OLR Bill Analysis

sSB 487

AN ACT ADOPTING THE UNIFORM ATHLETE AGENTS ACT

SUMMARY:

This bill make significant changes to current law on athlete agents. Among other things, it:

1. expands the types of agency contracts that are subject to the law's provisions by including agreements authorizing a person to negotiate endorsement contracts;

2. makes a number of changes to the reasons the Department of Consumer Protection (DCP) can refuse to issue or renew a registration or suspend or revoke one;

3. eliminates the requirement that the agent post a $ 100,000 surety bond as a condition of registration;

4. extends the registration period from one to two years;

5. adds a safe harbor provision when an athlete initiates contact with an agent who is not registered (the agent must register within seven days after the initial contact);

6. alters the registration application requirements and adds provisions on registration and renewal for agents who are registered in other states;

7. alters the contract requirements but applies these requirements only to agency contracts (unlike current law, the bill does not address financial services contracts which are agreements where an athlete authorizes an athlete agent to provide financial services including making and carrying out investment and other financial decisions);

8. increases from six to 14 days the time an athlete has to cancel an agency contract;

9. alters the provisions on prohibited conduct and no longer prohibits athlete agents from entering agency contracts with student athletes before their collegiate eligibility expires;

10. creates a cause of action by an educational institution against an agent or former student-athlete for damages caused by violations of the bill;

11. does not specifically allow restitution or make violations an unfair trade practice, as under current law;

12. alters the record-keeping requirements imposed on agents and reduces, from seven to five years, the time the agent must keep records;

13. eliminates certain rules and prohibitions regarding interviewing athletes; and

14. eliminates DCP's authority to adopt regulations regarding athlete agents.

EFFECTIVE DATE: January 1, 2005

ATHLETE

Similar to current law, the bill defines "student-athlete" as someone who engages in, is eligible to engage in, or may be eligible to engage in, an intercollegiate sport. But unlike current law, the bill does not limit its scope to athletes who have not signed a contract with a professional sports team for employment or for future athletic services.

The bill defines "intercollegiate sport" as a sport played at the collegiate level for which eligibility requirements are set by a national association for the promotion of athletics, such as the National Collegiate Athletic Association (NCAA).

AGENT

Under current law, an "athlete agent" is a person who (1) for compensation, recruits or solicits athletes to sign an agent, financial services, or professional sports services contract or (2) for a fee, procures or offers, promises, or attempts to obtain employment for an athlete with a professional sports team or as a professional athlete. The bill instead defines "athlete agent" as an individual who (1) enters an agency contract with a student-athlete and (2) solicits a student athlete to enter such a contract. Unlike current law, the bill includes someone who represents to the public that he is an agent.

Under current law, the term does not include the athlete's spouse, parent, or sibling. The bill also excludes an athlete's grandparents and guardians and someone acting on behalf of a sports team.

The bill allows only individuals to register as agents, thereby disqualifying corporations and other legal entities from registering.

AGENCY CONTRACT

The bill defines "agency contract," similar to current law, as an agreement in which a student-athlete authorizes a person to negotiate or solicit a professional sports services contract or an endorsement contract. But the bill makes endorsement contracts (defined as agreements under which a student-athlete receives consideration to use his publicity value on behalf of someone else) a type of agency contract subject to its provisions.

As under current law, a "professional services contract" is an agreement under which an athlete is employed by, or agrees to give services as a player on, a team or as a professional athlete.

REGISTRATION

Both the bill and current law require athlete-agents to register. The bill extends the registration period from one to two years. The bill sets the fee for an application or renewal at $ 200 for the two-year period instead of the $ 100 annual fee under current law. The bill also sets a $ 200 fee for applications or renewals based on registration in another state.

Safe Harbor Provision

The bill adds a provision that allows an individual to act as an agent before registration for all purposes except signing an agency contract if (1) the student-athlete or someone on his behalf contacts the agent and (2) the individual files an agent registration application within seven days of the initial act taken as an agent. A contract signed in violation of this provision is void. The bill requires the athlete agent to return any consideration received under such a contract.

The bill defines "contact" as a communication, direct or indirect, between an athlete agent and a student-athlete, to recruit or solicit the student-athlete to enter an agency contract.

Application Requirements

The bill requires an applicant to provide most of the same information as required currently under regulations but it adds some requirements and eliminates others. As under current law, the application must provide: (1) the applicant's name and address; (2) his business or employer, if applicable; (3) occupations engaged in for the past five years; and (4) a description of formal training, practical experience, and education.

