BILL ANALYSIS
SB 1098
Page 1
Date of Hearing: June 29, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
SB 1098 (Corbett) - As Amended: June 22, 2010
SENATE VOTE : 23-12
SUBJECT : Athlete Agents
KEY ISSUE : Should the existing Miller-Ayala Athlete Agents Act
be replaced with the Uniform Athlete Agents Act for the purpose
of regulating the activities of athlete agents and better
protecting student athletes?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This bill would enact the Uniform Athlete Agents Act to regulate
the activities of athlete agents in soliciting and contracting
with student and professional athletes. The bill is based on a
model statute drafted by the National Conference of
Commissioners on Uniform State Laws (NCCUSL) in 2000. It would
replace the existing Miller-Ayala Athlete Agents Act, the
California law that currently regulates athlete agents in the
state. The NCCUSL began work on model legislation in 1997 at
the request of the National Collegiate Athletic Association
(NCAA). Because agents solicit athletes from schools throughout
the nation, the NCAA sought a common approach that would subject
all agents to the same rules regardless of the state in which
they solicit and recruit athletes. Because both the
Miller-Ayala Act and the proposed Uniform Athlete Agent Act are
comprehensive statutes, there is a great deal of overlap between
them. However, the most significant differences concern
registration requirements and the ability of the state to deny
or revoke a person's authority to act as an athlete agent.
Existing law only requires a person who wants to act as an agent
to file information with the Secretary of State, but there is no
body that can prohibit a person from acting as an agent. This
bill requires a person to submit additional information to
obtain a certificate of registration issued by the Department of
Industrial Relations (DIR), prohibits anyone from acting as an
agent without a certificate, and would give DIR the power to
revoke a certificate for specified reasons. Finally, while both
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existing law and this bill apply to both student and
professional athletes, supporters contend that this bill will
offer greater protections for student athletes than does present
law. DIR, however, opposes this bill primarily on the grounds
that it believes that it is not the proper entity to enforce
regulation in this area and because of possible financial
burdens. However, as the author notes, DIR already regulates
talent agents - who have a similar contractual relation with
clients - and points out that SB 1098 provides for self-funding
through registration fees and a loan, as specified, for start up
costs.
SUMMARY : Enacts the Uniform Athlete Agents Act for the
regulation of agents who represent student and professional
athletes, and effectively replaces, as of July 1, 2011, the
existing Miller-Ayala Athlete Agents Acts, the existing
statutory framework for regulating such activity. Specifically,
this bill :
1)Requires athlete agents to register with and obtain a
certificate or registration from the Department of Industrial
Relations. Requires an applicant for certificate to provide
information concerning the prospective athlete agent's
background, criminal and disciplinary history, and training
and experience.
2)Prohibits, subject to certain exceptions, a person from acting
as an athlete agent without a certificate of registration, and
would make void a contract to represent a student or
professional athlete made in violation of registration
requirements, and would make voidable, at the athlete's
election, an agency contract that does not conform to other
provisions of the act. Requires the certificate to be
renewed, as specified.
3)Requires the athlete agent to disclose the fact of
registration to a student or professional athlete and inform
the athlete as to where information may be obtained regarding
the agent.
4)Specifies 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.
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5)Specifies what an agency contract shall state or contain with
a prominent notice to students concerning the implications of
signing the contract. Requires that notice must also be
provided to the athletic director of the educational
institution, as specified.
6)Permits a student athlete to rescind a contract within 14 days
of signing the contract.
7)Provides that certain conduct of the athlete agent may 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.
8)Provides a professional athlete, student athlete or
educational institution with a right of action against an
athlete agent for damages caused by violation of the UAAA.
9)Requires an athlete agent to create a trust fund for any
salary or funds received on behalf of a professional athlete.
10)Allows 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. Specifies this penalty
shall become operative on January 1, 2012.
11)Creates the Athlete Agent Registration Fund and allows for
the Department to establish by regulation a fee to fund the
costs of the registration program.
12)Incorporates many of the specific restrictions on athlete
agent conduct that are presently provided for in the
Miller-Ayala Act.
EXISTING LAW :
1)Provides, under the Miller-Ayala Athlete Agents Act, for the
regulation of athlete agents who for compensation, directly or
indirectly, solicit or recruit an athlete to enter into any
agent contract, endorsement contracts, or other professional
sports-related contracts. (Business & Professions Code
Sections 18895 et seq.)
2)Requires any athlete agent, prior to engaging in or carrying
on the business of athlete agent, to file a specified form
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with the Secretary of State that includes specified
information about the agent's background, criminal history and
disciplinary actions, if any, the names of other athletes the
agent has represented, a list of references, and a schedule of
fees to be charged and collected in the conduct of the athlete
agent business. (Business & Professions Code Section 18896.)
3)Requires the athlete agent, upon first contacting a
professional or student athlete, either directly or
indirectly, or the athlete's family member, to provide that
person with a written notification stating that the agent has
filed with the Secretary of State and that information filed
about the agent is available from the Secretary of State.
(Business & Professions Code Section 18896.6.)
