Trippe Hawthorne, a partner, and construction lawyer at Kean Miller, was a featured author for the American College of Real Estate Lawyers (ACREL), where he wrote on the subject of contractors and what it means to be licensed, insured, and bonded. Many property owners see this nomenclature in marketing and promotional materials for General Contractors but may be unclear as to what it all means.

With the aftermath of Hurricane Ida, being educated on the nuances of these designations are of critical importance to both the property owner and the contractors.

Following is the full text of the article, originally published in the August 2021 issue of the ACREL News and Notes monthly newsletter.

Every property owner who has endeavored to undertake a construction, renovation, or repair project has heard or seen the phrase “licensed, bonded, and insured”. But what does this mean, and does it really matter? Like all good questions, the best answer is, “it depends”.

Licensing: Many but not all states require contractors to be licensed. If the project is in a state where a contractor’s license is required, the importance of observing the licensing laws is critical. Violations of state licensing law can have catastrophic consequences to the unlicensed contractor and to the project. While owners do not typically have direct liability for a contractor’s violation of state licensing law, a project employing unlicensed contractors is subject to being shut down by licensing board investigators and authorities, which will undoubtedly cost the owner significant time and money. Also, it is generally the case that where a license is required for a particular type of work, a contract for such work with an unlicensed person may be subject to nullification.

The licensing process varies from state to state, but it is generally structured to require proof that a contractor has basic financial, business, and technical competency to perform the work for which the license in a particular classification has been issued in a responsible way. Technical competency is typically addressed through testing and/or required levels of experience in the specific area for which the license is sought. Many states have a tiered or subdivided contractor license system under which the state’s requirements for licensing are differentiated based on the monetary value of the contractor’s contracts and/or the type of services the contractor offers. Contractors that are licensed for large commercial construction contracts may hold a different type of license than subcontractors who are not dealing directly with owners, or contractors that only perform residential construction or home remodeling. Contractors and subcontractors performing inherently dangerous work which can threaten life, health, and safety (such as plumbing or electrical work) might need still other types of licenses.

Financial and business competency and viability is typically addressed through minimum asset requirements, examination of basic financial records, and background checks. The background checks may be for the licensed contractor and its key employees and agents and will include review for things like bankruptcies or unsatisfied judgments.

The structure and purpose of most state contractor licensing systems is to ensure basic competency and basic levels of financial stability. State licensing requirements help create, identify, and illuminate the channels available to customers, creditors, and the government to hold a contractor accountable, particularly where there is a public threat to life, health, or safety. Nevertheless, a contractor’s ability to obtain a license should not be overvalued, particularly with regard to competency, and state licensing law is generally of little help to owners in the event of a contractual dispute with a licensed contractor. A license (where required) is the bare minimum that any responsible contractor needs before they begin to accept contracts.

Bonded: While, as discussed below, traditional insurance is not intended to guarantee a contractor’s performance under a construction contract, certain types of surety bonds are. “Bonded” means that a surety will stand behind the contractor for some obligation owed by the contractor. The surety guarantees some aspect of the contractor’s performance to someone. The key questions then are “what performance has been guaranteed” and “to whom”?

Generally, when the words “licensed, bonded, and insured” are used in an advertisement for a contractor, the word “bond” generally refers to a license and/or permit bond. This license and/or permit bond guarantees that the contractor will abide by the terms of the license issued and/or the permit they have pulled, protecting some or all of the licensing board, the public works department, the owner, or the general public. The existence of and requirements for obtaining a license and permit bond vary greatly by state, county, or municipality. In the event of a troubled contractor, though, the proceeds of these bonds are likely to be claimed by a number of different people, and the amount of the bond may not be likely to be sufficient to cover the contractor’s liabilities. In other words, while it could be nice that a bond of general applicability exists, owners should not place any reliance on such a bond in their decision-making process.

