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The Changing Regulatory Environment for Clubs: A New Framework for Success

After his surprising victory in November, Donald Trump began to map out his most important policy objectives. Thankfully, one of his first priorities was to fundamentally change the way the federal government issues regulations. For leaders in the private club industry, that is music to our ears.

During the last eight years, the National Club Association (NCA has worked diligently to minimize the impact regulations have had (and still have) on private clubs. We achieved key successes for the club industry in areas like the Affordable Care Act (ACA); however, some issues remained unresolved. There were times when agency leaders in the previous administration disregarded the concerns we presented—even when the requests were slight tweaks rather than wholesale changes.

Under a new, pro-business administration, we now have a chance to address the problems with these previous regulations and make a systemic change to the way the process works.

Regulations To Be Reviewed

Private clubs have been besieged with red tape that has limited our growth with some of the most worrisome regulations including:

  1. The Department of Labor’s Overtime Exemption Rule
  2. The Environmental Protection Agency’s Waters of the United States Rule
  3. The ACA’s IRS Reporting Rules
  4. The Department of Labor’s Persuader Rule
  5. The National Labor Relations Board’s Ambush Election Rule

In the Trump administration, the new nominees and leaders of each department and agency have indicated they will work to remove these, and many other rules. In addition, they will also engage in meaningful dialogue with stakeholders to address the problems these rules were created to fix.

NCA’s goal is not to just stop these rules, but to craft better ones that take into consideration our industry’s needs while resolving the problems they were meant to address. We see an opportunity for that to happen in this administration.

Congressional Action

Following the White House’s lead, Congress has also begun taking action to reduce the number of regulations created by government agencies. Under the Congressional Review Act (CRA), Congress is entitled to express its disapproval of regulations within 60 legislative days from the day they are enacted. Of course, to stop the proposed regulation a CRA resolution must also be signed by the president.

Since regulations come from the president, there was no chance a CRA resolution passed during the previous administration would have been signed. That changed with President Trump’s victory.

So far, there have been nearly 20 CRA resolutions filed by the current Congress and Trump has signaled he will sign them all. While none of these 20 rules has a direct impact on the club industry, the fact remains that the regulatory environment is clearly undergoing a metamorphosis that will help private clubs in the end.

In addition, members of the House of Representatives and the Senate have also crafted the Regulatory Accountability Act. This legislation will require any regulation that has a significant and direct financial or employment impact on small businesses to be run through a far more rigorous review process than before.

Not only does this legislation reassert the dominance of the legislative branch of government in the regulatory process (something that has drifted more to the unelected bureaucracy over the last decade), but it also restores power back to the judicial branch when courts review regulations.

In Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Supreme Court ruled that if there is a question as to what an agency may do under a grant of authority from Congress, then the agency should be provided significant deference in its decision. Simply put, this ruling told judges across the country that federal departments and agencies were deemed to have the last say when it comes to regulations unless their action was arbitrary or capricious.

The Regulatory Accountability Act overturns that ruling and provides courts with the right to review regulations just as they would laws—with an unfettered eye to the intent of Congress. So, no more immediate deference will be granted to the department or agency that creates a new regulation.

With this provision and the other aspects of the Regulatory Accountability Act, the agencies and their unelected leaders who have dominated the regulatory space for so long will no longer wield the same kind of power. Congress and the courts will have more say and the business community will not be faced with the same kind of intransigence that it has faced in the past.

NLRB Changes

One of the more troublesome regulatory impacts coming from the last administration was the liberal use of the National Labor Relations Board (NLRB) as a vehicle to facilitate union growth. As the agency that adjudicates issues between management and unions, the NLRB was created to be the neutral arbiter allowing both sides to have their say. This power comes from the National Labor Relations Act and the NLRB serves as its enforcement agent. Unfortunately, during the last eight years the NLRB has been used more as a sword for unions than as a shield.

Now, this five-member NLRB will have three members from the president’s party and two from the opposition party. As such, we will soon see the NLRB begin to ease current regulations (like the Ambush Election Rule) and begin providing decisions that are less anti-business (likely striking down the Micro-Union and Joint Employer rulings). Most importantly, the pendulum will now swing back to the middle rather than to the union side, which is what we expect of the NLRB.

Creating New Regulations

As the new administration focuses on removing those regulations that have been vexing to clubs, Trump has also shown a desire to ensure new regulations are limited in their scope and number. With that in mind, one of his first Executive Orders mandates that for every new regulation produced, two must be removed.

With this order, the president made clear that federal departments and agencies have an obligation to review their current rules before adding any more. This simple requirement means that many duplicative or non-essential regulations will soon be removed.

Going hand in hand with this Executive Order is the president’s selection of former Rep. Mick Mulvaney (R-S.C.) as his director of the Office of Management and Budget (OMB). OMB is traditionally seen as the agency that establishes the president’s federal budget—his financial priorities for the country. However, OMB also has another job.

OMB houses the Office of Information and Regulatory Affairs (OIRA). OIRA is the office that reviews all regulations before they are issued. Since the executive branch of government creates all regulations, it makes sense that the president would have the chance to review everything before it goes out. Mulvaney will be the president’s point man for this task.

As a small business owner, Mulvaney understands the bottom line issues caused by Washington’s rules. As a member of the House of Representatives, he fought overreaching regulations and was a strong advocate for returning control of the rule-making process to the elected leaders of this country. There is little doubt he will be have a watchful eye over everything that comes forward from the departments and agencies of the Trump administration.

In addition to his business bona fides, Mulvaney is also a golfer and proud private club member. He is one who has never shied away from his club membership and NCA has supported him during his re-election campaigns through our political action committee. Our industry has someone who understands our issues in one of the more important offices that deal with regulations for the country.

Benefits of Reform

A discussion of regulatory reform is hardly a riveting topic for any audience. However, for nearly a decade, private clubs have been dealing with a hostile federal bureaucracy that has been uninterested in our concerns. The regulatory climate has been stormy and unforgiving. But now, the outlook is decidedly brighter.

From the White House to Congress, the change in how regulations are created and who reviews them will provide much needed relief and more balance in the coming months and years. Most importantly, we see this new regulatory climate restoring commonsense to the way Washington works, which is extremely welcome news indeed.

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