The National Law Forum

Compliance with Health and Fitness State Laws: Background, Best Practices and Key Takeaways for Health and Fitness Club Owners

We have found that most business owners desire to run their club, studio or other fitness facility in compliance with all applicable laws. However, the problem is the difficulty in obtaining complete and accurate information regarding which laws are applicable to their business. Therefore, the purpose of this article to:

(i) Provide information as to where club, studio and other fitness facility owners can find the relevant state laws;

(ii) Provide a general overview concerning the various definitions of “health and fitness facility” and how that definition varies from state to state (examples from New York, Colorado, Texas, Florida and Illinois statutes);

(iii)Examine a few of the more common statutes and regulations that show up in most states; along with general comments and analysis regarding these state statutes; and

(iv) Provide business owners with key takeaways and considerations when determining how to best comply with all applicable laws.

For purposes of this article, we focus solely on specific state laws that apply strictly to club, studio and fitness facilities. For further clarity, this means any laws that are generally applicable to all business (wage/hour laws, general corporation/LLC laws, etc.) will not be covered by this article but are still important for business owners to be aware of and follow.

I. Where Can Business Owners Find the Applicable State Laws?

Most of the 50 states have provided electronic access to their state laws. Through a simple Google search, you should be able to find your state’s applicable laws online. After locating the entire index of your state’s applicable laws, the difficult part is searching through potentially thousands of laws to determine which laws are applicable to your facility.

By way of example, after semi-extensive research, we located the applicable “health and fitness facility” state laws for New York, Colorado, Texas, Florida and Illinois. Some of these “health and fitness facility” laws are set forth in the following links:

If you cannot locate the state laws that are applicable to your fitness facility, an attorney well-versed in the health and fitness industry should be able to assist you or provide you with the relevant “health and fitness facility” laws.

Health and Fitness State Laws

II. How Do States Define “Health and Fitness Facility”?

There is a wide variety of definitions as to what constitutes a “health and fitness facility” depending on which state laws you are examining. It is important that you find and analyze your state’s particular definition of a health and fitness facility to prevent future issues (and fines) from non-compliance.

New York uses the term “health club” and defines it as any “person, firm, corporation, partnership, unincorporated association, or other business enterprise offering instruction, training or assistance or the facilities for the preservation, maintenance, encouragement or development of physical fitness or well-being . . . such term shall include but not be limited to health spas, sports, tennis, racquetball, platform tennis and health clubs, figure salons, health studios, gymnasiums, weight control studios, martial arts and self-defense schools or any other similar course of physical training.”

Similarly yet distinctly, Colorado also uses the term “health club” but defines it as “an establishment which provides health club services or facilities which purport to improve or maintain the user’s physical condition or appearance through exercise . . . the term may include but is not limited to a spa, exercise club, exercise gym, health studio, or playing courts…the term shall not apply to the following: any establishment operated by a nonprofit, or public/private school/college, any establishment operated by government, any establishment which doesn’t provide the health club services or facilities as its primary purpose, and health care facilities licensed or certified by the department of public health and environment.”

While both New York and Colorado use “health club” as a catch-all for health and fitness facilities, New York delves more deeply into the specifics of exactly what types of activities fall under the definition of a health club, while Colorado speaks about the activities more broadly. This distinction may lead to more fitness related facilities being subject to the health and fitness statutes in Colorado.

Texas uses the term “health spa” and defines it as “a business that offers for sale or sells members instruction in or the use of facilities for a physical exercise program . . . which doesn’t include: private club owned/operated by its members, aerobic/dance studios, physical rehabilitation facility, an activity conducted or sanctioned by a school and a hospital or clinic.” This broad definition differentiates itself from both New York and Colorado by listing what does not fall under the definition instead of what does fall under the definition. It also allows for a greater variance in the types of facilities that could fall under the umbrella of a health spa.

Florida uses the term “health studio” which is “any person who is engaged in the sale of services for instruction, training, or assistance in a program of physical exercise or in the sale of services for the right or privilege to use equipment or facilities in furtherance of a program of physical exercise.” Florida’s definition, similarly to Texas’ definition, provides more emphasis on the sale of services than the physical establishment and allowed activities as provided in New York and Colorado’s definitions.

Finally, Illinois defines “physical fitness center” as “any person or business entity offering physical fitness services to the public . . . physical fitness services includes instruction, training or assistance in physical culture, bodybuilding, exercising, weight reducing, figure development, judo, karate, self-defense training, or any similar activity; use of the facilities of a physical fitness center for any of the above activities; or membership in any group formed by a physical fitness center for any of the above purposes.” Similarly to New York, Illinois is very specific as to the types of activities that constitute a physical fitness center.