Current regulations require applicants to provide the names and addresses of all who have a financial interest in the agent's business. If the applicant is a corporation, education and experience information must be provided about all who act on the corporation's behalf as an athlete agent. Instead, the bill specifies that the applicant must provide the names and addresses of anyone who is (1) a partner, member, officer, manager, associate, or profit-sharer in the agent's business or (2) an officer, director, or shareholder with at least 5% of the shares in a corporation employing the agent. An applicant must also state whether he, or anyone named under this requirement (1) was convicted of a crime that would be, in this state, a felony and identify the crime; (2) was found to have made a false, misleading, deceptive, or fraudulent representation in an administrative or judicial proceeding; (3) did something that resulted in an athlete's sanction, suspension, or declaration of ineligibility for intercollegiate sports; (4) was the subject of a sanction, suspension, or disciplinary action arising out of their professional conduct; or (5) was denied an application.

The bill adds requirements that the applicant provide the (1) names and addresses of three references unrelated to the applicant and (2) the name, sport, and last-known team of each individual for whom the applicant acted as an agent in the past five years.

The bill eliminates a requirement that DCP adopt regulations to establish bond requirements for athlete agents (the regulations require a $ 100,000 surety bond).

Regulations also allow DCP to reserve the right, as a condition of registration, to approve the form of an agency, financial services, or professional services contract. The bill eliminates this explicit authority.

The bill requires the applicant to sign or otherwise authenticate the application under penalty of perjury (a class D felony punishable by one to five years in prison, a fine of up to $ 5,000, or both).

Registration Renewal

As under current law, the athlete agent must submit a written renewal application on a form provided by DCP with the same information required for the original application. The bill specifies that the athlete agent signs the form under penalty of perjury (a class D felony).

Registered in Other States

The bill allows an applicant who is already registered in another state to submit a copy of his application to, and the certificate issued by, the other state instead of completing the Connecticut application. The bill requires the DCP commissioner to accept the application if (1) it was submitted to the other state within the last six months, (2) the applicant certifies that the information in it is correct, (3) the information is substantially similar or more comprehensive than what this state requires, and (4) it was signed by the applicant under penalty of perjury.

The bill also includes a similar provision on registration renewal based on a valid registration in another state.

Temporary Registration

The bill allows the commissioner to issue a temporary registration while an application for registration or renewal is pending.

REFUSAL TO ISSUE OR RENEW REGISTRATION, SUSPENSION, AND REVOCATION

The bill makes a number of changes to the reasons DCP can refuse to issue or renew a registration or suspend or revoke one. The bill uses a broad standard about conduct that has a significant adverse effect on the fitness for the job and then includes a list of considerations (some of which are similar to the criteria in the regulations).

The bill allows the commissioner to refuse to issue or renew a registration or suspend or revoke one if he finds the applicant engaged in conduct that has a significant adverse effect on his fitness to act as an athlete agent. The commissioner can consider whether the applicant:

1. was convicted of a crime that, if committed in this state, would be a felony;

2. made a materially false, misleading, deceptive, or fraudulent representation as an athlete agent or in his application;

3. engaged in conduct that would disqualify him from being a fiduciary;

4. engaged in conduct the bill prohibits to induce an athlete to enter an agency contract;

5. had an athlete agent registration suspended, revoked, denied, or renewal refused in any state;

6. engaged in conduct that resulted in a student athlete's or educational institution's sanction, suspension, or declaration of ineligibility for participation in interscholastic or intercollegiate athletic events; or

7. engaged in conduct that significantly adversely reflects on the applicant's credibility, honesty, or integrity.

The commissioner must consider (1) how recently the conduct occurred, (2) the nature of the conduct and its context, and (3) any other relevant conduct.

Unlike current law, the bill requires notice and hearing under the administrative procedure act before suspending, revoking, or refusing to renew a registration. But the bill eliminates explicit authority for revoking a registration for conviction of a violation of the athlete agent laws, summary suspension after a criminal violation, and a one-year waiting period before reapplying for a registration after a revocation or judgment affirming it.

Under current law, the commissioner can refuse to issue or renew, suspend, or revoke a registration for violating any of the statutory provisions or the regulations. DCP can take one of these actions if the agent, its employees, agents, or officers:

1. is not lawfully engaged in business in the state;

2. engaged in conduct likely to mislead, deceive, or defraud the public or the commissioner;

3. engaged in untruthful or misleading advertising;

4. made a material misrepresentation;

5. made a false promise of a type likely to influence, persuade, or induce an athlete to enter a contract;

6. failed to account within a reasonable time for or remit funds that belong to client athletes;

7. was convicted of forgery, embezzlement, obtaining money under false pretenses, larceny, extortion, conspiracy to defraud, or similar offenses in this state or elsewhere;

8. engaged in dishonest, fraudulent, or improper dealings;

9. violated or failed to comply with the regulations;

10. acted as agent after his bond was cancelled;

11. commingled funds of others in an escrow or trustee account;

12. contacted an athlete directly or indirectly before being registered;

13. entered an agreement that offered something of value to an employee of a higher education institution in this state where the athlete is enrolled or a member of his family or a friend likely to influence the athlete's decisions, in return for referring a client;

14. divided fees or received compensation from a potential employer of an athlete that he has a contract with;

15. committed an unfair trade practice;

16. collected a fee over 10% of the direct and indirect compensation an athlete receives under a contract in a calendar year; or

17. sold or transferred an interest in or a right to profits from working as an agent in this state to someone who is not registered in this state.

