Over the past year and a half, high school and college athletes have signed thousands of name, image, and likeness (NIL) endorsement deals. NIL deals have been signed with local companies like car dealerships and national brands like Pepsi and Dr. Pepper. As the NIL industry has progressed, more and more college athletes have hired NIL agents to source and negotiate NIL deals for them.
Sports agents that typically negotiate professional playing contracts and marketing agencies that represent influencers, celebrities, and media personalities alike have sought to represent college athletes. Moreover, there has been an influx of new “NIL agents” looking to work in the industry. Although most NIL agents are hardly what is portrayed in Jerry Maguire—most do not represent professional athletes in negotiating playing contracts—they are considered sports agents by law and thus have legal responsibilities to consider. Additionally, as professional service providers, there are dozens of contract implications that NIL agents should be conscious of. Here are some of the primary legal concerns that NIL agents should consider prior to working with high school and college athletes:
Registration as an Athlete Agent and State Athlete Agent Laws
A major oversight for many NIL agents has been the failure to register with state agencies as an athlete agent. Although some state athlete agent laws have differing language and not all directly follow the Uniform Athlete Agent Act (UAAA), most state laws consider individuals who negotiate endorsement contracts on behalf of athletes to be sports agents. If the state you are operating in considers you to be an athlete agent and requires athlete agents to register with the state, you must do so.
NIL agents that fail to register with the states they are operating in can be subject to fines and personal liability. It is also important for NIL agents to be aware of multi-state registration requirements. Registering with one state may not be adequate if you are servicing clients in multiple states. It is likely that most NIL agents will have to register as an athlete agent in many states. Although NIL agents do not need to register with or be certified by a union, like the NFLPA, state registration is going to be required in almost all circumstances.
NIL agents also should consider other requirements of state athlete agent laws and the federal Sports Agent Responsibility and Trust Act (SPARTA) beyond registration. Most of these laws place limitations on athlete agents, requirements for dealing with client funds, and disclosures that must be made to student-athletes and their universities. NIL agents must examine the requirements of each state law where they are working with student-athletes to be sure to comply with any of these provisions.
State NIL Laws; NCAA, Institutional, and Conference NIL Policies
When representing high school and college athletes in NIL deals, agents should ensure that each deal is in compliance with state NIL laws and any applicable NCAA, state HSAA, institutional, and conference rules or policies. While many state NIL laws have overlapping provisions, NIL agents should be aware of where their requirements may differ. For example, some state NIL laws require that NIL deals be reported to the athletic department, while others do not. Additionally, even within the same state, there are athletic departments that require reporting, while others do not.
Moreover, NIL agents should closely follow the legislative landscape, as it has been dynamic and ever-changing for the first year and a half of the NIL era. Many states have updated or repealed their NIL laws, while the NCAA has released new guidance on multiple occasions. Importantly, NIL agents must check every deal for compliance, primarily due to the differences in state laws and institutional policies.
A written contract should be utilized for all NIL deals. Unfortunately, this is not always the case. Many athletes sign NIL deals without the help of an agent or attorney and many companies looking to work with athletes are unrepresented as well. These instances usually result in a “handshake deal” with no written contract at all or a contract that is poorly worded, inoperative, or unfavorable to the athlete. Agents representing college athletes for NIL deals should ensure that their clients are signing well-written and effective contracts, with favorable terms.
In addition to negotiating the up-front dollars and cents of the deal, NIL agents should help protect their clients’ long-term financial and intellectual property interests through effective contract clauses. Long-term ownership or licensing rights of an athlete’s intellectual property should be carefully considered before agreeing to any NIL deal. Moreover, NIL agents should consider how exclusivity clauses, renewal clauses, and termination clauses may impact the deal. Providing clients with flexibility and security should be paramount.
In addition to protecting client interests, NIL agents should work to protect their own interests as well. This does not mean taking advantage of student-athletes. Otherwise, it means that NIL agents should make sure that they reap the benefits of the work they performed for their clients—not other agents. The athlete representation business has always been extremely competitive, with agents always looking to “poach” competitors’ clients. For commission-based representation, this can be extremely problematic. NIL agents can help protect their interests by signing effective representation agreements with their clients. These agreements should outline the rights and responsibilities of the agent and client, including payment provisions, the contract term, termination provisions, and exclusivity provisions.
In addition to the laws that regulate athlete agents, NIL agents are also subject to state agency law. Agency law is a state common law doctrine that outlines the responsibilities and authority of agents who are working on behalf of clients. NIL agents should be aware of how agency law (in addition to their representation agreements) may impact their ability to negotiate and enter into binding agreements for their clients. Additionally, NIL agents should be aware that they can be held liable in civil cases for certain actions taken during their representation. Understanding agency laws and fiduciary obligations can help to protect NIL agents from inappropriately acting on behalf of their clients.
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