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Volume 21 No. 30

Labor and Agents

The agent, a self-described litigation attorney from New York City, was blunt.

 

“You are buying yourself lawsuits,” he told NFL Players Association officials and others gathered in March for the NFL combine in Indianapolis.

For emphasis, he repeated it, according to an audio recording of the annual agent meeting at the combine obtained by SportsBusiness Journal. His anger resonated through the room.

“You are buying yourself lawsuits! … No one wants to be in a position when you are at war with the players association, but if you take away their livelihood, they have nothing to lose.”

The moment is illustrative of the deteriorating relationship between the community of about 800 NFL player agents and the union, led by Executive Director DeMaurice Smith. The relationship has been declining for years, but it seems to have imploded in recent months.

Shown during a press conference at the Super Bowl in February, NFLPA Executive Director DeMaurice Smith (far left) speaks while members of the union’s executive committee participate on stage, including President Eric Winston (second from left).
Photo: getty images

“There’s a core group of agents who believe the union wants to minimize if not eradicate the agent industry in its entirety,” said Peter Ginsberg, an attorney hired by a group of agents because of what they view as threats to their jobs.

At the Indianapolis meeting, dozens of agents stood in line at three microphones in a large conference room to yell, complain and question the union. The primary issue was a newly mandated test on knowledge of the collective-bargaining agreement that all agents would have to take every two years, but the anger has been festering for a while.

Those who fail the test would be forced to take another one in Washington, D.C., with prospective agents applying for the first time. Failure a second time would mean suspension of their license.

First Look podcast, with NFLPA discussion beginning at the 13:45 mark:

But to agents in Indianapolis, it was just the latest threat from the NFLPA to their careers and livelihoods.

“You are going to see us in court on this one, if you suspend us, because we have already met the requirements,” a different agent told the NFLPA. Applause erupted in the room as agents took their turns to chastise union officials.

One agent who spoke out cited Steelers running back Le’Veon Bell’s contract talks as an example.

“While I am in the midst of negotiating for veterans or franchise players, I have to stop to prepare for a test?” he says, according to the tape. “That’s certainly going to help Le’Veon Bell, that I am going to stop the f------ preparation for his contract to study for a test.”

Veteran agent Adisa Bakari represents Bell.

In the highly competitive agent business, it’s difficult to get a group of them together, as grudges over recruiting battles and players switching representation sometimes go back decades. But the chaotic meeting, characterized by multiple people as “a shit show,” came after numerous agents have been holding conference calls starting about 2 1/2 years ago.

The secret calls — of which at least one had more than 100 agents on it — have focused on an increasingly harsh business environment under the current CBA negotiated by Smith in 2011 as well as new agent regulations implemented by the union since then. The calls started in the summer of 2015 after it was reported that the NFLPA was looking to cut agent fees and create an in-house function to negotiate contracts for players.

The NFLPA studied, but later rejected, the idea to lower agent fees from the maximum 3 percent to 2 percent a few years ago. They did, however, institute a “default fee” for agents of 1.5 percent unless the player agrees to a different amount, with the maximum still being the old standard of 3 percent. NFL agent fees are, and have been for years, the lowest among the major team sports.

A group of agents has even hired Ginsberg, a former assistant U.S. attorney for the Eastern District of New York, who in private practice has represented many coaches, agents and players in sports matters, including former running back Ray Rice. Ginsberg would not confirm that he has been hired but said he thinks the NFLPA has “a duty of fair representation” to the agents it regulates, as well as to the players it serves.

The NFLPA declined to make anyone available for an interview for this story. But the union did provide a statement:

“Our union works closely with agents and provides them with several formal and informal opportunities to have a dialogue with our player leadership. However, we embrace our fiduciary duty to players when we set regulations, certify and sometimes discipline agents. By law, the union grants agents the authority to negotiate contracts for players, so they not only have a responsibility to players, but they are also obligated to be agents of our union.

“We understand that some steps we take to ensure these obligations are adhered to create tensions with some agents. We also understand that the players’ right to set fees upsets some agents. We want a positive relationship with the agents where we work together to protect players and maximize our collective leverage, but we do not apologize for the decisions made by player leadership.”

