BILL ANALYSIS Ó
SB 101
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND
INTERNET MEDIA
Nora Campos, Chair
SB 101 (Corbett) - As Introduced: January 11, 2011
SENATE VOTE : 36-0
SUBJECT : Athletic Agents: Conflict of Interest
SUMMARY : Narrows provisions in the Miller-Ayala Athlete Agents
Act (Athlete Agents Act) regarding conflicts of interest for
agencies servicing professional athletic teams and leagues in
relation to the employment of athletes an agency may also
represent. Specifically, this bill :
1)Prohibits an athlete agent from having an ownership or
financial interest in any entity, only if that entity directly
employs an athlete in the same sport as a person with whom the
athlete agent has entered into an agent contract.
2)Prohibits an athlete agent from dividing fees with, or
receiving compensation from, a professional sports league,
team, or other organization, or its representatives or
employees, only if the fees or compensation are directly
related to on-field activities of athletes or other
representation of the league, team, or organization as it
directly relates to the employment of athletes.
3)Prohibits an athlete agent from offering or allowing any
full-time employee of a union or players' association
connected with professional sports to own or participate in
any of the revenues of the athlete agent.
EXISTING LAW, the Miller-Ayala Athlete Agents Act :
1)Regulates athlete agents regarding the representation of
professional and student athletes. (Business and Professions
Code Section 18895, Chapter 2, Division 8.)
2)Defines "agent contract" as any contract or agreement in which
a person authorizes or empowers an athlete agent to negotiate,
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or solicit on behalf of the person, with one or more
professional sports teams or organizations, for the employment
of the person by one or more professional sports teams or
organizations, or to negotiate or solicit on behalf of the
person for the employment of the person as a professional
athlete. (Business and Professions Code Section 18895.2.)
3)Defines "athlete agent" as any person who, directly or
indirectly, recruits or solicits an athlete to enter into any
specified type of contract, or for compensation procures,
offers, promises, attempts, or negotiates to obtain employment
for any person with a professional sports team or organization
or as a professional athlete. A talent agency is considered
an "athlete agent" if they engage in above defined activity.
(Business and Professions Code Section 18895.2.)
4)Prohibits an athlete agent from owning or having a financial
interest in any entity that is directly involved in the same
sport as a person with whom the athlete agent has entered into
an agreement contract for the purposes of negotiating an
endorsement contract, financial services contract or
professional sports service contract, or providing advice
concerning potential or actual employment as a professional
athlete. (Business and Professions Code Section 18897.27.)
5)Requires an athlete agent, if providing financial services to
the athlete, to disclose potential conflicts of interest, as
specified. (Business and Professions Code Section 18897.3.)
6)Prohibits an athlete agent from dividing fees with or
receiving compensation from a professional sports league,
team, or other organization or its representatives or
employee, or offer or allow any full-time employee of a union
or players' association connected with professional sports to
own or participate in any of the revenues of the athlete
agent. (Business and Professions Code Section 18897.47.)
7)Makes the violation of any provisions of the Athlete Agents
Act a misdemeanor offense. (Business and Professions Code
Section 18897.93.)
FISCAL EFFECT : Unknown
COMMENTS :
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1)Background: The Miller-Ayala Athlete Agents Act : In 1996, in
response to reports of a sports agent paying college students
in exchange for representation, the Senate Business and
Professions Committee Subcommittee on Sports held a hearing
wherein they heard testimony from university officials and
coaches, interscholastic sports governing bodies, attorneys,
and former college athletes on the topic of athlete agents.
All of these witnesses spoke of a growing pattern of various
abusive practices on the part of athlete agents. All
emphasized that such abusive practices have great harmful
effects on the athletes and their families and friends, their
athletic programs, and their schools generally, including
alumni and fans. All decried the lack of meaningful oversight
of athlete agents, citing insufficient penalties in current
law and apparent inattention and/or inability of any agency to
take action against athlete agents.
That same year, the Miller-Ayala Athlete Agents Act ƯAB 1987
(Miller), Chapter 957, Statutes of 1996], was passed to enact
a comprehensive set of provisions governing the conduct and
practice of individuals who work as athlete agents. However,
it did not include a registration program, but rather required
filing of information regarding the background and business
practices of the athlete agent with the Secretary of State's
Office.
According to the Secretary of State Special Filing Unit, as of
April 14, 2011, 469 athlete agents or athlete agent companies
have filed information. It is unknown whether any action has
been taken against athlete agents pursuant to this Act.
2)Uniform Athlete Agents Act (UAAA) : According to information
provided by the Uniform Law Commission and the National
Collegiate Athletic Association (NCAA), problems associated
with illegal athlete agent conduct are national in scope. Far
too often, they assert, the actions of athlete agents in other
states result in the loss of student-athlete eligibility, the
imposition of financial penalties on the student-athlete's
institution and the taint of a "scandal" on both the
institution and the larger intercollegiate sports community.
