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A union’s animating – indeed statutory – purpose is to protect its members. The unions representing players in the major American professional sports leagues are no different, doing battle with leagues and teams on a daily basis over the collective bargaining agreement governing players’ employment and disputes arising thereunder. One of the other ways in which players unions protect their members is through their regulation of agents. However, a recent lawsuit filed by agent Daniel Hazan against Detroit Pistons guard Malik Beasley demonstrates one way in which the National Basketball Players Association (NBPA) is failing its members.
From the New Deal to the NBPA
The National Labor Relations Act (NLRA), passed in 1935, was one of several major pieces of legislation enacted as part of President Franklin D. Roosevelt’s New Deal. The NLRA protects the rights of private sector employees to come together, unionize, and collectively bargain with their employers about their wages, hours, and other terms and conditions of employment.
To this end, in 1954, NBA players formed the NBPA for purposes of collectively bargaining with the NBA and its clubs. Since that time, the union and league have negotiated numerous collective bargaining agreements governing a wide range of issues affecting NBA player employment.
The NLRA not only empowers employees, but also the unions formed or selected by them for representation. Specifically, Section 9 provides that the union “shall be the exclusive representatives of all of the employees in [the employee]
unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment.” In other words, both employees and employers are prohibited from negotiating the terms of an employee’s employment without the union’s involvement or permission.
From the NBPA to the Agent
In sports, the union’s exclusive authority under the NLRA means, for example, that the NBPA has the right to negotiate all of the contracts of the approximate 450 players on NBA rosters. Such a workload is impractical. Consequently, the NBPA and the other unions in professional sports (such as the NFL Players Association (NFLPA) and Major League Baseball Players Association (MLBPA)), effectively delegate some of that negotiating authority to agents pursuant to a certification process.
In the collective bargaining agreement, the NBA and NBPA negotiate numerous parameters around player employment, including minimum salaries, the terms of the uniform player contract, dispute resolution, benefits, work schedules, and more. Nevertheless, there is still a considerable amount of room left to individual negotiation between the player and his agent and the team, notably the annual salary and length of the contract.
The union certification process varies across the unions but generally requires an extensive background check, sometimes an exam, and the agreement to abide by the union’s agent regulations. The regulations are extensive and intended to ensure that agents represent players competently, zealously, and ethically. The unions’ authority is further cemented as part of the collective bargaining agreements, in which the teams agree not to negotiate player contracts with agents not certified by the relevant union.
Failure to abide by the union’s regulations can lead to substantial penalties (as in the case of NFL agent Todd France) or the revocation of your certification (as with two want-to-be baseball agents affiliated with the rapper Bad Bunny).
The Agent Arbitration Process
Among the rules contained in the unions’ agent regulations is a general requirement that any dispute over the regulations, between agents, or between a player and an agent be resolved exclusively through a union-administered arbitration process. These rules serve several purposes, including: (1) providing a private, informal and cost-efficient forum for resolution of disputes involving players; (2) the development of a body of arbitral case law specific and responsive to that union and its members; and (3) ensuring that the union learns of and can monitor the conduct of the agents it regulates, particularly where they are engaged in disputes with players.
Nevertheless, the unions have taken different approaches concerning what types of disputes they believe fit within their regulation’s arbitration provision.
In the Bad Bunny case, the MLBPA took a broad view of its authority to regulate agents, insisting that it had the authority to regulate not just individual agents, but also any entities with which they performed services on behalf of MLB players, including marketing services. The would-be agents lost in their effort to persuade a federal court that the MLBPA was exceeding its authority.
Conversely, Roger Kaplan, the arbitrator responsible for disputes under the NFLPA agent regulations, has previously ruled that he does not have authority over entities through which agents operate.
Nevertheless, Kaplan has regularly exercised jurisdiction over contracts for marketing services agreed to between agents and players. Indeed, the NFLPA’s agent regulations require that agents submit a copy of any agreement between a player and an agent within ten days of its execution, including but not limited to marketing agreements, loans, lines of credit, and other services or benefits. The obvious but unstated reason for this requirement is so that the union can ensure that agents are not taking advantage of their player-clients.
The NBPA Steps Aside
Unlike the MLBPA and NFLPA, the NBPA does not seek to regulate every agreement between an agent and a player. Instead, it takes a limited (and myopic) view that its arbitration procedures only apply to the Standard Player Agent Contract (SPAC) through which the player retains the agent for purposes of negotiating an NBA player contract. That means agents must arbitrate claims against a player for unpaid commissions, but could sue them in court for any other aspect of their relationship.
NBPA-certified agent Daniel Hazan is exploiting this deficiency in the NBPA’s approach by suing Beasley, a former client, in federal court for allegedly refusing to repay a November 2023 $650,000 advance payment on marketing commissions from by his agency.
Hazan’s lawsuit is indicative of exactly the type of predatory conduct that the NBPA should be seeking to regulate. The NBPA agent regulations prohibit “[p]roviding or offering a monetary inducement… to any Player… to induce or encourage that person to utilize his services.” Yet the marketing advance provided by Hazan seems to be exactly that since it was executed at the same time that Beasley entered into a SPAC with Hazan. Be that as it may, the players unions in all sports have regularly – and implausibly – considered marketing advances not to be an inducement.
Nevertheless, the amount Hazan seeks in the lawsuit is also problematic. Despite advancing Beasley only $650,000, the contract included a $1,000,000 liquidated damages clause, which Hazan seeks to fully enforce. As a matter of law, liquidated damages clauses cannot be used as a penalty. But that seems quite clearly the intent of the provision drafted by Hazan.
The agreement otherwise is indicative of one-sided drafting. For example, the contract contains a lengthy indemnification provision through which Beasley would be obligated to reimburse Hazan for various costs under certain circumstances. Such clauses are common, but they are also usually reciprocal – imposing such obligations on both parties. Next, the agreement also obligates Beasley to reimburse Hazan for his legal fees in trying to enforce the marketing agreement, i.e., in the very lawsuit that Hazan has now filed.
Hazan’s LinkedIn profile indicates that he received a law degree from the Touro Law Center, a Long Island school near the bottom of law school rankings in America. Yet a search of New York records does not indicate that Hazan ever became a licensed attorney in New York. If he were, his conduct could potentially draw scrutiny under the State’s Rules of Professional Conduct for Attorneys.
Either way, the above facts demonstrate that this situation is one which the NBPA should seek to bring within its arbitration mechanism and more closely scrutinize. Its failure to do so is an abdication of its responsibility to its player-members.
Neither Hazan’s attorney nor the NBPA responded to a request for comment.