BILL ANALYSIS Ó
SB 238
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Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND
INTERNET MEDIA
Nora Campos, Chair
SB 238 (De Leon) - As Amended: April 13, 2011
SENATE VOTE : 37-0
SUBJECT : Athlete Agents
SUMMARY : Increases penalties for a violation of the
Miller-Ayala Athlete Agents Act (Act), which regulates
interactions between athlete agents and college and professional
athletes. Specifically, this bill :
1)Requires the court to suspend for a minimum of one year, or
where appropriate, revoke the privilege of a person to conduct
the business of an athlete agent if the person is convicted of
a violation of the Act.
2)Requires the court to order an athlete agent or athlete
agent's representative or employee to disgorge all
consideration received in connection with a violation of the
Act.
3)Specifies the distribution of all fines and disgorged monies
surrendered by an athlete agent or athlete agent's
representative or employee found in violation of the Act.
EXISTING LAW :
1) Regulates specified activities of an athlete agent in
representing or to represent student and professional
athletes. (Business and Professions Code Section 18895.2.)
2) 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
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of the person for the employment of the person as a
professional athlete. ÝBusiness and Professions Code
Section 18895.2(a).]
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.
ÝBusiness and Professions Code Section 18895.2(b).]
4) 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.
ÝBusiness and Professions Code Section 18895.2(i)(2).]
5) 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. (Business and Professions Code
Section 18895.2.)
6) Requires an athlete agent to file specified information,
including whether a student athlete or educational
institution has been impacted by the actions of the athlete
agent, with the Secretary of State, and to advise an athlete
of the availability of this information. (Business and
Professions Code Section 18896.)
7) Prohibits an athlete agent from offering or providing
money or any other thing of benefit or value to a student
athlete and 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.
(Business and Professions Code Section 18897.6.)
8) Prohibits an athlete agent or athlete agent's
representative from offering or providing money or anything
of benefit or value to a school or representative of a
school in return for a client referral. (Business and
Professions Code Section 18897.67.)
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9) Requires an athlete agent and student athlete who enter
into an agent contract to provide written notice within 48
hours of the contract to the chief administrator of the
school where the athlete has been admitted or is enrolled
and 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. (Business and Professions Code Section 18897.7.)
10) Makes a violation of the Act by an athlete agent or
athlete agent's representative or employee a misdemeanor,
punishable by a fine of not more than $50,000, or
imprisonment in a county jail not exceeding one year, or by
both that fine and imprisonment. (Business and Professions
Code Section 18897.93.)
11) Allows a court to suspend or revoke the privilege of an
athlete agent to conduct business as such if he or she is
convicted of a violation of the Act. (Business and
Professions Code Section 18897.93.)
FISCAL EFFECT : This bill passed out of the Senate
Appropriations Committee under Senate Rule 28.8.
COMMENTS :
1)Author's Statement and Support : According to the author,
"This bill protects student athletes from unscrupulous athlete
agents. Student athletes are continuously victimized by
unscrupulous athlete agents who lie, deceive and force student
athletes to enter into contracts that are not in their best
interest. Additionally, these athlete agents provide student
athletes with cash and secret gifts. The significant damage
that results from the illegal practices of these agents causes
the student athletes to be made ineligible for participation
in National Collegiate Athletic Association (NCAA) competition
and the team and the university to be subject to harsh
penalties (including the imposition of NCAA sanctions
resulting in the repayment of substantial monies received from
NCAA championship competition, the forfeiture of past contests
and prohibitions against future championship opportunities).
As one athletic director recently stated in testimony before a
congressional subcommittee on the subject: 'These agents,
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motivated largely by financial considerations, are willing to
use any means necessary to represent a student athlete who has
even a remote chance of playing professional sports. They
frequently employ tactics that involve secret payments to
friends and relatives who may be in a position to influence
the student athlete, unrealistic promises, and considerable
arm- twisting.' Aside from the Miller-Ayala Agents Act which
primarily requires athlete agents to register with the
Secretary of State's Office, athlete agents operate in an
unregulated and unchecked environment."