For a significant project, the owner will want to dictate the terms and conditions of the bond and have it dedicated to the project and that particular owner. Typically, this is done through a “payment and performance bond” issued for a specific project. The payment bond guarantees payment to subcontractors, material suppliers, laborers, and others that have worked on the project, and who may have lien rights against the owner. The performance bond generally serves as a guarantee by the surety to the owner that the contractor will perform the work pursuant to the terms and conditions of the contract. The performance bond does not entitle the owner to anything more than is owed under the construction contract, but does provide security that the project will be completed for the contract sum, even if not by the contractor.

Insurance: Whether a contractor is “insured” may be the most important or least important part of the trio, depending on the risk at issue. Insurance is the most valuable tool in protecting against the risks to third parties created by a construction project, but is not particularly useful in protecting the owner for its own damages caused by the contractor’s breach or bad work.

The most common risks addressed by a contractor’s liability insurance include property damage, injuries, and workers’ compensation claims. Many states’ contractor licensing laws require a minimum amount of general liability and workers’ compensation insurance in order to obtain and maintain a license. Liability and worker’s compensation insurance is important to protect owners from claims by third persons arising out of or related to their project, and insurance for these claims is of critical importance if they arise. While an owner can ascertain and determine a contractor’s available insurance through review of an insurance certificate supplied by the contractor’s insurance agent, for more significant projects, the owner will want to be added as an “additional named insured” to the contractor’s liability insurance policies and ensure that the available insurance has appropriate coverage and limits for the work at issue, and will defend the owner and contractor in the event of a claim.

While a contractor’s liability insurance may protect the contractor and even the property owner from claims for damages to third parties arising out of the project, it is not intended to protect the owner against breach of contract by the contractor or bad workmanship. In other words, “insured” means that a contractor has insurance to protect against risks to people other than the owner, and it is not likely to protect the owner from the owner’s own damages that may arise out of or relate to the project.

Construction projects also typically involve different types of property insurance, ranging from the owner’s property insurance policy or program to a builder’s risk policy, which protects the project and the materials and component parts thereof while the work is incomplete.

It’s important to understand the difference between being bonded and insured. For a contractor, one of the biggest differences between insurance and bonding is which entity takes on the risk; an insurance policy transfers the risk to the insurer, while a bond ultimately keeps the risk with the bonded contractor. For an owner, the main difference is in which types of circumstances are covered by bonds versus which are covered by insurance. Bonds should generally be associated with the Contractor’s performance of its obligations under the contract, whether to perform the work, or to pay subcontractors and material suppliers. Insurance should be associated with personal injury or property damage, typically to third parties.

The cost of licensing and insurance for a contractor is typically a general cost of doing business, while the cost of a project specific bond is… project specific. So, for projects where cost is a key factor (are there any where it is not?) many times, eliminating bonding requirements is a way to reduce project costs.

Surety bonds protect the interests of the project owner and ensure that the projects are completed correctly, securing the completion of the job and the security of the owner’s investment. Many surety bond companies won’t issue a bond without having sufficient security from the contractor and unless the contractor is sufficiently insured. If an incident occurred, causing property damage or personal injury, the surety would want to be confident that the contractor’s insurance would protect the continued viability of the contractor and its ability to complete the project, which the surety has guaranteed.

From a planning perspective, knowing that a contractor is “licensed, bonded, and insured” is certainly better than hiring a contractor that is not licensed, is not insured, and can’t get a bond, but prudence will always suggest consideration of the requirements and ramifications of the particular project, and at least some analysis of whether the protections offered by this contractor for a particular project are appropriate and sufficient.

To our clients, families, and friends – Our hearts go out to those affected by Hurricane Ida, including the attorneys and staff in our law firm.  We will stand with you in the coming weeks and months. The communities where we live and work are resilient and resourceful, and the people within our law firm are as well.  Whether we are helping our neighbors, serving our clients, or lending a hand to the less fortunate, we remain committed to a robust regional recovery of which we can all be proud.  We have learned much over the past fifteen years, from hurricanes Katrina to Gustav, and from the 2016 floods to the global pandemic.  Those lessons will serve us well as we navigate this new challenge, working in our office, or remotely. 

