Education WEEK 5 ASSIGNMENT

The four major sports leagues in the United States are governed by collective bargaining agreements. A collective bargaining agreement is a contractual agreement between employers and employees that regulates the terms and conditions of employment. In terms of professional sports, leagues and team owners are the employers, and the players are the employees.

All four major sports leagues in the United States (e.g., MLB, NBA, NFL and NHL) negotiate the terms of their collective bargaining agreements with the trade unions that represent their respective league’s athletes. These unions are the:

· National Basketball Players Association (NBPA)

· National Football League Players Association (NFLPA)

· National Hockey League Players Association (NHLPA)

· Major League Baseball Players Association (MLBPA)

The major professional sports leagues (e.g., MLB, NBA, NFL and NHL) in the United States are unique in terms of how players’ contractual salaries are negotiated. Typically a union negotiates directly with the employer on what wages an employee will earn. However, the MLBPA, NBPA, NFLPA and NHLPA delegate the negotiation of a player’s salary to agents. Due to the fact that a major responsibility of the union is being delegated away to agents, each association has rules governing agents.

One type of rule that players associations have in place to regulate agents’ behavior is called “certification.” In order for an agent to represent athletes in their contract negotiations with teams, the NBPA, NFLPA, NHLPA and MLBPA all require agents to become certified. Each association has its own rules governing what an agent needs to do to become certified.

The following displays sport agent certification requirements as of 2015.

Why Become a Sports Agent?

The following table displays the range of compensation a sport agent may receive.

Agents compete for a limited number of players. Some agents use unscrupulous methods to attract players to their agency, which may include (Mitten et al., 2013):

· Paying players

· Making promises to players

· Talking poorly about or telling lies about other agents

Criminal prosecution of agents does occur. Some states have enacted laws to regulate agent behavior. Additionally, a federal law, the Sports Agents Responsibility and Trust Act (SPARTA), was enacted to regulate agent behavior. If agents violate these laws, they may be prosecuted in criminal court.

State Law

The Uniform Athlete Agents Act (The National Conference of Commissioners on Uniform State Laws, 2015) is a model state law that provides a means of regulating the conduct of athlete agents in order to protect student-athletes. This act requires an athlete agent to register with a state authority before signing or recruiting clients. During the registration process, an athlete agent must provide important background information, both professional and criminal in nature. The act forbids the agent from giving the student-athlete inducements to enter into an agency contract (i.e., the act is aimed at ending sport agents’ practice of paying athletes to sign with them). As of 2014, the Uniform Athlete Agents Act has been adopted by 41 states.

Federal Law

The Sports Agent Responsibility and Trust Act (SPARTA) is a federal law regulated by the Federal Trade Commission. SPARTA requires agents to adhere to three duties:

1. Duty to be truthful;

2. Duty of disclosure; and

3. Duty to refrain from buying an athlete

After Certification: An Agent’s Responsibilities

The main duty of a sports agent is to negotiate a professional athlete’s contract with a team. Along with negotiating a player’s contract, agents may also serve other functions.

There are different types of agency firm structures (Mitten et al., 2013)

1. Full-Service Firms: The firm negotiates contracts, seeks out endorsement deals, and manages an athlete’s wealth.

2. Strictly Agents: The firm only negotiates the player’s team contract. The player must assemble other individuals to assist with endorsement deals and wealth management.

Regardless of what type of firm structure an agent operates under, he or she must adhere to certain legal duties that are inherent in the agency relationship. An agency relationship (Mitten et al., 2013) is a fiduciary relationship. A fiduciary relationship is one based upon special trust and confidence between the parties to the relationship. In an agency relationship, the principal grants the agent authority to act on their behalf in certain areas. If the agent consents to act in these areas, then the agency relationship is formed.

Here are several important terms (Mitten et al., 2013):

· Principal (the player): The one for whom action is to be taken

· Agent: The one who is to act

· Fiduciary: One who acts primarily for the benefit of another

There are six main legal duties that an agent owes to its principal:

1. Duty of care: Exercise reasonable care and skill in executing duties that a reasonable person under the same circumstances would execute.

2. Duty of loyalty and good faith: Act at all times solely in the best interests of the principal.

3. Duty of obedience: Carry out the principal’s desires even if the desires are unwise unless the desires are illegal, immoral, unethical or opposed to by public policy.

4. Duty of disclosure: Inform the principal of all matters that may affect the principal’s interests.

5. Duty of confidentiality: Keep conversations private unless otherwise authorized.

6. Duty to account: Account to the principal for all of the principal’s funds that come into the agent’s possession as part of the agency relationship.

Another group of people in the sports world who are often represented by agents is coaches. Agents for coaches are not regulated by a union, since coaches are not unionized. Thus, there are no certification requirements or percentage limits on what an agent can take from a coach’s contract for agents representing coaches.

Legal Definition of a Contract

“A contract is a promise or set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty” (Restatement 2nd of Contracts, 1981, §1).

Terms to be negotiated include:

· The scope of a coach’s responsibilities

· The duration of a contract

· Entitlement to perquisites

· Reassignment to non-coaching positions

· Termination of the relationship

· Buyout provisions

1. The scope of the coach’s responsibilities

· What the coach is responsible for must be thoroughly outlined in the contract

· For instance, is the coach only responsible for coaching? Does he call plays? Must he make a weekly radio or television appearance to earn part of his salary? Must he engage in fundraising activities on behalf of the university?