Now with the Chargers, executive committee member Russell Okung first negotiated his own contract with the Broncos in 2016.
Photo: getty images

The Los Angeles Chargers’ Russell Okung, a member of the NFLPA’s executive committee who has negotiated his own contract twice, said the union is trying to raise the standards of representation.

Told about the uproar at the agent meeting at the combine, Okung said, “It comes as no surprise to me that they would feel that way.” Agents are important, Okung said, but he added, “I think the real issue is whether the agency business is a viable business.”

Fighting for agents

It’s unclear how much of Okung’s feelings echo union membership, though officials at the meeting told the agents they were doing what the players wanted. Union officials, including Smith, are elected by the players, with agents having no voice in those decisions. Still, even though there have been NFL players who represented themselves through the years, the vast majority — some estimate upward of 99 percent — are represented by agents.

In the old days, players fought for the right to have an agent, as team owners across sports would refuse to deal with a player who was represented by a lawyer or agent.

The late Marvin Miller, founder of the MLB Players Association, frequently told stories about how baseball executives would not even allow a player’s father to negotiate on his behalf, and how the players were taken advantage of in negotiations by the more experienced and better-educated executives. The MLBPA, under Miller’s leadership, negotiated the right for players to be represented by agents in the 1970 MLB collective-bargaining agreement.

The NFLPA, meanwhile, was a pioneer in the regulation of agents, requiring they become certified in 1984 and having them take a test starting in the 1990s, adding a criminal background check in 2002 and other requirements since then.

Over the years, there certainly have been unscrupulous agents, such as Norby Walters and Lloyd Bloom, who were sentenced to prison in the late 1980s, and Tank Black, who was sent to prison in the early 2000s. Still, the NFLPA has been at the forefront of enacting agent regulations starting under the late Gene Upshaw and former general counsel Richard Berthelsen.

But since Smith took over in 2009 and negotiated a CBA that ended the owners’ lockout in 2011, media reports started questioning the need for players to have an agent at all. The 2011 CBA contains many provisions unfriendly to their profession, multiple agents said. Most notably, the agreement contains a rookie wage scale in which there is little room for financial creativity and, thus, negotiation.

The deal also hurts players who make it to a second contract in a number of ways, agents said. For example, all rookies have four-year deals except for first-round picks, theoretically the most valuable young players, for whom teams have the option for a fifth year at a set price.

The franchise-tag price that clubs can put on one player also was reduced under the CBA. Under the old deal it was the average of the top five players at the position, but under the current deal it is the average of the top players at the position going back five years, when the salary cap and salaries overall were lower.

Gould

Multiple agents said the first agent to speak out at the Indianapolis meeting was veteran Jimmy Gould, who they said gave an impassioned speech about how he has fought for clients, including the late Korey Stringer, during a 23-year career.

When asked about the relationship between agents and the union and what happened at the meeting, Gould said later, “Any time a demand is made on a group of dedicated and professional people without their input, what ultimately follows is a feeling of distrust and ensuing chaos. That is what happened and it is occurring at a very critical time when those same groups must be in lockstep with one another and married to the same agenda that is based on trust, respect, fairness and above all else, a real feeling of partnership.”

Reason for hope?

At least one agent said there is reason for hope in improving the relationship between agents and the NFLPA, based on a more placid smaller group discussion between agents and the union a day before the combative meeting.

The union typically holds a small agent meeting the day before the larger one at the combine. Agents are required to attend at least one meeting a year; most choose the larger gathering. The meeting before the bigger combine meeting is invitation-only by the union.

Veteran agent Peter Schaffer, one of those in the small group meeting, said there was a diverse group of about 25 agents there that included representatives from agencies large and small, agents who were young and old, male and female. From the NFLPA, Smith was there, as was player president Eric Winston, union general counsel Tom DePaso and other player leaders from the union’s executive committee.