Attorneys in our New Orleans office will be working remotely while the city grapples with the aftereffects of Ida. Our other office locations in Louisiana and Texas stand ready to support them, and our clients, as usual.  Thank you for the messages of hope and concern from around the country and around the world.  Your words of concern and comfort are meaningful and appreciated.

Please do not hesitate to contact me if you have questions, suggestions, or for opportunities to assist those impacted by this natural disaster. 

Linda Perez Clark
Managing Partner

The Louisiana Department of Natural Resources (LDNR) has issued an Emergency Use Authorization to permit certain activities necessary to address the impacts of Hurricane Ida that would normally require a Coastal Use Permit to be issued before the work.  This applies only within the Louisiana Coastal Zone. It is intended to complement the emergency use provisions of LAC 43:I.723.B.3.  Keep in mind that a Coastal Use Permit is not required for “normal maintenance or repair of existing [previously permitted] structures including emergency repairs of damage caused by accident, fire, or the elements,” pursuant to LAC 43:I.723.B.1.a.iii. However, if the repair goes beyond the normal repair of an existing structure, such as dredge or fill activities or construction of a new or expanded structure, then a permit may be required.  This emergency authorization,  however, allows the work to proceed immediately to be followed later by an after-the-fact permit.  The authorization for emergency work applies ONLY to those activities needed to restore infrastructure. Infrastructure is defined in LAC 43:VII.701 as “those systems which provide needed support for human social institutions and developments, including transportation systems, public utilities, water and sewerage systems, communications, educational facilities, health services, law enforcement, and emergency preparedness.”  This would include dredge or fill activities or other similar activities needed to address damages to docks, power lines, pipelines, drainage systems, and the like.

The LDNR authorization “reminds all emergency users to avoid and minimize impacts resulting from the activities authorized by this notice to coastal resources where possible, since compensatory mitigation for these impacts will most likely be required [if an after-the-fact permit is required].” LDNR requires the person responsible for the work to provide the department with notification via letter, email, or fax as soon as possible (preferably before or as soon as the work commences).  The notification should include: the name of the entity undertaking the activity,  a description of the work performed, a vicinity map showing the location of the emergency work, and project coordinates (latitude/longitude) if available.

The LDNR Coastal Use Emergency Authorization is currently effective only through September 3, 2021; but LDNR may extend it. See the authorization and fax, email, and other information at: http://www.dnr.louisiana.gov/assets/OCM/PublicNotices/PN_2021/ida.pdf.

The United States Army Corps of Engineers (USACE) has also announced special emergency permitting procedures for permits required by Section 404 of the Clean Water Act to expedite authorization for activities for response and recovery associated with Hurricane Ida damages.  The emergency permitting procedures are authorized by 33 C.F.R. 325.2(e)(4). The USACE directs an applicant for an emergency permit to “provide basic plans/ drawings summarizing the emergency situation, briefly describing the proposed work and location, and an estimate of the acreage of waters and/or wetlands to be impacted, preferably via email.  For work in the Louisiana Coastal Zone (LCZ), applicants must also submit this information to the LDNR, Office of Coastal Management (OCM).  The USACE will make a decision on the permit within 24-48 hours of the request.  Approvals will be granted via Programmatic General Permit if the project is located in the LCZ or USACE New Orleans District MVN General Permit No. 20 if the project is located outside the LCZ.  A link showing the terms of the Programmatic General Permit and the MVN General Permit No. 20 is available at: https://www.mvn.usace.army.mil/Missions/Regulatory/Permits/General-Permits/.

Because emergency authorizations under either the Programmatic General Permit or MVN General Permit No. 20 are temporary,  the permittee will be required to submit a site restoration plan or an after-the-fact permit application to maintain the work, within 30 days after the emergency permit approval.   For more information and USACE contacts, see: https://www.mvn.usace.army.mil/Missions/Regulatory/

Victims of Hurricane Ida now have until January 3, 2022, to file various individual and business tax returns and make tax payments.  The relief applies to taxpayers in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance.  Currently, this relief applies to the entire state of Louisiana but other Ida-impacted localities in neighboring states may be added.