Gym 2

The purpose in highlighting the differences in these state statutes is to demonstrate the importance in understanding the definitions of health and fitness clubs in each state, which allows you to determine if the laws are applicable to your business. As mentioned above, the failure to understand which statutes apply to your business could result in fines and other penalties down the road.

III. What are Some of the More Common Health and Fitness Statutes?

In analyzing the different health and fitness clubs statutes, several common themes arise. Perhaps the most obvious theme is consumer protection from deceptive sales and trade practices. New York’s legislature specifically outlines its purpose in creating its health club statute by declaring that the statutes was created to “safe-guard the public and the ethical health club industry against deception and financial hardship, and to foster and encourage competition, fair dealing, and prosperity in the field of health club services.”

Every state we examined included language in its statutes that provides the consumer with the right to:

(i) Rescind contracts within a certain time period after signing up;

(ii) Cancel his or her membership if their household moves between 5-25 miles from the location of the establishment where the consumer entered into the contract; and/or

(iii) Establish limits on membership fees and the length of the membership contract.

By way of example, in California every membership contract must include the following language in 10-point boldface type: “You, the buyer, may cancel this agreement at any time prior to midnight of the fifth business day of the health studio after the date of this agreement, excluding Sundays and holidays. To cancel this agreement, mail or deliver a signed and dated notice, or send a telegram which states that you, the buyer, are canceling this agreement, or words of similar effect. The notice shall be sent to: (name and address of facility operator).” Some of the applicable California statutes (but not necessarily all of the relevant statutes) can be viewed at these two links: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1812.80-1812.98 and/or http://www.dca.ca.gov/publications/legal_guides/w-10.shtml.

In addition to the three concepts listed above, most states require health and fitness facilities to maintain a pre-opening escrow account to protect customers in the event that the facility fails to open the facility within a defined period of time. For example, in Texas, if a health club does not open before the 181st day after it sells its first membership, members will receive a full refund of their prepayment.

Other common statutory requirements include that the membership contract must be in writing and provide a description of the services, facilities and hours of access, the facility must have a certificate of registration with the state, and the customer must receive a copy of the written contract. Additionally, many state statutes include language that a membership contract is void if a member enters into the contract under false or misleading information provided by the owner. This broad catch all is often invoked by customers seeking to get out of their membership (whether rightfully or wrongfully).

Another area of variance among state statutes is membership contract cancellation policies. As stated above, almost all states require that the club or fitness facility allow a member to terminate the membership agreement if the member moves some specific distance from the gym location (the actual distance varies from state-to-state). Also, most states have statutes that allow members to cancel their policies if the facility does not provide advertised services, fails to provide alternative facilities if the facility contracted for is forced to close or does not open on time, and if a member can no longer use the facility’s services due to a significant injury or disability in excess of six months.

As an example, Illinois’ statutes contain a simple cancellation policy where a customer may cancel his or her membership within three days of signing the contract for a physical fitness center that is open, or within 7 days of signing a contract for a club that has not yet opened. California, on the other hand, uses a sliding contract price scale to determine when a client has a right to cancel their membership: if the contract is $1,500-$2,000, the customer has a right to cancel within 20 days, $2,000-$2,500 and the customer has a right to cancel within 30 days, and if the contract is for more than $2,501 the customer has a right to cancel within 45 days of signing the contract. Finally, Texas requires that if a facility closes it must provide alternative facilities not more than 10 miles from the original location or it must pay a full refund to its customers of any pre-paid fees.

Gym 3

IV. Key Takeaways for Health and Fitness Clubs

Health and fitness club owners need to be mindful that every state has its own unique statutes and regulations that are applicable to any health and fitness clubs located in that state. These state statutes govern many aspects of their operations, including, but not limited to how they obtain customers and what needs to be included in their membership contracts.

At a minimum, club and fitness facility owners should review their existing form membership contract(s) to make sure they include the concepts discussed above; provided further, club owners need to specifically make sure that their form membership agreement(s) are compliant with all applicable laws, including sometime hard to find state statutes.

Further, national club and fitness facilities need to adjust their form membership contract on a state-by-state basis to ensure proper compliance (i.e. have a specific membership contract for their New York facilities, a different membership contract for their Florida facilities, etc.). Failure to do so can result in fines into the hundreds of thousands of dollars, as some states enforce their laws on a per occurrence (per membership) basis.