The regulations also allow DCP to refuse to issue or renew a registration if the applicant lacks formal training or practical experience in (1) contracts and their negotiation, (2) complaint resolution, (3) arbitration, or (4) civil resolution of contract disputes. For business entities, DCP must review their employees and agents. DCP can consider other relevant training, education, and experience for these requirements.

CONTRACTS

Form

The bill allows agency contracts to be in records (inscribed on a tangible medium or stored in an electronic or other medium that is retrievable in perceivable form), while current law requires them to be written. The bill does not require the use of plain language which current regulations do.

The bill only applies to agency contracts, unlike current law which also applies to financial services contracts and professional services contracts.

Contents

As under current law, an agency contract must contain (1) information on amounts the student athlete pays the athlete agent for services, (2) a description of services provided, and (3) the date of execution.

The bill adds that the contract must disclose (1) anything else the agent has or will receive from other sources for entering the contract or providing services, (2) unregistered individuals who will receive compensation, (3) expenses the athlete must pay, and (4) the contract's duration.

The bill requires the agent to give a record of the agency contract to the student-athlete at the time of execution.

The bill eliminates the requirement that the agent impose fees only according to the schedule in the contract and a provision allowing changes to the schedule effective seven days after he files with DCP a copy of the contract with the changes.

Contract Warning/Disclaimer

The bill does not apply its requirements to financial services contracts, as current law does. As under current regulations, the bill requires an agency contract to contain a conspicuous notice in boldface capital letters about (1) the possibility of losing eligibility as a student-athlete and (2) the right to cancel the contract. The bill adds that the notice must state that canceling might not reinstate eligibility.

The bill adds that the notice must include the requirement to notify an athletic director (described below). It eliminates the requirement that the notice state that (1) registration does not imply approval of the agent or contract and (2) the athlete should read the contract.

The bill specifies that the notice must be placed near the student-athlete's signature.

Non-Conforming Agency Contracts

The bill allows an athlete to void an agency contract that does not satisfy the rules described above. In those circumstances, he is not required to pay anything under the contract or return anything the agent gave him to induce him to agree to the contract.

Notification to Athletic Director

Current regulations require the agent to give a copy of an agent contract, financial services contract, or professional services contract to the athletic director of a higher education institution in this state where the athlete is enrolled within three business days of signing. The bill instead:

1. applies only to agency contracts;

2. requires the agent to give notice in a record and the athlete to inform his athletic director;

3. requires the agent to give a record to an athletic director of an educational institution where he has reasonable grounds to believe the athlete intends to enroll, as well as an athletic director where the athlete is enrolled; and

4. requires notice within 72 hours or before the athlete participates in an athletic event, whichever is less, which will be less than the three business days required under the regulations in some circumstances.

The bill defines "athletic director" as someone responsible for administering the overall athletic program, whether the responsibilities are for both sexes or for a single sex.

Right to Cancel Agency Contract

The bill increases, from six to 14 days, the time an athlete has to cancel an agency contract and requires the student-athlete to cancel by giving notice in a record. The bill also provides that (1) the student-athlete cannot waive this right and (2) if he cancels the contract, he is not required to pay anything under the contract or return anything received from the athlete agent to induce the contract.

RECORD RETENTION

The bill reduces, from seven to five years, the time that an agent must keep records. As under current law, the agent must keep (1) the name and address of individuals represented and (2) agency contracts entered into. The bill also requires the agent to keep records of costs in recruiting or soliciting athletes instead of information on fees received, services provided, and travel and entertainment expenses. The bill makes these records open to inspection by DCP, while current law requires the agent to provide DCP with the information in the records on written request.

PROHIBITED CONDUCT

The bill makes a number of changes to the types of conduct that athlete agents are prohibited from engaging in.

The bill eliminates a prohibition against (1) entering oral or written agency contracts or professional sport services contracts with an athlete before his collegiate eligibility expires and (2) dividing fees with or receiving compensation from a professional sports league or franchise or its representatives or employees.

Current law prohibits (1) entering an oral or written agreement offering anything of value to an employee of an institution of higher education in the state for referring an athlete and (2) giving, offering, or promising anything of value to an athlete, his guardian, or member of his immediate family before his college eligibility expires. The bill instead prohibits an athlete agent from furnishing anything of value to an individual other than the student-athlete or another registered athlete-agent, with intent to induce the student-athlete to enter a contract.

