If you follow college sports (and if you live in South Carolina, you probably do) you will have heard that the NCAA recently issued guidance that permits college athletes to profit from licensing their name, image, and likeness (“NIL”). This means that college athletes can now monetize their fame by licensing their name, image, reputation, face, etc., without forfeiting their eligibility. The State of South Carolina also recently passed legislation known as Intercollegiate Athletes’ Compensation for Name, Image or Likeness, S.C. Code §§ 59-158-10 to -80 (“SC NIL”), and amended certain other legislation to permit collegiate athletes to receive compensation for their name, image or likeness. Per the NCAA’s guidance, NCAA member-schools and athletes in South Carolina must follow South Carolina’s NIL laws.
Navigating these new NIL rules can be complicated, and athletes and businesses in South Carolina should ensure that they thoroughly understand SC NIL rules before entering into NIL contracts. This blog outlines some key considerations:
Considerations for Athletes:
- What can I do? SC NIL provides that an intercollegiate athlete may receive NIL compensation for: (i) third party endorsements, (ii) non-athletic work product, or (iii) activities related to a business that the intercollegiate athlete owns. “Third party” means any entity other than the institution of higher learning where you are enrolled. “Third party endorsements” are your support for, or recommendation of, a third party’s product or service. You may provide third party endorsements by way of social media, personal appearances, the creation of digital content that promotes third parties’ products or services, and a variety of other methods of endorsement.
- You cannot be paid or promoted by your school. NCAA rules and SC NIL prohibit athletes from being paid by their schools. Further, Section 59-158-20(C) prohibits your school or conference from creating or facilitating compensation opportunities for you.
- You cannot use your school’s facilities or trademarks. SC NIL prohibits you from using your schools’ facilities, uniforms, or intellectual property (think school logos, among other things) in connection with your NIL activities.
- You cannot enter NIL contracts contingent on participation or performance in your sport. Your NIL contracts cannot be contingent on, or promote, going to a particular school or conference or participating in a sport. Further, your athletic performance cannot be the basis for your compensation.
- Do I need to pay taxes? Yes. Your compensation will be taxed at the federal and state level.
- Can I form a business entity? Yes. In fact, it is generally better to have a corporate entity, like a limited liability company, in place to avoid personal liability, if possible. You can also procure insurance or require the other contracting party to procure insurance that covers you.
- Can I engage professionals to assist me? Yes. SC NIL authorizes using an “athlete agent,” who must be registered with the Department of Consumer Affairs. Between school and athletics, you already have two full-time jobs. Working with professionals, including accountants, lawyers, and registered NIL agents, will help ensure that you are in compliance with the NIL rules and that you have time to focus on school and sports.
- You must disclose your potential NIL contract to your school. Before signing an NIL contract or taking money for licensing your name, image, and likeness, you must disclose to your school the NIL contract in a manner designated by your school. For example, the University of South Carolina requires you to disclose the NIL contract 48-hours before signing. Clemson University requires NIL activity to be disclosed using COMPASS.
- Your school can veto your NIL contract. SC NIL rules allow schools to veto their athletes’ NIL contracts if the contract would conflict with the school’s “existing institutional sponsorship agreements or other contract,” or the school’s “institutional values.” The “institutional sponsorship” prohibition appears to be straightforward. Under this prohibition, Clemson, a Nike® school, may prohibit its athletes from signing contracts with Adidas®. The “institutional values” prohibition, on the other hand, is unclear, and offers schools broad veto power over their athletes’ contracts.
- Do not enter these contracts as a recruit. Though tempting, the best practice is to wait until you are on campus before signing NIL contracts. Both the NCAA and SC NIL rules include strong prohibitions against using NIL contracts as recruiting tools, and it’s best to avoid these questions altogether.
- You cannot promote alcohol, tobacco, gambling, or illegal activities.
Considerations for Businesses Entering NIL Contracts with Athletes:
- Get your contract right. If you hire an athlete under SC NIL law, it is critical that your NIL contract includes certain required provisions. If you don’t get your contract right, it may be invalid and unenforceable. Among other things, your NIL contract must include the following provisions:
- A “prominent disclosure” at the beginning and end of the NIL contract that warns the athlete of potential eligibility issues that may exist under current rules and policies. The athlete must separately acknowledge this disclosure (so signing at the end of the contract is not enough!).
- An “unequivocal ten-day revocation period” during which time the athlete can unilaterally decide to cancel the contract.
- Make required disclosures. At least five days before executing a NIL contract, you must disclose in writing to the athlete any prior or existing associations with any athletes or schools. Boosters whose businesses intend to enter into NIL contracts with athletes should pay particular attention to this requirement.
- Understand what you are paying for. College athletes are not allowed to use school intellectual property in connection with NIL activities. As a result, your NIL athlete cannot use a school’s trademarks to suggest that his or her school endorses your goods or services. Further, NIL contracts are void if the NIL athlete is convicted of a felony, and NIL athletes must meet their athletic departments’ policies with respect to attending class and good academic standing. Also note that these contracts have a hard, statutory deadline by which the NIL contract may not extend beyond an athlete’s participation in college sports.
The NIL program represents a new opportunity for college athletes and businesses in South Carolina to work together to advance both parties’ interests. We have already seen a proliferation of NIL contracts being signed across the country (ESPN link
). But when considering these NIL contracts, athletes and business owners should think ahead to ensure they comply with a complicated set of rules, most of which are in place to protect the college athlete. If you are an athlete or a business looking to profit from NIL opportunities, Tyler
would be glad to talk with you about your plans.