“They put a great cross section of agents together, and I think the agents were very passionate and educated in the way they expressed themselves on the major issues that were causing friction between the agents and the union,” Schaffer said. “I think there was some hesitation or reservations going in that these concerns would be met with resistance by the union.”

They were not.

The agents talked about a number of topics, including the proposed test and the 1.5 percent default fee, and they spoke on the premise that it was in the best interest of players if agents and the union worked together.

“To everyone’s appreciation, Eric and De and Tom DePaso heard the concerns of the agent community,” Schaffer said, adding he was optimistic that the relationship would get better.

But the next day, the tenor changed dramatically with the larger group of agents.

The explosion at the bigger combine meeting the next day did not happen in a vacuum. It occurred after previous meetings where agents said they felt union officials treated them in a condescending manner, and after several rules and regulations were enacted in recent years that placed more burdens on agents (see timeline).

The hostile relationship between agents and the union is something that’s increasingly being noticed in the larger sports world. USA Today recently ran a story with the headline “USA Today poll reveals union chief DeMaurice Smith has made ‘a lot of enemies’ among agents.” The story said a poll of 25 agents “largely graded the job performance of the NFL Players Association’s executive director as no better than ‘fair.’”

Although publicly agents are fighting the union, privately some say they are thinking of walking away from representing players in the sport they love. Some football agents and agencies are branching into other areas of representation, such as broadcasters and coaches, as the NFL increasingly becomes a low-margin business with a lot of headaches.

During the contentious meeting with the union, some agents credited Mark Levin, the NFLPA’s longtime director of salary cap and agent administration, for keeping the meeting calmer than it could have been. Levin, in attempting to calm the agents, told them in a measured tone not to worry, that the new test would not be that big of a deal.

But one agent, like Gould, brought up the issue of trust between the player representatives and the union.

“If the honest motive is just to make sure we have a baseline of knowledge, that would do the trick, for me,” the agent said at the meeting, according to the audio tape. “But to me the bigger problem is the flavor, this feel, of this partnership — that you call a partnership. It seems — I’ve been a member, a regulated agent, for decades — and it seems to me as the years go by more and more restrictions are put on us, more hardships. It’s become more difficult to earn a living.

“I think if this continues, the very thing you are trying to safeguard, that is having players represented by competent agents, will fail because the most competent among us will realize this is not a good idea to spend our time and make a living at. You will lose the best among us.”

How it got here

March 2009

Trial lawyer DeMaurice Smith is elected executive director of the NFLPA, beating three challengers for the position that was vacated when Gene Upshaw passed away in August 2008.

DeMaurice Smith is elected head of the NFLPA in 2009.
Photo: getty images

August 2011

The NFLPA agrees to a new collective-bargaining agreement that lowers the players’ share of revenue, puts in a rookie pay scale, removes agents’ ability to negotiate player incentives in rookie deals, and lowers franchise-tag amounts for veterans.

March 2012

Smith runs unopposed for executive director and is re-elected to another three-year term.

June 2014

The NFLPA initiates a review of agent regulations, including requesting any side agreements such as marketing guarantees and loans that agents had with players, information that was previously private between agents and players. In a memo sent to agents, the union also warns that multiple violations of rules will result in double the discipline handed down for the previous violation.

March 2015

Smith wins re-election after being challenged by eight opponents, each of whom needed the endorsement of three player representatives to be placed on the ballot.

Summer of 2015

USA Today reports that the NFLPA is looking at changes that include lowering the maximum agent fee and creating an in-house resource to negotiate contracts and/or advise players on doing their own deals. SportsBusiness Daily reports that rival agents begin to hold meetings in response to what they see as a threat to their livelihoods.

Summer of 2015

The NFLPA implements new, stricter testing requirements for agent certification; 38.7 percent of the 204 test-takers pass the test, the lowest pass rate ever. The previous pass rate had been around 70 percent.

November 2015

The NFLPA holds a meeting with a small group of powerful agents to discuss union rule changes. The meeting is unusual in that it was held during the season at the union’s Washington, D.C., headquarters and agents were sworn to secrecy. The union tells the agents that it is looking at reducing the maximum agent fee from 3 percent to 2 percent on playing contracts.