Both the bill and current law prohibit an agent from giving materially false or misleading information or making materially false promises or representations. The bill specifies that the athlete agent must not do so intending to induce a student-athlete to enter a contract.

The bill adds provisions prohibiting an athlete agent from intentionally (1) initiating contact with a student-athlete unless he is registered, (2) refusing or failing to retain or permit inspection of records that he must keep, (3) failing to register, (4) providing materially false or misleading information in an application for registration or renewal, (5) pre- or post-dating an agency contract, and (6) failing to notify a student-athlete before he signs or authenticates an agency contract for a particular sport that it may make him ineligible to participate as a student-athlete in that sport.

PENALTIES

As under current law, a violation of the athlete-agent laws is a class B misdemeanor, punishable by up to six months in prison, a fine of up to $ 1,000, or both.

As under current law, the bill allows the commissioner to assess a civil penalty against an athlete agent after notice and a hearing under the administrative procedures act. The bill changes the penalty from up to $ 1,000 plus profits derived from the violation minus restitution paid, to a maximum of $ 25,000.

The bill eliminates provisions allowing restitution and making violations an unfair trade practice, as current law provides.

CAUSE OF ACTION BY EDUCATIONAL INSTITUTION

The bill gives an educational institution the right to sue an athlete agent or former student-athlete for damages caused by violations of the bill. It allows the court to award costs and reasonable attorney's fees to the prevailing party. Damages include losses and expenses incurred because of (1) injuries from the violation or (2) penalties, disqualification, or suspension from participation in athletics by (a) a national association for promoting and regulating athletics, (b) an athletic conference, or (c) a reasonable self-imposed disciplinary action taken to mitigate sanctions likely to be imposed by an organization. The right to sue arises when the educational institution discovers, or by reasonable diligence should have discovered, the violation (but the bill does not set a limitation on the time to bring a suit). The liability of the athlete agent and student-athlete is several and not joint. The bill does not restrict rights, remedies, or defenses.

SERVICE OF PROCESS

Under the bill, a nonresident acting as an athlete agent in this state appoints the secretary of the state as his agent for service of process in a civil action in this state related to his actions as an athlete agent here.

INTERVIEWS

The bill eliminates the requirements relating to interviews between athletes and agents. Under current law, the time, place, and duration of an interview between an athlete and agent must follow any policy that the school where the athlete is enrolled adopts or follows. An interview is a face-to-face meeting to recruit or solicit the athlete for (1) an agent contract, financial services contract, or professional services contract or (2) employment with a professional sports team or as a professional athlete.

REGULATIONS

The bill eliminates DCP's explicit authority to adopt regulations to set requirements for registration and regulating athletes including (1) agent qualifications and registration procedures, (2) bond requirements, (3) requirements for contracts including fee schedules, (4) limits and conditions on communicating with athletes such as advertising and interviewing, (5) guidelines for registration suspension and revocation, (6) limits on fees and compensation such as the transfer of interests or rights to participate in profits made by agents, and (7) other reasonable regulations the commissioner finds necessary or desirable.

E-SIGN

The bill specifies that the legal effect, validity, or enforceability of electronic records or signatures and of contracts formed or performed with records and signatures conforms to the requirements of the federal Electronic Signatures in Global and National Commerce Act (E-SIGN) (15 U. S. C. § 7001 et seq. ) but it supercedes, modifies, and limits E-SIGN as allowed by that act.

This federal act applies to transactions in interstate and foreign commerce. The act validates the use of electronic records and electronic signatures in transactions but does not require anyone to agree to use or accept electronic records or signatures. Where E-SIGN conflicts with a state law, the federal law preempts state law. A state provision can modify, limit, or supercede E-SIGN's electronic contracting provisions if it provides alternative procedures or requirements for the use or acceptance of electronic records or signatures, is consistent with the federal law, does not require or accord greater legal status or effect to a specific technology, and specifically references the federal act.

OTHER PROVISIONS

The bill specifies that in applying and construing its provisions, consideration must be given to the need to promote uniformity.

The bill states that if any provision or its application to a person or circumstance is invalid, it does not affect other provisions or applications of the bill that can have effect without the invalid provision or application. It also states that its provisions are severable.

The bill also deletes provisions (1) in regulations that a business entity that acts as an athlete agent is not relieved of responsibility for the conduct of its agents, employees, or officers and the agents, employees, and officers are not relieved of responsibility by reason of their relationship with the business and (2) in statute that nothing requires an athlete to use an agent or limits his ability to contract for services outside the state.

COMMITTEE ACTION

Judiciary Committee

Joint Favorable Substitute

Yea

40

Nay

0