Dynamics of a player-agent relationship in the NBA - Part 1

Introduction

One of the most difficult tasks for a newly turned professional athlete is to choose his or her business team and that often begins with selecting an intermediary or a sports agent. Anecdotal evidence shows that athletes in the professional sports world have been taken advantage of, and therefore, it is very important for professional athletes to surround themselves with the right kind of people. In leagues like the National Basketball Association (NBA) and the National Football League (NFL), athletes draw seven-figure salaries at a very young age. There have been instances where the athletes, once their playing career was over, could not manage their money and went bankrupt. This can be attributed to poor financial management skills.

Many of these athletes are ‘one and done’ prospects, i.e., only after one year of college they turn professional. Hence, they are devoid of the college education that plays an essential role in gaining necessary financial and life skills. Athletes hire intermediaries to represent themselves and ensure financial stability even after their professional career is over; these agents are expected to work in the best interest of the athlete. The traditional norm is that the athletes enter into a Standard Player Agent Contract (“SPAC”) with the intermediaries. This marks the outset of a player-agent relationship. Often regarded as a fiduciary relationship under common law, there is a principal-agent relationship in which the principal authorizes the agent to work on his behalf. Once the principal-agent relationship is established, the agent is duty-bound to represent the athlete and negotiate the best possible deal for the athlete.

There are certain duties vested on the agent towards the principal, which include good faith, loyalty, candor, transparency, using reasonable care, and applying proper skill to serve the best interest of the Principal.

National Basketball Association

In the NBA, there is a provision in the collective bargaining agreement between the National Basketball Player’s Association (NBPA) and the NBA that states that a player agent must be certified by the NBPA in accordance with the Player Association’s Regulations governing player agents.[1] If a contract between a team and a player is negotiated by a non-certified agent, then such a contract will be considered void. It is the duty of the player association to submit a list of certified agents to the NBA office along with the list of players and their respective agents. Such list is updated every two weeks.[2] The scope of a player agent’s activities is quite wide. It includes providing advice, information, counsel or assistance to players, including rookies, with respect to negotiating their employment contract with NBA teams on their behalf. The duty of enforcing such contracts also lies on the agent.

Certification Process

In order to receive certification from NBPA as an intermediary, the first and foremost thing is to meet the eligibility criteria i.e. the applicant must hold a degree in a four year program from an accredited college or university. The NBPA, in its own discretion, may accept relevant negotiating experience to substitute for any year(s) of college education.

The next step is filling out the “Application for Certification of NBPA Player Agent” and a non-refundable fee shall be payable at the time of filing the application. The applicant, while filling out the application, must follow the guidelines issued on the NBPA website. The application can only be filed under individual capacity; no application on behalf of a corporation shall be entertained by the NBPA. Further, the NBPA reviews the application and conducts a background investigation along with an informal meeting with the applicant. In addition to this, the applicant is required to pass a written exam conducted by the NBPA. The subject matter of the examination essentially deals with the provisions of the Collective Bargaining Agreement and the NBPA rules and regulations. The NBPA provides a preparation course to the applicants.[3]

Intermediary Compensation

The NBPA has set a threshold for the remuneration received by an intermediary depending on the type of contract negotiated by the agent. If an intermediary negotiates a minimum contract as per the NBA-NBPA collective bargaining agreement, the intermediary can charge a maximum fee of 2% of the player’s compensation for each season or a lesser percentage as agreed between the player and the intermediary. If the intermediary negotiates a contract in which the player earns more than the minimum compensation, then the intermediary can charge a maximum fee of 4% or a lesser percentage as agreed between the player and the agent. The term “player compensation” includes base salary, signing bonus, or any performance bonus. The agent fee is only payable once the player receives the compensation on which the fee is based.[4]

The league has seen tremendous success. The skyrocketing revenues and the players earning lucrative contracts have lured many new and young intermediaries to be a part of the NBA. The agents are always on the lookout to poach another agent’s client, thus making the competition cutthroat and creating a hostile environment among agents. An NBA player firing his agent has become a frequent practice in the league. The New York Knicks centre, Mitchell Robinson, who was drafted in 2018, has had five agents represent him before signing with Thad Foucher of the Wasserman group.[5]Poaching of clients is another common practice in the NBA. There are some intermediaries who are bothered by poaching to the point that they try to ensure that their clients do not attend certain events or training facilities where there is a risk that their client might be poached by another intermediary. This usually happens when the player is in his contract year and about to sign a lucrative deal. A new agent approaches a player and makes him believe that he is worth more money and that the agent can help him make more money. Though a common phenomenon in the league, it is not necessarily the case that it pans out as expected. There have been various instances where the intermediaries have made big promises to the players but failed to fulfil them. Another New York Knicks centre, Nerlens Noel, had a similar experience with his then-agent Rich Paul, of Klutch Sports.

Part 2 will be published next week, exploring 'The Nerlens Noel and Rich Paul Saga' in addition concluding thoughts.