4)Requires that all athlete agent contracts shall be in writing
and specifies required contents of the contract, including a
description of the services to be performed and a schedule of
fees. (Business & Professions Code Sections 18897 and
18897.1.)
5)Requires athlete agents to keep records, as specified, and
generally requires the agent to inform the athlete of all
financial interests and to refrain from disclosing false,
fraudulent, or misleading information or advertisements.
(Business & Professions Code Sections 18897.2 to 18897.5.)
6)Imposes various restrictions on the manner in which an athlete
agent may contact or recruit student athletes, including
prohibitions on money or gifts, as specified. Requires that
contracts with student athletes include, among other things, a
conspicuous notice to the student athlete that signing a
contract will likely result in a loss of eligibility to
compete in interscholastic or intercollegiate sports. Grants
to any student athlete who enters into a contract with an
athlete agent a 15-day right of rescission. (Business &
Professions Code Sections 18897.6 to 18897.77.)
7)Permits a professional athlete or a student athlete, or any
educational institution, or any league, conference,
association, or federation of the educational institution, or
any other person, to bring a civil action for recovery of
damages from an athlete agent, if that professional athlete,
student athlete, or other person or entity is adversely
affected by the acts of the athlete agent or his
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representative that are in violation of the above provisions.
Provides that a prevailing plaintiff shall recover actual
damages, or $50,000, which ever is greater, as well as
punitive damages, court costs, and attorney's fees. (Business
& Professions Code Section 18897.8.)
8)Requires every athlete agent to provide security for potential
claims against the agent through liability insurance or an
escrow account, as specified. (Business & Professions Code
Section 18897.87.)
9)Provides that any contract that is negotiated by an athlete
agent who fails to comply with the above provisions is void
and unenforceable, and that no person shall owe an athlete
agent any money or other consideration if the athlete agent
fails to comply with the above provisions. (Business &
Professions Code Section 18897.9.)
COMMENTS : In 1997, the NCAA and several academic institutions
asked the National Conference of Commissioners on Uniform State
Laws (NCCUSL) to draft a model bill that, according to the NCAA,
would "provide a uniform system for regulating athlete agents."
(See "Uniform Athlete Agents Act (UAAA) History and Status,"
available at www.ncaa.org .) In 2000, NCCUSL completed the
Uniform Athlete Agents Act. According to the NCAA, as of March
18, 2010, 38 states and the District of Columbia had adopted the
UAAA. According to the prefatory note to the UAAA, in an era of
highly compensated professional athletes, competition among
agents to solicit and recruit the best student athletes has
intensified. Although prior to 2000 many states, including
California, had enacted statutes for regulating athlete agents,
there were substantial differences in registration and
disclosure requirements, which made it difficult for agents
practicing in several states to be certain that they were fully
complying with different state laws. In addition, the NCCUSL
concluded that there were still a minority of agents who used
inappropriate recruitment techniques, including undisclosed
payments or gifts to student athletes or their families. Such
violations could result in athletes loosing eligibility to
participate in intercollegiate sports and sanctions against
universities and colleges. Thus, the NCAA and the NCCUSL have
concluded that a uniform system will ensure that all athletes,
educational institutions, and agents will be subjected to a
known and consistent set of rules.
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The Miller-Ayala Act . California was one of 28 states that
regulated athlete agents at the time that the NCAA asked the
NCCUSL to draft a model law. The Miller-Ayala Athlete Agents
Act (AB 1987, Chapter 957, Stats. of 1996) created a
comprehensive statute regulating the activities of persons who
worked as athlete agents. This legislation came on the heels of
a 1996 Senate Business and Professions oversight hearing on
abusive practices of some athlete agents and the harmful effect
that this had, not only on student athletes and their families,
but on educational institutions and athletic programs as well.
However, the Miller-Ayala Act lacks a registration system
similar to that required under this model bill. Instead, a
person can act as an athlete agent merely by filing required
information with the Secretary of State. However, there is
presently no body that can deny persons the ability to act as
agents or revoke the authority of those who acted unlawfully.
For the most part, the Miller-Ayala Act enforced its
requirements by permitting persons or institutions that were
harmed to bring civil actions, giving student athletes a 15-day
right of rescission, and providing that any contract that
violated the terms of the statute was either void or voidable by
the athlete, depending on the nature of the violation.
This bill takes a more proactive approach by authorizing the
Department of Industrial Relations to demand more rigorous
registration requirements at the front end and prohibiting
anyone from acting as an athlete agent without a certificate of
registration. This bill would require an athlete agent to renew
the certificate every two years, and it would give DIR the right
to deny or revoke certificates for specified violations or
misconduct. The bill incorporates many of the provisions of the
Miller-Ayala Act with minor modifications to make them
consistent with the UAAA. The bill specifies that the Uniform
Athlete Act shall not become operative until July 1, 2011, and
provides that the existing Miller-Ayala Act will be repealed as
of January 1, 2012.
Major and Minor Differences Between Miller-Ayala and SB 1098 .