The relief postpones various tax filing and payment deadlines that occurred starting on August 26, 2021.  This means that individuals who had a valid extension to file their 2020 tax return by October 15, 2021, will now have until January 3, 2022, to file those returns.  However, the relief does not extend to the payments owed on those returns as those payments were due prior to August 26.  The relief also extends the time to pay the quarterly estimated tax payments due on September 15.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the disaster occurred (the 2021 return normally filed in 2022) or the return for the prior year (2020) which may allow a taxpayer to benefit from a refund sooner.  Taxpayers should use the FEMA declaration number 4611 for Hurricane Ida losses in Louisiana when claiming a loss.

More information about the various returns and taxes that are extended by this announcement can be found on the IRS disaster relief page: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

At the request of Louisiana Governor John Bel Edwards, President Joseph Biden declared that a “major disaster” exists in much of south Louisiana due to damage caused by Hurricane Ida. One consequence of this declaration is that businesses, cooperatives, and non-profit agencies operating in the “major disaster” area are eligible to apply for low-interest loans from the Small Business Administration (SBA).  Homeowners in the major disaster area with damage not covered by insurance are also eligible to apply for a loan from the SBA loan to assist with the cost of home repairs.

The SBA offers disaster-related loans to businesses: (1) to repair physical damage to a business; (2) to assist with economic injury (e.g., a business that has lost revenue but has ongoing expenses); and (3) to assist a business whose essential employee(s) is a military reservist called to active duty.  The SBA also offers disaster-related loans to individuals for the cost of making disaster-related repairs to their primary residence or to replace personal property destroyed in the disaster (if insurance is not available).

You can learn more about SBA disaster loans here, and begin the application process here. Importantly, SBA disaster loans are loans, not grants; they must be repaid. The interest rates and repayment terms for SBA disaster loans are better than many borrowers would be able to obtain from commercial lenders. According to the SBA’s Disaster Declaration Fact Sheet for Hurricane Ida, currently located here, the interest rates for the more popular SBA disaster loans are as follows:

For Physical Damage:

  • Homeowners with Credit Available Elsewhere 3.125
  • Homeowners without Credit Available Elsewhere 1.563
  • Businesses with Credit Available Elsewhere 5.710
  • Businesses without Credit Available Elsewhere 2.855
  • Non-Profit Organizations with Credit Available Elsewhere 2.000
  • Non-Profit Organizations without Credit Available Elsewhere 2.000

For Economic Injury:

  • Businesses & Small Agricultural Cooperatives without Credit Available Elsewhere 2.855
  • Non-Profit Organizations without Credit Available Elsewhere 2.000

Businesses and individuals in the following Louisiana parishes are currently eligible for Physical Damage and Economic Injury loans: Ascension, Assumption, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, Saint Bernard, Saint Charles, Saint Helena, Saint James, Saint Martin, Saint Mary, Saint Tammany, St. John the Baptist, Tangipahoa, Terrebonne, Washington, West Baton Rouge, West Feliciana.

Businesses and individuals in the following Louisiana parishes are currently eligible for (only) Economic Injury loans: Avoyelles, Concordia, Lafayette, Saint Landry, Vermilion.  Businesses and individuals in the following counties in Mississippi are also currently eligible for (only) Economic Injury loans: Amite, Hancock, Marion, Pearl River, Pike, Walthall, Wilkinson.

Contact author and attorney, Eric Lockridge, with questions concerning this blog post and the content within.

With increasing optimism regarding offshore wind energy and commercial solar power, renewable energy projects are starting to gain steam with Louisianians. Although utility-scale solar projects are novel in Louisiana, Act 301 (formerly Senate Bill 185) proactively addresses the concerns of taxpayers, landowners, and developers concerning solar leases.