2)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 ÝAB 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.
3) The NCAA Oversight of Athletics : The NCAA is the national
governing body for college athletes, coaches, and athletic
departments. The NCAA has rules which require college
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athletes to maintain amateur status while they are in school.
NCAA rules prohibit student athletes from accepting what the
organization terms as "improper" benefits, including gifts,
cash, or other items of value. Under NCAA rules, student
athletes permanently lose their collegiate eligibility if
they sign with an agent. The specific penalties for
reinstatement depend on the severity of the violations,
ranging from a repayment of the value of the benefits and
sitting out games to permanent ineligibility.
For penalties to be levied against an institution for an
agent violation, the institution must either have known or
should have known or had culpability for those violations.
Penalties are determined by the Committee on Infractions,
which is an independent body of representatives from member
institutions and the general public.
According to the NCAA.org website, "We believe the rules are
reasonably clear in this area, especially for
student-athletes and for agents - there should be no
confusion on what is and is not allowed. ? What often gets
missed in all of this is that the NCAA and its members do not
have jurisdiction over agents. The only people who can take
action to regulate agents and people working for them are the
players associations and various state agencies working to
enforce agent law in those states that have it." Toward this
end the NCAA supports the UAAA.
4)Uniform Athlete Agents Act (UAAA) : According to information
provided by the Uniform Law Commission and the 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 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
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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).
5)Increased Penalties are Intended to Deter Improper Activities
and Remove Bad Actors From the Profession : By imposing a
mandatory minimum one year suspension for any agent or agent's
representative found guilty of violating the law, this bill
seeks to remove unscrupulous agents from practice. This
suspension, in addition to the bill's financial penalties is
aimed at deterring improper conduct before it starts.
According to the bill's sponsor, "Unscrupulous agents thrive
on exploiting the financial circumstances of student-athletes,
encouraging them to accept financial incentives. The current
penalties afforded by the existing law are too lenient, when
weighed against the significant damage that may result from
agent's illegal practices." In addition, information provided
by the author demonstrates that a significant financial
incentive exists for agents to lavish top talent with gifts in
order to sign them to lucrative professional contracts.
Agents who are able to successfully woo top talent receive a
huge payday if they are able to sign a top draft pick and
share in the large signing bonus, plus millions more over the
course of an elite athlete's career. (See, Dohrmann, George,
"Confessions of an Agent" Sports Illustrated, October, 10,
2010.)
According to the University of Southern California, this bill
is needed because, "The penalties for students and
institutions by the ÝNCAA] can be substantial and do enormous
damage, but there is no ÝNCAA] jurisdiction over athlete
agents and their role in any possible violation." The sponsor
adds that this bill will "remove the financial incentive to
act illegally" by forcing athlete agents to disgorge any
illegally obtained payments stemming from illegal conduct with
a college athlete. Additionally, the law seeks to ban an
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agent from practicing in California for a minimum of one year
if found responsible for violating the law. "Together these
penalties are designed to deter agent misconduct, or at a
minimum ensure that agents share in the punishment for
misconduct by guaranteeing that the student athlete is not the
only person to suffer as a result of illegal agent behavior."
6)Prior and Related Legislation :
SB 101 (Corbett, 2011) would alter provisions in the
Miller-Ayala 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. Status: currently pending before
this committee.
SB 1098 (Corbett, 2010) would have enacted the Uniform
Athletes Agents Act. 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
Los Angeles City Attorney (Sponsor)
Association of Independent California Colleges and Universities
California Community Colleges Chancellor's Office
California Interscholastic Federation
Stanford University
UCLA Department of Intercollegiate Athletics
University of California Office of the President
University of Southern California
Opposition
None known
Analysis Prepared by : Dana Mitchell / A.,E.,S.,T. & I.M. /
(916) 319-3450
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