Introduction

On February 3, 2022, Alabama Governor Kay Ivey signed into law Alabama House Bill 76, which repealed Alabama's NIL law that legalized collegiate student-athletes receiving compensation for their names, images, and likenesses (“NIL Act”). As this author previously wrote, college football recruiting was the original impetus for Alabama passing the NIL Act and, in an ironic twist, college football recruiting was the ultimate impetus for Alabama repealing it. As a result of the NIL Act's repeal, many are left wondering whether Alabama's student-athletes can still accept compensation for their NIL. As this article explains, the answer is yes.

Background of NIL Act

On April 20, 2021, Alabama Governor Kay Ivey signed Alabama’s NIL Act into law. Alabama Representative Kyle South (R-Fayette), who sponsored the NIL bill, said the NIL Act’s main purpose was to ensure Alabama universities were not at recruiting disadvantages compared to universities in states with similar laws. Both Auburn University and the University of Alabama supported the NIL Act’s passage. For our summary of the NIL Act, click here.

Alabama's NIL Act was incorporated into, and made a part of, a pre-existing law – the Alabama Revised Uniform Athlete Agents Act (2016) ("Agents Act"). Among other regulations, the Agents Act requires individuals acting as athlete agents in Alabama to register with the Alabama Secretary of State before representing student-athletes in connection with professional team contracts or endorsement contracts.

Post NIL Act Developments

After Alabama adopted its NIL Act, several developments occurred that had consequential effects on the NIL Act’s meaningfulness:

On June 21, 2021, the U.S. Supreme Court decided the case of NCAA v. Alston et al., which, upon antitrust grounds, unanimously upheld a ruling by the U.S. Court of Appeals for the Ninth Circuit that struck down NCAA caps on student-athlete academic benefits.

Effective July 1, 2021, the NCAA adopted an interim policy allowing student-athletes to receive NIL compensation, which stated as follows:

• Individuals can engage in NIL activities consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.
• College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to name, image, and likeness.
• Individuals can use a professional services provider for NIL activities.
• Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.

On January 20, 2022, the NCAA voted to ratify a new streamlined constitution that will reduce the NCAA’s responsibility and overhaul rules at all levels of college sport, including stating that student-athletes “may not be compensated by a member institution for participating in a sport, but may receive educational benefits and benefit from commercialization through use of their name, image, and likeness.”

The NIL Act's Repeal

Based in part on the developments occurring after the NIL Act's passage, Representative South sponsored House Bill 76 to repeal the NIL Act after having sponsored it less than one year earlier; and, on February 3, 2022, Governor Kay Ivey signed the bill and officially repealed the NIL Act.

While lobbying for the bill’s passage on the House floor, Representative South explained why the NIL Act’s repeal became important: “[The NCAA] passed a set of rules for their member institutions, and where we find ourselves is state rules were more restrictive than what the NCAA set forth….“ South said earlier that the NCAA’s decision to allow student-athletes to receive NIL compensation meant Alabama’s NIL Act was more restrictive, which prompted concerns that Alabama’s top-tier universities could be at a recruiting disadvantage. “That’s kind of the gist behind [HB76],” Rep. South said. “It may be the shortest-lived law on the books, passed one session and repealed the next.”

The NIL Act's Restrictions

The exact provisions of Alabama's NIL Act that Alabama's Legislature and Governor found too "restrictive" are unclear. The NIL Act contained numerous restrictions, including the following:

• The term "compensation" excluded scholarships or stipends by an educational institution calculated on the costs of living and attendance at the institution.
• It limited the amount of NIL compensation properly payable to student-athletes by imposing a standard that NIL compensation must have been "commensurate with the market value" of the student-athlete's NIL.
• The payor of NIL compensation could not condition its payment upon the  athletic performance or attendance at a particular institution.
• Only third parties not owned or operating under the authority of the student-athlete's educational institution could pay NIL compensation to a student-athlete.
• Neither an educational institution, an entity with the purpose of supporting or benefitting an educational institution or its intercollegiate sports, nor an officer, director, or employee of an educational institution or entity could compensate or cause compensation to be directed to a student athlete or the family of a student athlete for use of the student athlete’s NIL
• Except with the written consent of the educational institution, a student-athlete could not enter into a contract for NIL compensation if the educational institution determined a contract term conflicted with a contract term binding upon the educational institution
• Before a student athlete could execute a contract for NIL compensation, the student athlete had to disclose the contract to the educational institution in a manner the institution prescribed.
• A contract for a student athlete’s NIL formed while the student athlete was participating in an intercollegiate sport at an educational institution could not extend beyond the student athlete’s participation in the sport at the educational institution.
• A student athlete could not receive or enter into a contract for NIL compensation in a way that also used any registered or licensed marks, logos, verbiage, or designs of an educational institution, unless the educational institution provided the student athlete with written permission to do so prior to the contract’s execution.
• A student athlete could not receive NIL compensation as an inducement to attend or enroll in or continue attending a specific educational institution.
• Educational institutions could prohibit student-athletes from entering into endorsement contracts with, or receiving compensation from, certain brands or companies and wearing certain clothing or gear in certain circumstances (including tobacco companies or brands, alcoholic beverage companies or brands, sellers or dispensaries of controlled substances, including marijuana, adult entertainment businesses, and casinos or other entities that sponsored or promoted gambling).

What Remains that Regulates NIL Compensation?

Following the NIL Act's repeal, three main regulatory sources still govern the payment of NIL compensation to student-athletes in Alabama.

First, the NCAA's interim NIL policy remains in effect and will apparently be endorsed by the NCAA's new streamlined constitution.

Second, educational institutions and athletic conferences can freely adopt their own regulations regarding NIL compensation. These regulations may impose some of the same restrictions that the now repealed NIL Act imposed.

Third, Alabama's Agents Act remains in effect after the NIL Act's repeal and governs "endorsement contracts." Under the Agents Act, an "endorsement contract" is an agreement under which a student-athlete is employed or receives consideration from a third party for the student-athlete's publicity, reputation, following, or fame (i.e., NIL) obtained because of athletic ability or performance. Accordingly, in addition to requiring athlete agents to register in Alabama, the Agents Act continues to govern NIL compensation in several ways, including, among others, requiring the agent to (i) make certain disclosures and warnings to the student-athlete in the agency contract and (ii) notify the student-athlete's educational institution of their relationship. An agent's failure to comply with the Agents Act carries civil and criminal penalties, including a fine up to $50,000 and felony charges.

Conclusion

In summary, Alabama has repealed its NIL Act less than one year after passing it into law. Student-athletes can still receive compensation for their NIL in Alabama, but they must comply with only three main regulatory schemes instead of four -- the NCAA interim NIL policy, the regulations of Alabama's educational institutions, and the Agents Act.

William M. Lawrence is a partner in Burr & Forman’s Birmingham, Alabama office and leads the firm’s NIL industry group. He has advised NCAA member institutions, student-athletes, athlete agents, and businesses regarding NIL related issues. For more information and resources about NIL, please visit our Sports Law website.