Act 301, which was signed into law by Governor Edwards on June 14, 2021 and takes effect on August 1, amends two provisions of Louisiana Revised Statute § 30:1154, requiring the secretary of the Department of Natural Resources (DNR) to develop regulations governing solar leases. The Act tasks the DNR with promulgating minimum requirements for maintenance of property during a lease, including establishing minimum spacing between installations and setbacks, as well as decommissioning and final site closure upon termination of a lease.[1]

Although Act 301 aims to proactively mitigate future issues with solar farm decommissioning, the legislation likely has little bearing on residential use of solar devices on private property, as the Act clarifies that the development, installation, or operation of solar devices installed on private property for residential use may not be precluded by the DNR secretary.[2]

[1] https://www.legis.la.gov/legis/ViewDocument.aspx?d=1235566

[2] https://www.legis.la.gov/legis/ViewDocument.aspx?d=1235566

As part of an ongoing investigation led by the Delaware Attorney General’s Office into the potential environmental impacts of legacy industrial activities in the state, Delaware has reached a $50 million settlement agreement with DuPont Co., Corteva, and the Chemours Co. for alleged damages resulting from these companies’ use of chemicals called PFAS.

Dubbed the “forever chemical,” per- and polyfluoroalkyl substances, or PFAS, are a large group of synthetic chemicals that includes perfluorooctanoic acid (PFOA), perfluorooctane sulfonic acid (PFOS), and GenX Chemicals.[1] PFAS are ubiquitous, having been manufactured and used worldwide since the 1940s in a number of different products, such as non-stick cookware, water-repellent clothing, coatings for paper used in food packaging, stain-resistant fabrics and carpets, and other products that resist grease, water, and oil. Certain studies have found that PFAS may be associated with a range of adverse health impacts including developmental and reproductive problems, increased risk of cancers in the liver and kidney, thyroid disease, asthma, and immunological effects. The most common PFAS exposure routes are through ingesting food, drinking water, and inhaling dust and particulates.

DuPont, Corteva, and Chemours have agreed to collectively pay $50 million to resolve their alleged responsibility for elevated PFAS levels in the waterways and groundwater of all three counties in Delaware.[2] Under the settlement agreement, DuPont and Corteva will each pay $12.5 million, while Chemours will pay $25 million. The companies will fund up to an additional $25 million if they settle similar claims with other states for more than $50 million in the next eight years.[3]

PFAS litigation has expanded significantly in recent years. The widespread use of these chemicals could implicate liability for companies and products in a variety of industries. For instance, DuPont, Corteva, and Chemours committed $4 billion at the start of the year to cover alleged liabilities for their past use of PFAS and recently agreed to pay $83 million to settle multidistrict litigation in Ohio over PFOA.[4] In 2018, the 3M Company settled with the State of Minnesota for $850 million for alleged damages to drinking water and natural resources as a result of supposed PFAS contamination.[5]

The arrival of a new presidential administration, which promised to focus on PFAS regulation and has appointed key government officials with experience in dealing with PFAS issues, is expected to coincide with and potentially enable an expansion in the volume and scope of both regulation and litigation. Companies whose operations and products use, or historically used, any PFAS would be well-advised to consider strategies to evaluate, address, and mitigate legal risks and potential litigation.

The author would like to thank summer law clerk, Olivia Guidry, for her work in developing and preparing this blog article. 

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[1] EPA, Basic Information on PFAS, https://www.epa.gov/pfas/basic-information-pfas (last visited July 14, 2021).

[2] Delaware Department of Justice, State Resolves Natural Resource Damage Claims, Delaware.gov (July 13, 2021), https://news.delaware.gov/2021/07/13/state-resolves-natural-resource-damage-claims/.

[3] The $50 million settlement will go to the Natural Resources and Sustainability Trust, which will fund purification of drinking water; restoration of natural resources; environmental sampling and testing for PFAS in the ground, water, and air; research and development focused on PFAS; and community environmental justice and equity grants.