ARTICLE BY Aaron D. Werner of Horwood Marcus & Berk Chartered

Connor Valentyn contributed to this article.

Obama Administration Announces Plan to Promote Electric Vehicles

In late July, the Obama administration announced a collaboration with 50 federal and state agencies, electric utility companies, vehicle manufacturers, electric charging station companies, and others in the private sector to promote faster development of electric vehicle charging infrastructure and increased numbers of electric cars on the roads.

This announcement, made in partnership with the Department of Energy (DOE), Department of Transportation (DOT), Environmental Protection Agency (EPA), Air Force and Army, comes just after the DOE’s first-ever Sustainable Transportation Summit. To learn more about the collaboration, continue reading!

This collaboration aims to promote consumer adoption of electric vehicles and increase the accessibility of charging infrastructure across the country. Major goals include:

Guaranteeing $4.5 billion in loans to finance a national network of electric vehicle charging infrastructure to increase consumer access;
Utilizing funds from the Fixing America’s Surface Transportation(FAST) Act, signed into law by Obama in December 2015, to identify zero emission and alternative fuel corridors and developing a 2020 vision for the optimal placement of fast charging infrastructure; and
Encouraging state, county, and municipal governments to partner with the Federal government to procure subsidized electric vehicle fleets.

Additionally, the collaboration has agreed to a set of Guiding Principles to Promote Electric Vehicles and Charging Infrastructure to encourage market growth and spur adoption of electric vehicles by developing vehicles and charging infrastructure that are accessible, affordable, reliable and convenient for consumers.

The market for electric vehicles has grown significantly in recent years, with battery costs falling 70%, more than 20 plug-in electric vehicle models now on the market, and more than 16,000 charging stations deployed – up from fewer than 500 in 2008.

ARTICLE BY Sahir Surmeli of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Seventh Circuit: Title VII Offers No Protection Against Sexual Orientation Discrimination

In the midst of a legal, political and cultural landscape expanding the rights of LGBT individuals, the Seventh Circuit U.S. Court of Appeals has held to prior precedent in reaffirming that Title VII does not prohibit sexual orientation discrimination. Kimberly Hively v. Ivy Tech Community College, __ S.Ct. __, No. 15-720 (July 28, 2016). According to the court, though “the writing is on the wall” that sexual orientation discrimination should not be tolerated, because the writing is not in a Supreme Court opinion or Title VII, the court’s hands are tied.

In two 2000 opinions, Hamner v. St. Vincent Hosp. & Health Care Ctr., Inc.and Spearman v. Ford Motor Co., the Seventh Circuit had previously held that Title VII offers no protection from sexual orientation discrimination. The court revisited the issue now in order to provide a more detailed analysis in light of recent trends and decisions advancing LGBT rights.

The court recognized the merits of many of Ms. Hively’s arguments, and acknowledged that in light of the recognition of other rights of LGBT individuals the current legal landscape does not make sense. In recent years, the U.S. Supreme Court struck down the Defense of Marriage Act as unlawful (U.S. v. Windsor) and legalized gay marriage (Obergefell v. Hodges). In 2015, the EEOC held that sexual orientation discrimination is a form of sex discrimination under Title VII. Baldwin v. Foxx (July 16, 2015). Many judicial decisions at the district court level have repeatedly recognized that sexual orientation discrimination cannot be tolerated. Yet, Congress has repeatedly rejected new legislation that would extend Title VII to cover sexual orientation discrimination, and it has not amended the language of Title VII to include sexual orientation.

This creates “a paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act.” The court observed, “From an employee’s perspective, the right to marriage might not feel like a real right if she can be fired for exercising it.”

Nonetheless, the court stated that Congress’ failure to amend Title VII to include sexual orientation cannot be due to its unawareness of the issue. Thus, Congress must have intended a very narrow reading of the term “sex” when it passed Title VII.

In excluding sexual orientation discrimination from the coverage of Title VII, the Seventh Circuit conveyed its apparent reluctance in doing so:

“Perhaps the writing is on the wall. It seems unlikely that our society can continue to condone a legal structure in which employees can be fired, harassed, demeaned, singled out for undesirable tasks, paid lower wages, demoted, passed over for promotions, and otherwise discriminated against solely based on who they date, love, or marry. The agency tasked with enforcing Title VII does not condone it, … many of the federal courts to consider the matter have stated that they do not condone it …; and this court undoubtedly does not condone it… . But writing on the wall is not enough. Until the writing comes in the form of a Supreme Court opinion or new legislation, we must adhere to the writing of our prior precedent[.]”