2. Duration of the contract

· The contract must exist for a fixed period of time. The duration of that time period must be clearly stated within the text of the contract. For instance, the contract may exist for four years or through four seasons of football.

3. Entitlement to perquisites

· Perquisites: “Incidental profits attached to an official position beyond the salary or regular fees” (Black’s Law Dictionary 1968 p. 1299)

· Examples: Cars, country club memberships, private jet time, houses, luxury suites, season tickets

· Coaches may receive perquisites from the school or outside entities (e.g., a luxury car company can agree to provide the coach with a car)

4. Reassignment to non-coaching positions

· A coach’s contract must specify whether he or she may be reassigned to a non-coaching position. It must specify the reasons why the coach can be reassigned and must also define the types of positions within a university to which a coach can be reassigned. Generally, a coach is reassigned if he or she isn’t performing well as a coach. Coaches will generally be reassigned to a position in the athletics department. Coaches do not favor reassignment clauses because they enjoy coaching. Thus, agents for coaches should try to draft the contract so that the coach cannot be reassigned. Schools prefer reassignment clauses, because it provides some leeway for them outside of firing the coach if the coach isn’t performing well on the field.

5. Termination of the Relationship

· The contract must specify how the relationship can be terminated, i.e., how and when the school can fire the coach and how and when the coach can quit his or her job.

Employment relationships in the United States are generally presumed to be “at-will.” At-will employment means that an employer can terminate an employee at any time for any reason, except an illegal one, or for no reason, without incurring legal liability. Likewise, an employee is free to leave a job at any time for any or no reason with no adverse legal consequences.

The at-will presumption is a default rule that can be modified by a contract term stating that the coach can only be terminated for cause. Thereafter, what amounts to being “for cause” is defined in the contract.

· What constitutes “for cause” (Mitten et al., 2013)? Examples include:

· The coach’s team’s has a poor winning percentage.

· The coach refuses or is unable to perform duties.

· The coach is convicted of a serious criminal offense.

· The coach engages in fraud or dishonesty in the performance of duties.

· The coach participates or encourages participation in sports gambling.

· The coach engages in conduct detrimental to the best interests of the institution or team.

· The coach commits serious NCAA violations or the coaches below him or her commit serious NCAA violations while under the coach’s control.

When a coach is fired or quits before his contract expires, the question becomes: What does the school owe the coach, or what does the coach owe the school? To answer this question without having to rely on the court system, most coach’s contracts contain a liquidated damages clause, otherwise known as a “buyout clause.”

A liquidated damages clause is “. . . the amount specified in the contract that the parties have agreed is a reasonable estimation of the costs the parties” will incur in “the event of a breach.” (Mitten et al., 2013, p. 142) Liquidated damages must be a good faith estimate of the damages that are expected if either side breaches the contract. A liquidated damages clause cannot be a penalty.

An example of a penalty would be if the liquidated damages clause was for a dollar amount so high that it precluded the coach from taking a job elsewhere or prevented the school from hiring another coach (Mitten et al., 2013).

What the School Owes a Coach

· What does a school owe a coach when the coach is fired for cause? The school owes the coach nothing.

· What does a school owe a coach when the coach is fired, but not for cause? If there is a buyout clause, the school owes the coach whatever is specified in the buyout clause. If there is not a buyout clause, it is likely that the coach will sue the school to recoup lost wages. The coach’s lost wages amount to whatever dollar amount is remaining on his or her contract.

· What does a school owe a coach when the coach’s contract period expires and the school does not re-hire the coach? The school owes the coach nothing.

What the Coach Owes a School

· What does a coach owe a school when the coach leaves the school to coach elsewhere during the term of his contract? If the coach has a buyout clause, the coach will owe whatever is specified in the buyout clause. Oftentimes, the coach’s new school will pay part, if not most, of the coach’s buyout clause with the old school.

If the coach does not have a buyout clause, the school will likely sue the coach for the damages it incurred by him or her taking a job during the term of the contract.

· What if the coach leaves the school to coach elsewhere after the term of his or her contract? The coach owes the school nothing.

· What happens to a coach’s perquisites if his contract with the school is terminated? If the perquisites are from the school, the coach will no longer receive them if he or she is fired for cause or leaves for another opportunity. The coach will receive the perquisites if they are specified in the buyout clause and as long as he or she is not fired for cause.

· What happens if the perquisites are from an entity other than the school? This depends upon the coach’s contract with that entity.

References

American Law Institute (1981). Restatement 2nd of Contracts § 1. Philadelphia, PA: American Law Institute.

Black, H. C. (1968). Black’s Law Dictionary (4th ed.) St. Paul, MN: West Publishing Company.

Mitten, M. J., Davis, T., Shropshire, K. L., Osborne, B., & Smith, R. K. (2013). Sports law:  Governance and regulation, college edition.  New York, NY: Wolters Kluwer Law & Business.

The National Conference on Commissioners on Uniform State Laws. (2015). Athlete Agents Act . Retrieved from: http://www.uniformlaws.org/Act.aspx?title=Athlete%20Agents%20Act

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