Are you thinking about signing an endorsement deal as a high school or college athlete? The NCAA’s recent decision to allow college athletes to profit from their name, image, and likeness (NIL) has created new financial opportunities for many students. High school athletes in some states also qualify for NIL deals. However, every contract comes with legal and financial risks.
Attorney Michael R. Hughes of The Hughes Companies can review your endorsement contract and help you avoid unfair or detrimental terms. He can explain your rights, identify risks, and negotiate changes to protect your financial future. Under the House Settlement, third party NIL deals associated with boosters or collectives must be approved by a clearinghouse or go through arbitration. In this new landscape, student athletes with high endorsement potential and NIL value need skilled legal counsel. Contact The Hughes Companies for a free consultation with an experienced attorney and sports agent.
What Is an Endorsement Deal?
An endorsement deal allows a company to pay an athlete to promote its products or services. Companies might ask athletes to appear in advertisements, wear branded gear, or post about the brand on social media. In exchange, athletes receive money, free products, or other benefits. These agreements fall under name, image, and likeness (NIL) rights, meaning companies pay athletes for their personal brand rather than their performance in a sport.
Athletes should understand that endorsement deals are legally binding contracts. A company might require participating athletes to meet certain obligations, such as making a specific number of social media posts or attending promotional events. If the athlete fails to meet these terms, the company could withhold payment or even take legal action.
Key Terms in an Endorsement Contract
Endorsement contracts include terms that determine how an athlete gets paid, what the athlete must do, and how long the agreement lasts. Here are some key terms you should know when considering an endorsement contract:
- Payment Structure: The contract should explain how and when the athlete will get paid. Some offer a flat fee, while others pay based on sales or social media engagement. If it includes royalties, the athlete will earn a percentage of sales from promoted products.
- Length of Agreement: Some contracts last a few months, while others extend for years. Athletes should determine how long they will be tied to a brand and whether they can end the contract early.
- Exclusivity Clause: Many contracts require an athlete to promote only one brand in a certain industry. For example, if an athlete signs an endorsement deal with a shoe company, they might not be able to wear or promote a competitor’s shoes.
- Options/Right of First Refusal: Some endorsement deals give the endorsee the right to option the contract or give them the right to refuse to extend the agreement before another endorsement agreement can be entered into. For student-athletes that eventually become professionals, these clauses can conflict with the collective bargaining agreements of many leagues, like the NFL.
- Termination Clauses: Contracts should explain what happens if the athlete or company wants to end the deal early. If the athlete breaks the contract terms, the company could take legal action or require the athlete to repay money received.
Legal Considerations for NIL Endorsements
Athletes should never assume an endorsement contract is fair. Some businesses include unfair terms that favor them and leave athletes with little control. Before signing, it’s best to ask an attorney to review the contract. NIL deals give athletes financial opportunities, but legal mistakes can put eligibility, earnings, and reputations at risk. Let’s review some key factors to consider.
Compliance with NIL Laws and NCAA Rules
Each state has different NIL laws, and the NCAA has rules that affect college athletes. Some schools also have policies that limit certain endorsements. Athletes must confirm that any prospective deal follows all necessary rules before signing. Violating these rules could result in financial penalties, loss of eligibility, or legal disputes.
Disclosure Requirements
Some states and schools require athletes to report NIL agreements. Failing to disclose an endorsement deal could cause problems, including contract cancellation or loss of eligibility.
Intellectual Property Rights
An endorsement deal might allow a company to use an athlete’s name, image, and likeness in marketing materials. The contract should clearly state how the company can use these rights and for how long. Some contracts give companies broad control over an athlete’s NIL, which could prevent the athlete from working with other brands in the future.
Tax and Financial Responsibilities
NIL earnings count as taxable income. Athletes must set aside money for taxes and report earnings correctly. Some endorsement contracts also include payment structures that might not be favorable. Athletes should understand these details before agreeing to endorsement deals.
Protecting Your Personal Brand in Endorsements
An athlete’s personal brand can affect their future endorsement deals, career opportunities, and reputation. Companies want athletes who represent their values and maintain a positive public image. Athletes must think carefully before signing endorsement deals because the companies they promote will shape how fans, recruiters, and future sponsors see them.
Athletes should only work with brands that align with their personal values. Signing with a controversial or poorly reviewed company could damage the athlete’s reputation. Before agreeing to a deal, athletes should research the company’s history, customer reviews, and public perception. A company with legal issues or negative publicity could create long-term problems for an athlete’s image.
Conversely, some contracts include morality clauses that allow a company to end a deal if the athlete behaves in a way that hurts the brand’s image. These clauses often give companies broad control, so athletes should fully understand them before signing. If a contract allows a company to cancel a deal for vague reasons, the athlete could lose income without warning.
Why Legal Guidance Matters for NIL Endorsements
Endorsement contracts contain legal terms that can affect an athlete’s financial future, eligibility, and rights. Companies create contracts that protect their interests, not the athlete’s. Athletes must understand every detail of an NIL agreement before signing to avoid legal risks.
A sports law attorney can review these contracts, identify risks, and negotiate changes to protect athletes. They can also confirm whether a contract follows all relevant NCAA rules, state laws, and school policies so athletes do not lose the right to compete. Additionally, lawyers can help athletes understand tax obligations in contracts and avoid unexpected financial issues.
Reviewing a contract with a lawyer can help athletes protect their earnings, eligibility, and reputation. With the right legal guidance, athletes can prevent long-term problems and retain more control over their NIL rights.
Contact a Sports Law Attorney in Oregon
Endorsement deals can create great opportunities, but a bad contract could limit your future and put your earnings at risk. Before signing any NIL agreement, take the time to understand your rights and protect yourself. Contact The Hughes Companies today for a free initial consultation.