The legislative, regulatory and judicial environment for clubs has never posed more challenges to clubs. From the proposed Overtime Rule to the longstanding Affordable Care Act (ACA), among other legal issues, clubs should be mindful of the direct impact these matters have on their operations. The National Club Association has compiled a list of the most impactful issues for clubs to watch in 2016.
1. The Proposed Overtime Exemption Rule
Employee-related lawsuits are receiving more visibility in the public sphere. One of the most prominent areas for these lawsuits is overtime compensation. In fact, overtime lawsuits rose 7.6 percent in 2015 to an all-time high of 8,781 cases. In 2016 that number is expected to grow even more.
Currently, a South Florida club is in the midst of a lawsuit filed by a former sous chef who believes he was entitled to overtime pay. This case hinges on whether the plaintiff was exempt from overtime pay or not. It is likely to be one of many overtime cases from employees brought against clubs.
The Department of Labor’s (DOL’s) proposed overtime exemption rule will increase the minimum weekly salary for an employee to be exempt from overtime pay from $455 per week ($23,660 per year) to $970 per week ($50,440 per year). Also under review is the “primary duty” test for each exempt employee category. The rule is expected to go into effect in the second half of 2016.
Impact:
As the overtime exemption threshold is set to increase, the number of nonexempt employees will rise sharply and will increase clubs’ vulnerability to overtime pay and potential litigation if clubs fail to comply with the new rule appropriately. In response, clubs should reevaluate their relationships with their exempt employees and clearly define employees’ roles and duties to comply with the regulation.
The proposed rule will also pose significant financial and administrative challenges to clubs. It may force club leaders to re-evaluate their current staffing plans, change employees’ hours and shifts, and alter employee compensation packages to minimize potential increases in overtime obligations. NCA will continue to work with DOL and lawmakers to find reasonable ways to modify the rule before it is finalized. 20 Clubs will be required to follow DOL guidance to ensure they comply with these rules to avoid unnecessary litigation.
2. Independent Contractor Classification
In an effort to minimize worker misclassification under the Fair Labor Standards Act (FLSA), DOL has issued new guidelines for defining who is considered an independent contractor (IC) or an employee. Clubs must now look at an “economic realities” test to help them classify their staff correctly. Failure to do so, and thus failure to classify a worker correctly, could lead to significant financial penalties under the FLSA. The factors a club must now look at include:
- Is the work performed integral to the club’s business?
- Does the worker’s opportunity for profit or loss depend on his own managerial skills?
- What is the extent of relative investment in each business by the club and worker?
- Does the work require special skills or initiative?
- How permanent has the relationship been between the worker and the club?
- What is the club’s degree of control over the worker?
Impact:
DOL has broadened the definition of an IC, and coupled with the expansion of the term “joint employer (issue 6),” clubs that have caddies, golf and tennis pros, fitness instructors, and even cleaning crews and landscapers classified as ICs now have new concerns. Clubs will be required to follow DOL guidance to ensure they comply with these rules to avoid unnecessary litigation. NCA will continue to review this guidance and let you know when additional information regarding enforcement is provided. Until then, NCA strongly urges all clubs currently using independent contractors to review this new DOL interpretation with their club counsel.
3. Waters of the United States (WOTUS) Rule
The WOTUS Rule now in effect will cause private clubs’ ponds, creeks and streams to fall under the Clean Water Act (CWA). Under this new regulation, clubs will be subject to the Environmental Protection Agency’s requirements that regulate the use of certain chemicals and fertilizers that may runoff into these newly protected bodies of water.
Fortunately for clubs, the rule has been put on hold for all 50 states until a lawsuit against the regulation is resolved. While the rule does not present an immediate concern, circumstances could change quickly.
NCA is working with our allies in the House of Representatives as well as the Senate to prohibit funding for the WOTUS Rule in the fiscal year 2016 government funding bill. This effort has received strong support so we will continue pushing for its inclusion in the final funding legislation.
Impact:
If the courts decide to allow the WOTUS Rule to go forward, clubs will be hit with significant financial and administrative burdens. To prepare for this possibility, clubs should begin an audit of their course water to determine whether it falls under the law. If it does, clubs must ensure they meet the necessary requirements to avoid violating the CWA.
4. Affordable Care Act
The ACA poses one of the most significant problems for the private club industry. Despite many efforts, the health care law has survived years of legal battles since its inception, and most recently, a bill to repeal the entire ACA that passed the House and Senate was vetoed by the president. However, some meaningful changes to the ACA have been made in the last few months.
The Protecting Affordable Coverage for Employees (PACE) Act, which gives smaller clubs much-needed relief by allowing them to stay in the large-group market to purchase health insurance plans, was signed into law. In addition, the auto- enrollment requirement, which would have forced clubs with 200 or more full-time employees to immediately enroll new, full-time employees into the club’s insurance plan upon hire, was also repealed.
NCA and our allies worked extremely hard to ensure these repeal measures made it to the finish line. The president’s decision to sign the PACE Act into law marked the first time in four years that the ACA was amended. Together the repeal of the auto- enrollment provision and the PACE Act could be a sign that more positive changes to the ACA could happen in the future.
The next “fix-it” bill to watch is the Simplifying Technical Aspects Regarding Seasonality (STARS) Act, an NCA-backed bill that will sync the exception periods for seasonal “workers” and “employees” to six months.
