PHILADELPHIA — College athletes whose efforts primarily benefit their schools may qualify as employees deserving of pay under federal wage-and-hour laws, a U.S. appeals court ruled Thursday in a setback to the NCAA.

The court, in the latest challenge to the NCAA’s long-held notion of “amateurism” in college sports, said that a test should be developed to differentiate between students who play college sports for fun and those whose effort “crosses the legal line into work.”

“With professional athletes as the clearest indicators, playing sports can certainly constitute compensable work,” U.S. Circuit Judge L. Felipe Restrepo wrote. “Ultimately, the touchstone remains whether the cumulative circumstances of the relationship between the athlete and college or NCAA reveal an economic reality that is that of an employee-employer.”

A colleague, in a concurring opinion, questioned the difficulty of such a process, noting that nearly 200,000 students compete on nearly 6,700 Division I teams. The NCAA had hoped to have the case dismissed, but it will instead go back to the trial judge for fact finding.

The ruling follows a 2021 Supreme Court decision that led the NCAA to amend its rules to allow athletes to profit from their name, image and likeness. In May, the NCAA announced a nearly $2.8 billion revenue-sharing plan that could steer millions of dollars directly to athletes by next year.

The Division I athletes and former athletes behind the suit in Philadelphia are seeking more...

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