[4] Jef Feely, Tiffany Kary, & Tony Robinson, Dupont, Chemours in $4 Billion ‘Forever Chemicals’ Cost Pact, Bloomberg (Jan. 22, 2021 9:24AM), https://www.bloomberg.com/news/articles/2021-01-22/dupont-and-chemours-in-4-billion-forever-chemicals-cost-pact.

[5] Minnesota 3M PFC Settlement, https://3msettlement.state.mn.us/ (last visited July 14, 2021).

Louisiana law requires the timely and prompt payment of all amounts due a discharged, resigning, or retiring employee.  Under Louisiana law, vacation pay is considered an amount due if the employee was eligible for vacation with pay, had accrued the right to take vacation with pay, and the employee had not taken or been compensated for the vacation time as of the date of the employee’s departure.  The recent retirement of Barry Alvarez, Wisconsin’s former head football coach and athletic director, illustrates how accrued but unused vacation can add up. In Alvarez’s case, as reported by 247Sports.com, Wisconsin paid him $301,133 for his unused vacation (equal to 1272 hours, more than 31 weeks).  Alvarez’s situation is a reminder to all employers to pay attention to accrued but unused vacation balances.  For more on the Alvarez story, see https://247sports.com/college/wisconsin/Article/Barry-Alvarez-huge-payout-saved-vacation-time-Wisconsin-athletic-director-retire-football-Badgers-167571891/?utm_source=facebook&utm_medium=news_tab&utm_content=algorithm

The United States has become one of the largest and rapidly-expanding wind markets in the world, with the U.S. Energy Department investing in both land and offshore research and development projects in an effort “to advance technology innovations, create job opportunities and boost economic growth.”[i] In the future, the Energy Department predicts that the U.S. wind industry will constitute a “critical part” of its strategy to decrease carbon pollution, diversify the U.S. energy economy, and bring American-made clean energy technologies to the global market.[ii]

Offshore wind projects, in particular, present significant opportunities to the U.S. due to abundant offshore wind resources, significant siting and development opportunities, as well as electricity demand growth and scheduled power plant retirements in coastal states.[iii] Moreover, an expansive offshore wind industry would contribute significantly to important environmental and economic benefits for the U.S. such as reduced greenhouse gas emissions, decreased air pollution from other emissions, reduced water consumption, greater energy diversity and security, and increased economic development and employment.[iv]

In early June 2021, the Biden administration tagged the Gulf of Mexico as an area of interest to explore the potential of offshore wind energy development, as part of the administration’s overarching goal to increase the U.S.’s growth in clean energy over the course of the next decade. Following this announcement, the Department of Interior’s Bureau of Ocean Energy Management (“BOEM”) published a Request for Interest (“RFI”), targeting the coastal states of Louisiana, Texas, Mississippi, and Alabama, to gather information on and gauge interest in offshore wind energy development in the Gulf of Mexico. Thereafter, BOEM held its first Gulf of Mexico Intergovernmental Renewable Energy Task Force Meeting, the goal of which was to (1) “facilitate coordination among federal, state, local, and tribal governments regarding the wind energy leasing process on the Outer Continental Shelf in the Gulf of Mexico,” (2) “share information about existing Gulf of Mexico activities and marine conditions,” and (3) provide updates on regional offshore wind goals and developer activities.”[v]

And most recently, the Louisiana Governor’s Office hosted the first-ever Louisiana Wind Week 2021 from June 21st through June 25th.[vi] Wind Week 2021 consisted of five virtual sessions, including presentations, panel discussions, as well as Q&A sessions with the public, to explore various topics pertaining to Louisiana’s future in offshore wind energy development. The sessions included presentations on and discussion of “Offshore Wind Leasing and Administration Priorities,” “Minimizing Potential Impacts,” “Engaging Existing Users and Understanding Their Concerns,” “Connecting Offshore Wind to Users,” and “Existing and Future Supply Chain Capacity.”