February 2016

The NFLPA holds a contentious meeting with agents at the NFL combine. Tempers flare over rumors that the union might cut the maximum fee.

March 2016

The NFLPA votes down a proposal to cut the maximum agent fee from 3 percent to 2 percent. Russell Okung, a member of the NFLPA executive committee, negotiates his own contract with the Denver Broncos, first reported at $53 million over five years but widely criticized in media reports for being team friendly. He ends up getting cut after a year and being paid just $8 million. Okung then negotiates another four-year, $53 million deal with the San Diego Chargers. Reports indicate it’s a much better deal, with $25 million in guaranteed money.

August 2016

The NFLPA informs agents that it has changed the Standard Representation Agreement (SRA) to make 1.5 percent the “default fee” for agents unless the player agrees to a different amount.

September 2017

The NFLPA changes its constitution so that a new 14-member committee of players will determine whether to keep the executive director. The change removes the ability for other candidates to run for election by garnering the support of three player representatives. The union announces Sept. 20 that Smith has been re-elected under the new procedure.

Photo: getty images

January 2018

The NFLPA notifies agents that they will be tested every two years in June on knowledge of the CBA. If they fail the test they will sit for the prospective-agent test in July. Agents who fail twice would lose their license.

March 2018

Agents at the NFL combine ask the union to consider testing modules as well as no punishment for failing the new test. Later, at a group meeting, agents yell at NFLPA members on stage in what veterans in the business say was the most factious meeting the two groups have ever had.

Major League Baseball players in 2017 collectively received more than $125 million in checks from their union, much of it representing several years of withheld licensing revenue. But amid a labor relationship with MLB management now growing more tense, it could be the last such distribution for quite some time.

 

The MLB Players Association’s 2017 annual report, filed recently with the U.S. Department of Labor, showed the large-scale distribution to players last year that jumped significantly from a comparable figure of $7.4 million in 2016. The outlay is in keeping with typical union practice, as the MLBPA, like many sports unions, saves money from group licensing efforts in escalating amounts during labor negotiating cycles and then redistributes the funds once a collective-bargaining agreement has been reached. A similar MLBPA distribution of nearly $132 million in withheld licensing revenue happened in 2012.

MLBPA Executive Director Tony Clark said the union may retain more revenue in coming years as it heads toward the next round of talks on a new labor agreement.
Photo: getty images

Following the completion of the current five-year labor deal in late 2016, MLB players last year received as much as $107,000 each, based on factors such as service time and participation in special promotions, up from individual outlays of up to $20,000 in 2016.

MLBPA Executive Director Tony Clark indicated the savings activity, concentrated primarily in U.S. Treasury securities and other investments, may be amplified during the upcoming three years leading up to the next round of bargaining in 2021.

“It is likely the players will retain more moving forward,” Clark said via email.

Since last fall, league-union tensions have risen significantly, due primarily to a sharply depressed free-agent player market last offseason that was among the slowest in more than a generation.

Clark declined to go into further detail on the planned saving activity, and decisions in this area are often made during the union’s annual meeting each fall. But prior to these remarks and last year’s monetary distribution to players, the union in 2016 built up its asset base to $178.6 million, the second-largest sum in the organization’s history. If Clark’s remarks prove true, it is possible that MLBPA’s assets will grow beyond $200 million, which has happened just once before, in 2011.

The union’s revenue from “other receipts,” where licensing income is listed and itemized, was reported at $54.2 million for last year, up 6 percent from 2016. The annual report, known as the LM-2, is based on cash and not accrual accounting, and payments are credited in the years they are received and not earned. As a result, views into the financial state of the organization can be deceiving.

Still, the MLBPA continued to show growth in revenue from several of its top licensees, a situation Clark credited to increased fan interest in baseball and better visibility of players’ personalities.

Trading card partner Topps was the union’s largest licensee last year with $11.2 million in payments, up from $10.9 million, though some of that latest figure represented obligations from 2016. Sony Interactive Entertainment, makers of the video game “MLB: The Show,” ranked second at $9.8 million, up from $6.7 million the prior year.