The Save American Workers Act (SAW Act) is another bill that NCA is working to pass. This bill aims to change the definition of a “full-time employee” under the ACA from one who works 30 hours per week back to one who works 40 hours per week. The Employer Mandate, Health Insurance Tax, Cadillac tax and medical device tax are additional aspects of the ACA that pose challenges and expenses for clubs that NCA is working to eliminate.
Impact:
The ACA has strained clubs both administratively and financially. With more than 20,000 pages of regulations, the ACA is difficult to learn, understand and implement. Fortunately, recent amendments to the law give hope that more changes that benefit clubs can be made in the future. Until then, clubs should continue to take the necessary actions to comply with the ACA
5. National Labor Relations Board’s (NLRB) Union Organizing Rules
In 2015, the NLRB’s Ambush Election Rule went into effect. The rule speeds up the time a union organizing election can be held from an average of 38 days to as few as 15. And there is no rule preventing unions from participating in a “stealth” campaign months before they call for the “official” election to start.
Further, the board issued a ruling that allows employees working for union organizers to use their employer’s e-mail systems for union organizing activities, superseding the employer’s property rights. In addition, the NLRB implemented the “micro-union” rule, which allows small subsets of employees, such as departments, to unionize. For instance, this means that a union could organize a “micro-union” of pool wait staff rather than the entire wait staff.
Impact:
These rulings hamper a club’s ability to adequately prepare themselves and their employees for union elections. Today, a union can organize a small group of workers (which may be easier to persuade than a large group) potentially months before its “official” campaign starts and hold an election just 15 days after it is announced.
There are two pending lawsuits against the ambush rule as well as two pending cases regarding the micro-union rule. Therefore, the courts may have a major impact on how the ambush rule and micro-union rule are carried out. NCA will notify members as these cases are decided
6. The NLRB’s Joint Employer Status
The NLRB also created another legal issue for clubs by expanding the definition of “joint employer.” According to the new definition, if a club controls the “means and manner” of the contractor’s employees’ work, such as provisions in the contract that set pay or prohibiting employees who are under the influence of drugs or alcohol from working at the club—all reasonable clauses found in most contracts—the club may be considered a joint employer. Therefore clubs that hire ICs, such as landscapers, cleaning service providers and others, can now more easily be considered a joint employer with the contractor and thus liable for any labor violations committed by that contractor. With deeper pockets than most, clubs would be an interesting target for plaintiffs’ attorneys.
Impact:
The new joint employer ruling dramatically increases a club’s liability when hiring a contractor. Clubs should ensure that any contracts they have are well defined and include provisions for defraying costs should a “joint employer” situation arise. Club leaders are advised to discuss this matter with their local club counsel as soon as possible. NCA will continue to work with the Coalition for a Democratic Workplace allies to fight the NLRB’s overreach in these issues.
7. Private Status and Discrimination
Maintaining a club’s private status is one of the most important tasks of club leaders. Without this designation, clubs are subject to a bevy of regulations that can negatively impact their operations.
Clubs are well aware of the threat from discrimination lawsuits, but increasing public awareness of social issues regarding race, religion, sexual orientation, gender and disabilities have place added pressure on the industry to ensure clubs cross their Ts and dot their Is when it comes to their private status. In any discrimination cases filed against clubs, the plaintiff’s must first prove that the club is not truly private and instead is a place of public accommodation. If that occurs, then the club will be subject to the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA) and state anti- discrimination laws.
A court in Washington state found Spokane Country Club to be a place of “public accommodation” that was subject to anti- discrimination laws. The jury found that the club’s men’s only grill and men’s only tee times were discriminatory and a total judgment of more than $1.3 million was levied against the club. As a result, the club filed for bankruptcy and was sold.
In a current case, a frequent guest (a nonmember) has sued a private club claiming the club should allow him to use a “specialized handicapped golf cart” on the club’s golf course, specifically including on its greens and in bunkers. The club’s policy does not permit the usage of the specialized cart in those areas.
This case will rely on proving whether the club is truly private or not. If the club is private, it is exempt from the ADA and the lawsuit will be dismissed. If it is deemed a public accommodation, it is subject to the ADA and potential penalties.
Impact:
In today’s social and legal environment, clubs are more vulnerable than ever to discrimination claims that put their private status under scrutiny. NCA reminds clubs of the risk of not following the guidelines for purely private clubs.
8. H-2B Visa Program
Many clubs across the country use the H-2B Visa Program to secure temporary, seasonal workers to fill employment needs when American workers are unwilling to fill the positions. Without the program, those clubs would find it difficult to meet their staffing needs during their busy seasons—making the H-2B Visa Program vital to how many clubs operate.
In April 2015, DOL overhauled the entire H-2B Visa Program, which added many new requirements that clubs must follow when recruiting, employing and paying H-2B and domestic workers.
This rule is in addition to another rule—the H-2B Wage Rule—which also went into effect in April 2015 and increased the pay H-2B workers must receive to well above market rate.
Impact:
Together, these two rules will place tremendous financial and administrative burdens on clubs that utilize the H-2B Visa Program. NCA is working with the H-2B Workforce Coalition and our allies on Capitol Hill to stop both of these rules. If Congress cannot help, NCA and our allies will likely file litigation to have the courts weigh in on these regulations. Plan Ahead Clubs should prepare for these legal and workforce issues today. If you have any questions regarding these or other legal challenges affecting the club industry, please contact Brad D. Steele, NCA Vice President of Government Relations & General Counsel at 202-822-9822 or [email protected].
Phillip Mike is NCA’s senior communications manager.