In an effort to address these problems, the National
Conference of Commissioners on Uniform State Laws, Uniform Law
Commission (NCCUSL) began work in 1997 on developing a model
state athlete agent law. At the time, there were 28 state
athlete agent laws each with a different set of fees, bonding
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and registration requirements, and a list of prohibitive acts.
In 2000, after three years of work, that included input from
sports agents, representatives of the professional sports
leagues players' associations and the NCAA, NCCUSL completed
its work in drafting the UAAA. The model law provides for
important protections for student-athletes and educational
institutions and it also seeks to assist athlete agents by
standardizing and streamlining the regulations governing the
profession. The UAAA has been enacted in 40 states.
Adoption of the full provisions of the UAAA were considered
and approved by this committee in the prior legislative
session, but that measure was vetoed. (See comment below,
regarding SB 1098). The proposal before the Committee today
is narrower, containing only the conflict of interest
provisions of the earlier legislation.
3)Author's Statement and Support : According to the author,
"Under current law, an agent is prohibited from having an
ownership or financial interest in any entity that is directly
involved in the same sport as a person the agent represents.
However, in the past 15 years, the talent agent business has
grown and expanded beyond traditional television, film and
music businesses. Talent agencies now represent athletes,
corporations and non-traditional TV personalities and
broadcasters. They also provide services that include
marketing, licensing and business development. Senate Bill
101 clarifies that talent agencies can represent leagues and
teams for procuring and negotiating sponsorship, endorsements,
media rights, and purchase or sale of a team. Representation
of leagues and teams are not in connection with the
representation of professional athlete for on-field services
and does not present a conflict of interest."
The sponsor of the measure adds, "The changes in the law are
necessary because agents represent leagues and teams, not in
connection with the employment of athletes, but for marketing,
sponsorship, endorsement, media rights, and purchase or sale
of a team. Representation of leagues and teams are not in
connection with the representation of professional athletes
for on-field services and does not present a conflict of
interest."
4)Expands Agents Ability to Represent Multiple Interests Within
the Same Sport and Split Fees : This proposed legislation will
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expand the ability of agents to engage in business
relationships which have heretofore been prohibited as
statutory conflicts of interest. Existing law prohibits an
athlete agent from having any ownership or financial interest
in with any entity that is directly involved in the same sport
as a person with whom the agent has entered into an agreement
with (emphasis added). This bill would narrow that
prohibition to only those who directly employ athletes, and
thereby broadens agents' ability to enter into financial
partnerships, and to hold ownership interests, within the same
sport as those where they represent athletes as clients.
In addition, existing law forbids any fee splitting or
compensation arrangements between agents and a professional
sports league, team, or other organization or its
representatives or employees. SB 101 will now allow such
agreements in all instances except where the fee or
compensation the agent receives is directly related to
on-field activities of athletes or other representation of the
league, team, or organization as it directly relates to the
employment of athletes.
While the expansion of agents' ability to work with, for, and
partially own teams which are in the same sport and league as
players they also represent, may not present an obvious direct
conflict of interest - this fact pattern is currently central
to two different on-going labor disputes. In both labor
disputes between players and owners of the National Football
League and the National Basketball Association, a key issue
is the amount of profit generated by the respective leagues.
In both of these sports, team owners make up the membership of
the league. The players associations have demanded a greater
share of profits, and the owner have refused to divulge how
much profit each team and league generates. (See Players
Association Files Unfair Labor Charge Against NBA , Sports
Illustrated, March 2011, and Burke, Doris, et al, The Gross
Football Product , Sports Illustrated, March 2011). If this
bill were to become the law, an agent could be a part owner of
a team and the representative of players with whom the owners
are negotiating. At the very least they could be splitting
profits with a league in which their player/client also have a
potential interest.
It should be noted that when the conflict of interest
provisions of this bill were considered by this committee in
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prior legislation, they were coupled with an enforcement and
regulatory scheme which would have provided oversight of the
profession of athlete agents. This bill does not contain any
oversight or enforcement provision.
A related measure, SB 238 (De Leon), which is also set for
hearing in this committee, would provide increased penalties
for violations of the Miler-Ayala Athlete Agents Act.
5)Prior and Related Legislation :
SB 238 (De Leon, 2011) would increase penalties for a
violation of the Athlete Agents Act, which regulates
interactions between athlete agents and college and
professional athletes by requiring an agent to relinquish all
consideration received in the violation, and specifies the
distribution of relinquished moneys. Status: Currently
pending before this committee.
SB 1098 (Corbett, 2010), would have enacted the Uniform
Athletes Agents Act (UAAA). Status: Vetoed by Governor
Schwarzenegger citing opposition to new regulation in the
industry and burden upon the Department of Industrial
Relations.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of Talent Agents
Opposition
None known
Analysis Prepared by : Dana Mitchell / A.,E.,S.,T. & I.M. /
(916) 319-3450