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North Carolina Governor Rescinds Executive Order on NIL

    Client Alerts
  • March 15, 2024

Over the last three years, following the implementation of an interim policy from the NCAA in July 2021, college student-athletes have been able to pursue name, image, and likeness (NIL) deals. In addition to the NCAA rules, many states — especially in the Southeast — created additional rules and requirements governing NIL activity. North Carolina was one of them.

Initially drafted to help the state's colleges and universities remain competitive in a rapidly changing environment, North Carolina Executive Order 223 unequivocally allowed college student-athletes to monetize their popularity and earn money for use of their name, image, and likeness.

However, the recent flurry of litigation facing the NCAA regarding NIL issues and antitrust concerns is forcing many states to revisit their own NIL laws and question their necessity.

Just last week, North Carolina Governor Roy Cooper rescinded Executive Order 223, effectively eliminating the entire order, including the state’s ban against using NIL as a recruiting inducement, among other things.

Legal Implications for Colleges

Cooper's action has important legal implications for North Carolina's public colleges and universities and their athletic programs. Student-athletes and universities will have more flexibility as to how they may engage in NIL activities. For the first time, during the recruiting process, an incoming student-athlete or a transfer student may pit rival collectives or booster clubs against each other to leverage a better NIL deal. Coaches may talk to donors about enticing recruits with valuable NIL opportunities with the hopes that the recruit will be persuaded to join their team.

However, it is imperative that colleges and universities understand how to leverage this new flexibility within the parameters of other governing rules and laws, including Title IX compliance as well as NCAA rules banning "pay for play" deals and prohibiting schools from providing NIL compensation directly to their student-athletes.

Recent Litigation Forces Change to NIL Landscape

The timing of the governor's action is noteworthy because it comes on the heels of other legal decisions against the NCAA and a number of its member schools. For example, in Tennessee v. National Collegiate Athletic Association, a federal district court judge entered a preliminary injunction last month against the NCAA preventing it from enforcing the NCAA Interim NIL Policy, the NCAA Bylaws, or any other authority to the extent such authority prohibits student-athletes from negotiating compensation for NIL with any third party entity, including collectives, until a final decision is made in the case.

Enjoining the NCAA's ability to enforce its rules pertaining to collectives and boosters undoubtedly served as the catalyst for the governor's decision to rescind the prior executive order. In fact, Cooper noted the preliminary injunction issued in Tennessee "diminished" the need for the state-level rules established in Executive Order 223, which included language that expressly prohibited current and prospective college student-athletes from entering into NIL contracts as a direct inducement to enroll or continue enrollment.

Additionally, a NLRB regional director recently issued a ruling in early February that men's basketball players at a private college were employees within the meaning of the NLRA and therefore entitled to form a union. Those players then voted to unionize and the NLRB subsequently certified their vote.

This decision is forcing many schools to carefully weigh how much control they are exhibiting over their respective student-athletes.

These legal developments, and others on the horizon — like the legality of transfer restrictions — should serve as a reminder that college sports remain in a state of constant change. And it will likely continue to change in favor of student-athletes who want to participate in the business of college sports.

Understanding How to Leverage NIL Amidst Continued Legal Changes

Ultimately, repealing Executive Order 223 presents a huge opportunity for North Carolina student-athletes and colleges and universities to gain major recruiting advantages. However, there are other NIL rules and laws in place that must not be overlooked even in the pursuit of a good recruit.

It's critical that higher education institutions stay on top of the latest changes and respond accordingly to remain competitive. Before taking any action, colleges and universities should pause and consider how these changes actually impact them and then consider the best way to respond. Keep in mind: What might work best for a large, public institution might not work for a smaller, private college. There is no one size fits all solution in the ever-evolving world of college sports.

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