how much time and how many parts the company needs to repair the system. And the company does not tell the HVAC service person how to repair the heating system. The HVAC company applies its own expertise.

Of course, this comparison is not perfect, but the closer the entity treats workers like it does service providers as opposed to its employees, the more likely it is that government agencies and courts will agree the worker is an independent contractor.

Misclassifying employees as independent contractors is expensive and time-consuming. The Employers Council makes available to its members resources on properly classifying its workers. And Employers Council consulting and enterprise level members may speak directly with our human resources professionals and employment attorneys at any time for advice on properly classifying its workers.