As previously noted, the major difference between Miller-Ayala
and SB 1098 concerns the more stringent registration
requirements and the power that SB 1098 gives DIR to deny and
revoke certificates of registration to athlete agents. However,
there are a number of other differences as well, mostly minor
but some potentially significant. For example, following the
UAAA, SB 1098 provides more detail on the required contents of
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the agent contract, including information relating to the basis
and method of calculating consideration. SB 1098 also has
expanded requirements relating to student athletes, since this
has been one of the major areas of concern. Both existing law
and SB 1098, for example, give students athletes a right of
rescission, 15 and 14 days respectively, to rescind an agent
contract. Most of the other differences between existing law
and SB 1098 do not reflect substantive policy changes so much as
an effort to establish conformity with the UAAA.
Funding for Registration and Enforcement . SB 1098 expressly
provides that the costs of administering this act is to be
funded by the fees that DIR is authorized to collect for each
application for registration and renewal. The bill specifies
that such fees shall be deposited in a newly created Athlete
Agent Registration Fund. To cover start up costs, the bill
requires the Department of Finance to approve a loan from the
Labor Enforcement and Compliance Fund to the DIR. The bill also
provides that these funds shall be repaid, with revenue
generated from registration fees, on or before July 1, 2014.
ARGUMENTS IN SUPPORT : According to the author, this bill will
not only bring California into line with the vast majority of
other states that have adopted the UAAA, it will also "be
helpful for the many California agents who do business across
state lines." California, the author notes, "has a large number
of student athletes and professional teams and this will give
athlete agents a legitimate way to register." The author also
believes that, overall, this measure will increase protections
for student athletes and educational institutions.
The NCAA contends that while most agents perform a valuable
service for both student and professional athletes, "far too
often dishonest agent conduct, intended to take advantage of the
student-athlete for financial gain, results in the loss of the
student-athlete's eligibility, the imposition of financial
penalties on the student-athlete's institution, and the taint of
'scandal' on both the institution and the entire community of
amateur athletics." NCAA adds that, too often, while the
athlete and school face repercussions, the agent is not held
accountable. NCAA believes that this bill will help create
"uniformity of state athlete agent laws by establishing a
standard set of registration requirements, fees, consumer
protection requirements and notice provisions for both athletes
and their institutions."
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The NCCUSL notes that with the proliferation of professional
sports franchises and large athlete salaries, competition
between athlete agents has become more intense, and includes
efforts to inappropriately recruit student athletes through
undisclosed payments or gifts. NCCUSL believes that the UAAA
and SB 1098 will provide important protections for
student-athletes and educational institutions alike. As
importantly, NCCUSL contends, it "creates a uniform body of
agent registration information for use by state agencies,
simplifies the regulatory environment faced by legitimate sports
agents, and provides public and private recourse against
unscrupulous actors."
The University of California, UCLA, San Diego State University,
and the Association of Talent Agents support this bill for many
of the same reasons stated above. They particularly support the
creation of uniform and nationally consistent standards.
ARGUMENTS IN OPPOSITION : The Department of Industrial Relations
(DIR) opposes this bill because it believes that it will "add
regulatory and oversight functions, and new costs to the DIR's
regulatory role." In particular, DIR believes that the bill
would add duties "outside of an employment context as a contract
between an athlete agent and a student or professional athlete
does not involve an employer-employee relationship." DIR states
that of the 38 states that have adopted the UAAA, DIR is unaware
of any state that manages the program through its labor and
workforce agency.
Author's Response to Opposition : The author responds to DIR's
concerns about costs by pointing out that the program will be
self-funding through registration fees and that start up costs
are covered by the required loan, as discussed above. The
author also rebuts DIR's contention that the agent-athlete
relationship falls outside of the DIR's usual concern with the
traditional employment relationship. The author points out, for
example, that talent agents, who enter into similar contractual
relationships with clients, are presently regulated by DIR.
Finally, the author contends that amendments taken in the Senate
delayed implementation until July 1, 2011, giving DIR added time
to make needed adjustments.
Indeed, the author is correct that talent agents are regulated
by the Labor Commissioner, the Chief of the Enforcement Division
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within the DIR. Talent agents are required to make their
written application for a license directly to the Labor
Commissioner. As with the athlete agent under this bill, the
prospective talent agent must provide specified information not
unlike that which is required for the certificate of
registration under SB 1098. The Labor Commissioner has the
power to review contracts and deny or revoke licenses, and the
Commissioner enforces disclosure and notice requirements for
talent agents that are similar to the parallel requirements for
athlete agents under this bill. (Labor Code Sections
1700-1700.44.) In short, the contractual relationship between
talent agents and clients is quite similar to that between
athlete agents and their clients. If DIR has the capacity to
license and regulate talent agents, it would seemingly have the
capacity to certify and regulate athlete agents.
REGISTERED SUPPORT / OPPOSITION :
Support
California Commission on Uniform State Laws (sponsor)
Association of Talent Agents
NCAA
Uniform Law Commission
UCLA
University of California
San Diego State University
Opposition
Department of Industrial Relations
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334