Clark earned $2.21 million in total compensation in 2017, up 5.7 percent from the prior year.

Newport Sports Management has represented the No. 1 overall NHL draft pick five times, and the 37-year-old agency is in line to do it again next month with client Rasmus Dahlin, an 18-year-old Swedish defenseman.

Newport Sports founder Don Meehan and agents Craig Oster and Greg Landry are representing Dahlin, who’s been called “a generational” talent by multiple hockey media news outlets. NHL.com draft experts unanimously ranked Dahlin, who plays for Swedish Hockey League team Frölunda HC, No. 1 in a mock draft earlier this year.

Meehan

In April, the Buffalo Sabres beat 14 other non-playoff NHL teams that were in the lottery for the top pick in the draft. Meehan is confident Buffalo will take Dahlin. “They haven’t told us, officially, no, but you could bet your beach house in L.A. that they are going to take him,” Meehan said. 

Newport has a history with top Swedish players, having represented Nicklas Lidström, a former Detroit Red Wing who is in the Hockey Hall of Fame, as well as current Ottawa Senators captain and two-time Norris Trophy winner Erik Karlsson. Dahlin is comparable to Lidström and Karlsson at the same age, Meehan said.

Oster

Meehan bases his confidence that Dahlin will be taken first in the June 22 draft based on what team personnel have said.

“There has been so much acclaim on Rasmus Dahlin with all our discussions with management personnel throughout the league that I believe I can safely say the consensus is anybody who won the lottery would be taking Rasmus Dahlin,” Meehan said. 

Dahlin speaks English, but Meehan said it’s premature to talk about endorsement deals. 

Landry

Dahlin began playing in the Swedish Hockey League at age 16. He was on Sweden’s Olympic hockey team in Pyeongchang, the youngest men’s hockey player to participate in the Olympics since 1984.

“His speed and his edge work are incredible, and his hockey sense is extremely high,” Oster said. “He has the ability to see things on the ice and create plays on the ice that is unique. And lastly, he is able to do everything at a very high rate of speed despite being 6-foot-2. A lot of the scouts who have evaluated him have said that he performs like he is a forward, not a defenseman.”

Rasmus Dahlin manuevers during a Newport Sports showcase for its top NHL prospects.
Photo: getty images

The five No. 1 picks who Newport Sports has represented are Wendel Clark, taken by the Toronto Maple Leafs in 1985; Joe Murphy, taken by the Detroit Red Wings in 1986; Ed Jovanovski, taken by the Florida Panthers in 1994; Alex Ovechkin, taken by the Washington Capitals in 2004; and Steven Stamkos, taken by the Tampa Bay Lightning in 2008.

In this year’s draft, Newport Sports also represents three other projected first-round picks: Boston University left wing Brady Tkachuk; Barrett Hayton, a center for Ontario Hockey League team Sault Ste. Marie; and Grigori Denisenko, a wing for Russian Kontinental Hockey League team Lokomotiv Yaroslavl. Additionally, the agency represents two other highly rated players: Calen Addison, a defenseman for Western Hockey League team Lethbridge Hurricanes, and Boston College forward Jack McBain.

WASSERMAN’S NBA CLASS: Wasserman has signed several prospects for the NBA draft, including Kentucky guard Shai Gilgeous-Alexander and Tulane guard Melvin Frazier. Those two players, as well as George Washington forward Yuta Watanabe, are being represented by agent Thad Foucher.

Agent Darren Matsubara signed San Diego State forward Malik Pope and New Mexico State forward Zach Lofton.

Wasserman also signed two international players — Isaac Bonga, who plays guard for the Fraport Skyliners in the German Basketball Bundesliga, and Arnoldas Kulboka, who plays forward for the Italian team Betaland Capo d’Orlando in the European Basketball Champions League. Agents Jason Ranne, George David and Foucher are representing those players.

 

Liz Mullen can be reached at lmullen@sportsbusinessjournal.com. Follow her on Twitter @SBJLizMullen.