BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 1098 (Corbett)
As Amended April 5, 2010
Hearing Date: April 13, 2010
Fiscal: Yes
Urgency: No
KB:jd
SUBJECT
Athlete Agents
DESCRIPTION
This bill, sponsored by the California Commission on Uniform
State Laws, would enact the Uniform Athlete Agents Act, which
would regulate the activities of an athlete agent in soliciting
or contracting to represent a student or professional athlete.
BACKGROUND
In 1996, the Senate Business and Professions Committee
Subcommittee on Sports heard testimony from university officials
and coaches, interscholastic sports governing bodies, attorneys,
and former college athletes. The witnesses at this hearing
described a growing pattern of various abusive practices on the
part of athlete agents. In particular, they emphasized the
great harmful effects that such abusive practices have on the
athletes and their families and friends, athletic programs, and
their schools generally. Their testimony highlighted 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 (AB 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
(more)
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Office.
In 1997, the National Conference of Commissioners on Uniform
State Laws (NCCUSL) began work on developing a model state
athlete agent law in order to address the problems associated
with illegal athlete agent conduct nationwide. At the time,
there were athlete agent laws in 28 states, each with a
different set of fees, bonding and registration requirements,
and a list of prohibitive acts. Many of the laws were
ineffective and, as a result, were sporadically enforced. In
addition, agents expressed frustration over the differing state
regulations and the time and costs associated with registering
in many of the jurisdictions. Consequently, many agents simply
ignored most state agent laws and the corresponding registration
requirements. After three years of work, which included input
from sports agents, representatives of the professional sports
leagues players' associations, and the National Collegiate
Athletic Association, NCCUSL completed its work in drafting the
Uniform Athlete Agents Act.
To date, UAAA has been enacted in thirty-nine states and is
currently pending enactment in three states, including this
measure in California.
This bill was approved by the Senate Business, Professions and
Economic Development Committee on April 5, 2010 by a vote of 5
to 2.
CHANGES TO EXISTING LAW
Existing law , the Miller-Ayala Athlete Agents Act, regulates
specified activities of an athlete agent in representing or to
represent student and professional athletes. (Bus. & Prof. Code
Sec. 18895 et seq.)
Existing law defines "agent contract" as any contract or
agreement in which a person authorizes or empowers an athlete
agent to negotiate, 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. (Bus. & Prof. Code Sec. 18895.2.)
Existing law 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,
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offers, promises, attempts, or negotiates to obtain employment
for any person with a professional sports team or organization
or as a professional athlete. (Bus. & Prof. Code Sec. 18895.2.)
Existing law includes a talent agency as an "athlete agent" if
they engage in the activities of an athlete agent as defined.
(Bus. & Prof. Code Sec. 18895.2.)
Existing law defines particular types of contracts entered into
by athlete agents on their own behalf or with others, and when
persons may be considered as participating in negotiations to
enter into a contract. (Bus. & Prof. Code Sec. 18895.2.)
Existing law defines "student athlete" as any individual
admitted to or enrolled as a student in an elementary or
secondary school, college or university, or other educational
institution if the student participates as an athlete in a
sports program. (Bus. & Prof. Code Sec. 18895.2.)
Existing law requires an athlete agent to file with the
Secretary of State specified information about his or her
background, criminal and disciplinary record, training and
experience, and to advise an athlete of the availability of this
information. (Bus. & Prof. Code Sec. 18896.)
Existing law requires an athlete agent to establish a trust fund
and deposit into it all funds received on behalf of the athlete
and, if providing financial services to the athlete, to disclose
potential conflicts of interest, as specified. (Bus. & Prof.
Code Sec. 18897.2.)
Existing law imposes additional requirements pertaining to an
athlete agent's transactions with a student athlete, specifying
the circumstances under which an athlete agent may contact a
student athlete, or his or her family. (Bus. & Prof. Code Sec.
18897.63.)
Existing law requires the athlete agent to include a disclosure
in a contract with a student athlete, warning the student that
he or she may lose eligibility to compete in interscholastic or
intercollegiate sports upon entering into the contract and
allowing the student athlete to rescind the contract within 15
days. (Bus. & Prof. Code Sec. 18897.73.)
Existing law allows for civil action to recover damages
resulting from a violation and makes void any contract that
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fails to comply with its requirements. (Bus. & Prof. Code Sec.
18897.8.)
Existing law requires every athlete agent to provide security
for claims against them in the amount of $100,000. (Bus. &
Prof. Code Sec. 18897.87.)
Existing law makes the violation of any provisions of the Act a
misdemeanor offense. (Bus. & Prof. Code Sec. 18897.93.)
This bill would conform existing law regarding the regulation of
athlete agents to the Uniform Athlete Agents Act (UAAA) as of
July 1, 2011, and would make the existing Miller-Ayala Athlete
Agents Act inoperative on July 1, 2011.