One of the biggest impressions from Louisiana Wind Week 2021 is that offshore wind energy development in the Gulf of Mexico, while still in its infancy, represents an area of great economic potential for the State of Louisiana. Additionally, Louisiana’s decades-long experience with offshore oil and gas development puts the State in a prime position, in terms of both experience and infrastructure, for offshore wind energy development.

We will continue to monitor and report on developments in offshore wind energy development in the Gulf of Mexico.

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[i] See https://www.energy.gov/science-innovation/energy-sources/renewable-energy/wind.

[ii] https://www.energy.gov/science-innovation/energy-sources/renewable-energy/wind.

[iii] National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States Report, September 2016, U.S. Department of Energy and U.S. Department of the Interior.

[iv] National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States Report, September 2016, U.S. Department of Energy and U.S. Department of the Interior.

[v] https://www.boem.gov/renewable-energy/state-activities/gulf-mexico-gom-intergovernmental-renewable-energy-task-force.

[vi] https://gov.louisiana.gov/index.cfm/page/124#:~:text=Louisiana%20Governor%27s%20Office%20is%20hosting,of%20the%20state%27s%20energy%20future.

In the United States, name, image, and likeness (“NIL”) are the three elements that make up a legal concept known as the right of publicity. The right of publicity is an intellectual property right that protects against the misappropriation of a person’s name, likeness, or other forms of personal identity—such as nickname, pseudonym, voice, signature, likeness, or photograph—for commercial benefit. NIL compensation is compensation, typically money, earned by athletes for their NIL.

Prior to July 1, 2021, NCAA regulations prevented student-athletes from receiving any form of compensation, despite immense pressure from players and fans. This pressure escalated in light of the United States Supreme Court’s recent unanimous decision in NCAA v. Alston, when the Court declined to grant the NCAA immunity from federal antitrust laws and held that athletes can receive “extra-educational benefits” from their institutions. As a result of this decision and various pending state laws, the NCAA will now allow student-athletes to benefit from their marketability, namely NIL rights during their tenures as college athletes.

While NCAA athletes are now able to monetize their social media accounts, sign autographs, coach camps, and participate in advertising campaigns, these athletes must protect their brands through an effective trademark strategy. There are multiple aspects of an athlete’s NIL that can be trademarked, but the focus should be on the athlete’s name, logo, or slogan.

Name, logo, or slogan recognition will have a direct correlation in an athlete’s ability to monetize their likeness. Obtaining a trademark on these items prevents other parties from distributing products using that name, logo, or slogan without the athlete’s permission. Athletes may then use the trademarked NIL to build a brand, be it through social media, merchandise sales, advertising campaigns, or signing autographs.

Limitations Under the NCAA’s Interim Policy

The NCAA’s waiver of NIL restrictions does not create a free-for-all for college athletes. This is not a “pay-for-play” model of college athletics, and the NCAA has made clear this is an interim move until federal legislation is in place. However, as it stands, state legislation and universities will have an oversight role in the athlete’s NIL rights.

For example, athletes in Texas will be prohibited from endorsing alcohol, tobacco products, and sports betting. Further, universities have the power to object to deals that conflict with existing agreements the university has—i.e., a university football player may have issues endorsing Adidas when the university is sponsored by Nike. In most cases, athletes will be prohibited from displaying school marks or logos while monetizing their own NIL. For states that have passed laws related to NIL, universities are responsible for determining whether athletes’ NIL activities are consistent with state law. In states without NIL laws, such as Louisiana at present, athletes may engage in NIL activities without violating NCAA rules that have historically prohibited an athlete’s ability to monetize their likeness.

What Comes Next?

Federal legislation will likely provide student-athletes across the country with a uniform policy on how best to monetize their NIL in a fair, efficient manner. The most effective way for college athletes moving forward to protect their names and brands is by filing trademark applications, particularly for endorsement services and specified products. Athletes will then be able to accept sponsorship deals, market products, and create their own brands, while simultaneously protecting their NIL through a trademark strategy.

The authors wish to thank their law clerk, Cullen McDonald, for his assistance in preparing this article.