Can Athletic Departments Cap Coaching Salaries To Save Money?

Recently, three Clemson professors penned a piece suggesting that the salaries of college coaches could be capped as a way to make up for some of the financial challenges facing athletic departments. I asked three attorneys with expertise in the area of antitrust to weigh in on whether their proposed plan could withstand a legal challenge. The answer was a resounding no.

In the piece by the professors, it was stated, “A salary cap for college coaches would not be subject to the Sherman Act because it allows for competition in the form of other competitive leagues, such as the NJCAA and NAIA, and it would not impact the consumer or constituency pricing for the sports fan.”

All three antitrust experts I spoke with disagreed.

“If the NCAA or its member schools unilaterally imposed any sort of restraint on coaching salaries, it would be illegal,” said Christopher L. Sagers, James A. Thomas Professor of Law at Cleveland State University. “In fact, it would be a naked horizontal price agreement, and therefore per se illegal.” 

To play devil’s advocate, if it wasn’t a per se violation, would the NJCAA and NAIA really be considered comparable options?

“I wouldn’t characterize them as being at the same level. It’s unlikely that the NJCAA and NAIA would be considered part of the relevant market in an antitrust case,” said Gabe Feldman, director of the Tulane Sports Law Program. “Salary levels and the level of play and publicity, among other things, are not comparable to the NCAA and do not serve as a reasonable alternative for coaches.”

Michael A. Lindsay, co-chair of the antitrust and commercial litigation practice groups at Dorsey & Whitney LLP, elaborates and says whether the leagues are competitive is not really the point. “The question is whether those leagues are competing for the same coaching talent. Small colleges and junior colleges are great, but does anyone believe that they are competing for the same coaching talent as the big state schools and other sports powerhouses? Or that they have the budgets to do so?”

Lindsay says schools in particular should be careful when it comes to salary-cap agreements between schools.

“The Justice Department and Federal Trade Commission have taken a keen interest in wage-fixing and no-poaching agreements between employers competing for the services of potential employees, and there have been private antitrust class actions as well–including one against Duke and UNC. So anyone thinking about a salary-cap agreement with other schools should think twice,” said Lindsay.

In the case Lindsay referenced, Duke and UNC agreed to a $54.5 settlement after being sued in a private action for antitrust collusion wherein it was alleged the schools agreed not to hire each other’s employees.

Perhaps even more on point is a case from 1998 where a federal jury in Kansas awarded more than $66 million to 1,900 assistant college coaches, finding their salaries were illegally restricted by the NCAA. The NCAA had imposed a rule in 1992 (which was lifted in 1995 after another court loss) restricting the salaries of certain assistant coaches to $12,000 per academic year. The coaches contended it had stifled competition and deprived them of fair market wages, while the NCAA argued it only applied to Division I and was a way of containing costs, comparing them to graduate student teaching assistants.

“Any school can make a unilateral decision on the maximum that it will pay coaches, but once there is talk of a group agreement in an industry, it’s time to become real friendly with the university’s general counsel,” said Lindsay.

Some may question how this is any different to the various caps the NCAA has imposed on student athlete competition.

“It would be different because antitrust law’s deference to the NCAA’s amateurism rules does not extend to coaches,” said Feldman. “Any attempt to cap coaching salaries would likely be struck down as an illegal restraint of trade.”

So, what can be done about coaching salaries?

“A possible source for significant change is federal legislation, which could restrict spending on athletics and provide a safe harbor for the NCAA,” said Feldman.

Sagers says athletic departments have their hands tied because the only avenue “is to bargain collectively, which would require the coaches first to initiate collective bargaining.” 

“I don’t know what the incentive would be for coaches to bargain at this point, except in the unlikely event that COVID will be so bad that there are wholesale closures of whole athletic programs all over the place,” said Sagers. “The employers cannot join together unilaterally—that’s not how the labor exemption works. It must be the employees who first decide to bargain collectively; then, under circumstances governed by labor law, employers can form multi-employer groups. Otherwise, antitrust fully applies.”

At least for now, the solution seems to be voluntary pay cuts for coaches. According to an ESPN survey in mid-July, nearly half of all head football and basketball coaches at major programs had agreed to pay reductions.