This bill would define "contact" as a communication, direct or
indirect, between an athlete agent and a student or professional
athlete, to recruit or solicit the student or professional
athlete to enter into an agency contract.
This bill would define "intercollegiate sport" as a sport played
at the collegiate level for which eligibility requirements for
participation by a student athlete are established by a national
association for the promotion or regulation of collegiate
athletics.
This bill would require athlete agents to register with and
obtain a certificate of registration from the Department of
Industrial Relations (Department), rather than the Secretary of
State and provide specified information about his or her
background, criminal and disciplinary record, training and
experience, and to advise an athlete of the availability of this
information.
This bill would specify that the agent must submit an
application for registration within seven days after an initial
act as an athlete agent or a contract resulting from violation
of this requirement will be void.
This bill would require the athlete agent to disclose the fact
of registration to a student or professional athlete and where
information may be obtained regarding the agent.
This bill would specify that an application for a certificate of
registration is a public record.
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This bill would require renewal of registration and would create
a registration renewal process that includes either a form
prescribed by the Department or a copy of the application for
renewal and valid certificate of registration from another
state, according to certain conditions.
This bill would allow the Department to issue a temporary
certificate of registration while an application for
registration or renewal or registration is pending.
This bill would specify that the Department may suspend, revoke,
or refuse to renew a registration for conduct specified and
shall provide notice and an opportunity for a hearing in
accordance with current law.
This bill would specify what an agency contract shall state or
contain with a prominent notice to students of what the
implications are to signing the contract and voids a contract
that does not conform to any other requirements within the UAAA.
This bill would provide for notice within 72 hours to the
athletic director of the educational institution upon entering
into an agency contract and the ability of the student athlete
to cancel a contract within 14 days.
This bill would delineate what conduct of the athlete agent
would subject the agent to criminal and civil penalties and
allows a court to suspend or revoke the registration of the
agent for criminal violations as specified.
This bill would provide an educational institution with a right
of action against an athlete agent for damages caused by
violation of the UAAA.
This bill would allow the Department to assess a civil penalty
against an athlete agent not to exceed twenty-five thousand
dollars ($25,000) for violation of the UAAA.
This bill would create the Athlete Agent Registration Fund and
would allow for the Department to establish by regulation a fee
to fund the costs of the registration program.
This bill would require athlete agents to maintain certain
records and have them open for inspection by the Department
during normal business hours.
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COMMENT
1. Stated need for the bill
According to the author, currently, there is no state regulatory
body empowered to deny or revoke an applicant's authority to act
as an athlete agent based upon an evaluation of the person's
conduct to determine his or her fitness to represent athletes.
The author has introduced this measure to conform California law
to the Uniform Athlete Agents Act in order to increase
protections for student-athletes and educational institutions
and streamline the regulations governing athlete agents.
2. Registration of Athlete Agents
Under current law, athlete agents must register with the
Secretary of State. According to the Secretary of State Special
Filing Unit, four hundred athlete agent companies have filed
information, but it is unknown whether any action has been taken
against athlete agents pursuant to the Miller-Ayala Athlete
Agents Act.
This bill would require the registration, certification, and a
mandated criminal history disclosure of sports agents seeking to
represent student athletes who are or may be eligible to
participate in intercollegiate sports. Agents would have to
register with the Department of Industrial Relations
(Department), as opposed to the Secretary of State, and would be
required to disclose (1) their training, experience, and
education, (2) whether they or an associate have been convicted
of a felony or crime of moral turpitude, (3) have been
administratively or judicially determined to have made false or
deceptive representations, (4) have had their agent's license
denied, suspended, or revoked in any state, or (5) have been the
subject or cause of any sanction, suspension, or declaration of
ineligibility. The Department would be empowered to refuse to
issue a certificate of registration if it determines that the
applicant has engaged in conduct that has a significant adverse
effect on the applicant's fitness to act as an athlete agent.
A certification of registration would have a term of two years
from the date of issuance. This bill would create a renewal
process for certificates of registration and authorize the
Department to suspend, revoke, or refuse to renew a registration
for conduct that would have justified denial of the original
certificate. However, the department would only be able to take
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this action after proper notice to the agent and an opportunity
for hearing.
This bill would also create a process for athlete agents who are
issued a valid certificate of registration or licensure in one
state to cross-file that application (or a renewal thereof) in
California. In sum, this bill would create a stricter
registration process than currently provided for in current law,
and would facilitate the exchange of information pertaining to
an agent's professional conduct between states.
3. Agency Contracts
This bill would impose specified contract terms on agency
contracts, which are intended to serve the benefit of student
athletes. Student athletes who enter an athlete-agent contract
may (often unexpectedly) lose their intercollegiate eligibility.
