BILL ANALYSIS                                                                                                                                                                                                    



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          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