A union’s animating – indeed statutory – purpose is to protect its members. Unions representing players in the major American professional sports leagues are no different. They do battle with leagues and teams on a daily basis over the collective bargaining agreement governing players’ employment.

Another way that players unions protect their members is by regulating 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 is failing its members.

From the New Deal to the Players Association

The National Labor Relations Act, passed in 1935, was one of several major pieces of legislation that made up 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, players in the National Basketball Association formed the Players Association 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 empowers not only employees, but also the unions formed or selected by them for representation. Specifically, Section 9 of the NLRA says that employees’ designated representatives “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, the NLRA prohibits employees and employers from negotiating the terms of an employee’s employment without the involvement or permission of the union.

From the Players Association to the agent

In sports, the union’s exclusive authority under the NLRA means, for example, that the Players Association has the right to negotiate all of the contracts of the approximately 450 players on NBA rosters. Such a workload is impractical. Consequently, the NB Players Association and the other unions in professional sports (such as the National Football League Players Association and the Major League Baseball Players Association), effectively delegate some of that negotiating authority to agents pursuant to a certification process.

In the NBA collective bargaining agreement, the League and the Players Association negotiate numerous terms related to player employment, including minimum salaries, the uniform player contract, dispute resolution, benefits, work schedules, and more. But there is still room left for individual negotiation between the player and his agent and the team – most significantly, the annual salary and length of the contract.

The process by which an agent is certified by the union 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 that they will not negotiate player contracts with agents who have not been 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 revocation of the agent’s certification (as with two want-to-be baseball agents affiliated with the rapper Bad Bunny).

The agent arbitration process

The unions’ agent regulations include 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 the following:

• They provide a private, informal and cost-efficient forum for resolution of disputes involving players.
• They help to develop a body of arbitral case law that is specific and responsive to that union and its members.
• They ensure that the union learns of and can monitor the conduct of the agents it regulates, particularly where they are engaged in disputes with players.

The unions have taken different approaches concerning the types of disputes they believe fit within their regulations’ arbitration provisions.

In the Bad Bunny case, the MLB Players Association 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 Players Association was exceeding its authority.

On the other hand, Roger Kaplan, the arbitrator responsible for disputes under the agent regulations of the NFL Players Association, has previously ruled that he does not have authority over entities through which agents operate.

However, Arbitrator Kaplan has regularly exercised jurisdiction over contracts for marketing services agreed to between agents and players. Indeed, the agent regulations of the NFL Players Association require that agents submit a copy of any agreement between a player and an agent within 10 days of its execution, including marketing agreements, loans, lines of credit, other services or benefits, and more.  The obvious but unstated reason for this requirement is to allow the Players Association to ensure that agents are not taking advantage of their player-clients.

National Basketball Players Association steps aside

Unlike the Players Associations for MLB and the NFL, the National Basketball Players Association 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 apply only to the Standard Player Agent Contract 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.

Certified agent Daniel Hazan is exploiting this deficiency in the Players Association approach by suing Malik Beasley, a former client, in federal court for allegedly refusing to repay a November 2023 $650,000 advance on marketing commissions made by Mr. Hazan’s agency. 

Mr. Hazan’s lawsuit illustrates exactly the type of predatory conduct that the Players Association should be seeking to regulate. The agent regulations prohibit an agent from “[p]roviding or offering a monetary inducement . . .  to any Player . . . to induce or encourage that person to utilize his services.”

The marketing advance provided by Mr. Hazan seems to be exactly that because it was executed at the same time that Mr. Beasley entered into an agent contract with Mr. Hazan. However, none of the players unions in any sport have considered marketing advances to be a prohibited “inducement.”

The amount that Mr. Hazan seeks to recover is also problematic. Although the advance was $650,000, the contract included a liquidated damages clause of an additional $1 million, which Mr. Hazan seeks to fully enforce. As a matter of law, liquidated damages clauses cannot be used as a penalty, but that seems to be the intent of the provision drafted by Mr. Hazan.

The agent contract seems one-sided in other ways, as well. For example, it contains a lengthy indemnification provision through which Mr. Beasley would be obligated to reimburse Mr. Hazan for various costs under certain circumstances. Clauses like this are common, but they are also usually reciprocal – in other words, they impose the obligations on both parties. The agreement also obligates Mr. Beasley to reimburse Mr. Hazan for legal fees incurred by Mr. Hazan in trying to enforce the marketing agreement.

The National Basketball Players Association should seek to bring this type of dispute within its arbitration mechanism and more closely scrutinize these contracts between players and their agents.