In order to prevent this result, this bill would provide
student athletes with a statutory right to cancel an agency
contract within 14 days after the contract is signed without
penalty. Further, athlete-agent contracts would be required to
disclose (1) the amount and method of calculating the agent's
compensation, (2) the name of any unregistered person receiving
compensation because the athlete signed the agreement, (3) a
description of reimbursable expenses and services to be
provided, as well as (4) warnings disclosing the cancellation
and notice requirements imposed under the act.
This bill would also require both the agent and the student
athlete to give notice of the contract to the athletic director
of the affected educational institution within 72 hours of
signing the agreement, or before the athlete's next scheduled
athletic event, whichever occurs first. Where applicable, the
agent would also be required to provide this notice to a school
where he or she has reasonable grounds to believe the athlete
intends to enroll. Agents would be required to maintain
executed contracts and other specified records for a period of
five years, which would be open to inspection by the Department
during normal business hours.
These provisions of the bill would ensure that student athletes
are aware of the consequences of entering into an agency
contract and are afforded an opportunity to walk away. They
would also help to ensure that educational institutions that may
be impacted by the contract are put on notice of the student
athlete's potential ineligibility.
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4. Offenses and Enforcement
This bill would prohibit athlete agents from providing
materially false or misleading information or making a
materially false promise or representation with the intent of
inducing a student athlete to enter into an agency contract, or
from furnishing anything of value to a student athlete or
another person before that athlete enters into an agency
contract. This bill would also provide that an athlete agent
may not (1) intentionally initiate contact with a student
athlete unless registered under this act, (2) may not refuse or
willfully fail to retain or permit inspection of required
records, (3) fail to register where required, (4) provide
materially false or misleading information in an application for
registration or renewal thereof, (5) predate or postdate an
agency contract, (6) fail to notify a student athlete (prior to
signing) that signing an agency contract may make the student
athlete ineligible to participate as a student athlete in that
sport, or (7) cause a student athlete to engage in any conduct
that may result in sanctions, penalties, or disciplinary action
imposed by a national association of college athletics against
the student athlete or educational institution.
In addition to imposing criminal penalties for violations of
these provisions, this bill would also provide educational
institutions with a statutory right of action against an athlete
agent or former student athlete for damages caused by a
violation of this bill. The damages could include losses and
expenses incurred as a result of the educational institution
being penalized, disqualified, or suspended from participation
by an athletics association or conference, or as a result of
reasonable self-imposed disciplinary actions taken to mitigate
sanctions, as well as associated party costs and reasonable
attorney's fees. The Department would also be authorized to
assess a civil penalty against an athlete agent not to exceed
$25,000 for a violation of this bill.
While this bill specifically creates a statutory right of action
for educational institutions, it does not reference an athlete's
right to bring a civil action to recover damages. In contrast,
existing law provides for a broad statutory right of action to
recover damages resulting from a violation and makes void any
contract that fails to comply with its requirements. (Bus. &
Prof. Code Sec. 18897.8.) This bill would repeal these
provisions of existing law. This Committee may wish to consider
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whether this bill should be amended to include a specific
statutory right of action for athletes who incur damages as a
result of a violation of this bill.
Suggested Amendment
On page 13, line 29, strike "An" and insert:
"Any professional athlete, student athlete, or educational
institution"
5.Bill would incorporate other protections under existing law
It is important to note that, although this bill would enact a
number of new regulatory requirements for athlete agents, it
would also incorporate some of the existing protections in
current law. For example, athlete agents would still be
required to maintain trust funds for athlete's salaries. In
addition, this bill would also incorporate an existing ban on an
athlete agent's interest in an entity involving the same sport
as a student athlete whom the agent solicits to enter into an
agency contract.
This bill would also enhance disclosure requirements for athlete
agents relating to their interests in an entity involving the
same sport as the professional athlete they are soliciting to
enter into a contract. Agents would also be required to
disclose any interests in a financial entity providing financial
services to a client that is a professional athlete. Finally,
this bill would also enhance an existing prohibition on the
division of compensation between athlete agents and a
professional sports league or team which is directly related to
a professional sports services contract.
Thus, this bill would not diminish any of the protections for
student or professional athletes provided for under current law.
Rather, this bill would overall increase protections for
athletes and the educational institutions where they compete,
while at the same time creating uniformity with other states
with respect to the regulatory environment for athlete agents.
Support : Association of Talent Agents; National Collegiate
Athletic Association; Rich Herczog, Director of Compliance, UCLA
Intercollegiate Athletics; Uniform Law Commission; University of
California; University of Southern California
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Opposition : None Known
HISTORY
Source : California Commission on Uniform State Laws
Related Pending Legislation : None Known
Prior Legislation :
SB 694 (Sher) and SB 1652 (Sher) of the 2001-2002 Legislative
Session would have both enacted the UAAA. Both measures were
ultimately vetoed by then Governor Davis due to budget concerns
associated with requiring the Department of Industrial Affairs
to take on new responsibilities.
Prior Vote : Senate Business, Professions and Economic
Development Committee (Ayes 5, Noes 2)
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