The Seventh Circuit went on to offer its further observations:

“Many citizens would be surprised to learn that under federal law any private employer can summon an employee into his office and state, “You are a hard‐working employee and have added much value to my company, but I am firing you because you are gay.” And the employee would have no recourse whatsoever—unless she happens to live in a state or locality with an anti‐discrimination statute that includes sexual orientation.”

Those states are currently California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington and Wisconsin. Other states apply the prohibition to public employment only: Alaska, Arizona, Indiana, Kentucky, Louisiana, Michigan, Montana, North Carolina, Ohio; Pennsylvania, and Virginia. Some local city and county ordinances contain similar anti-discrimination provisions.

The bottom line for both employers and LGBT individuals, in the Seventh Circuit and elsewhere, is that the employment protections afforded to individuals based on sexual orientation remains determined, for now, at the state and local level.

ARTICLE BY Julie Furer Stahr of Schiff Hardin LLP

Civil Penalties Nearly Double for Form I-9 Violations

Significantly Increase for Other Immigration-Related Violations

Due to the implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Sec. 701 of Public Law 114-74) (“Inflation Adjustment Act”), higher fines and civil penalties have now gone into effect for assessments that occur on or after August 1, 2016. These higher penalties can be applied to violations that occurred after November 2, 2015, the day the President signed the Act into law.

The Inflation Adjustment Act will be implemented by multiple federal agencies that have authority to assess civil penalties. The following is a summary, by federal agency, of the penalties covering violations for the unlawful employment of immigrant workers; violations related to Forms I-9; immigration-related discriminatory employment practices; and violations of the H-1B, H-2A and H-2B temporary visa for foreign worker programs. The increases in many categories are substantial. The penalties for Form I-9 paperwork violations are increased by an eye-catching 96 percent.

Department of Homeland Security fines:

Department of Homeland Security Fines i-9 violations

Department of Justice fines:

Department of Justice Fines

Department of Labor fines:

Department of Labor Fines

The consequence of the above is that employers should continue to aggressively monitor their immigration programs for compliance or suffer the harsher sting of these increased fines. Given that the penalties for I-9 errors are practically doubled, it is more important than ever to ensure I-9s are completed timely, correctly and are periodically audited. Moreover, most I-9 violations are considered continuing violations until they are corrected.

ARTICLE BY Gregory A. Wald of Squire Patton Boggs (US) LLP

Pokémon GO – Next Stop: Regulation & Litigation

As everyone is aware, the Pokémon GO craze has taken the world by storm in the past month. Reports estimate there have been over 75 million downloads of the digital game since the program became available on July 6. Apple has not issued any concrete numbers, but has confirmed that it was the most downloaded app ever in its first week of availability.

When the game was first offered, users were required to grant permission not only to use a player’s smartphone camera and location data but also to gain full access to the user’s Google accounts — including email, calendars, photos, stored documents and any other data associated with the login. The game’s creator, Niantic, responded to a public outcry – including a letter from Minnesota Senator Al Franken – stating that the expansive permission requests were “erroneous” and that Pokémon GO did not use anything from players’ accounts other than basic Google profile information. The company has since issued a fix to reduce access only to users’ basic Google account profile information.

As is often the case, remarkable success naturally attracts critics who take aim. In a letter dated July 22, 2016, the Electronic Privacy Information Center (EPIC) wrote to the Federal Trade Commission (FTC) requesting government oversight on Niantic’s data collection practices. EPIC is a non-profit public interest research center in Washington, D.C., focusing public attention on privacy and civil liberties issues.

Niantic’s Privacy Policy

EPIC’s letter highlighted a number of alleged issues with Niantic’s privacy policy:

Niantic does not explain the scope of information gathered from Google profiles or why this is necessary to the function of the Pokémon GO app.
Niantic collects users’ precise location information through “cell/mobile tower triangulation, wifi triangulation, and/or GPS.” The Company’s Privacy Policy states Niantic will “store” location information and “some of that location information, along with your … user name, may be shared through the App.” The Privacy Policy does not indicate any limitations on how long Niantic will retain location data or explain how indefinite retention of location data is necessary to the functionality of the Pokémon GO app.
With Pokémon GO, Niantic has access to users’ mobile device camera. The Terms of Service for Pokémon GO grant Niantic a “nonexclusive, perpetual, irrevocable, transferable, sublicensable, worldwide, royalty-free license” to “User Content.” The Terms do not define “User Content” or specify whether this includes photos taken through the in-app camera function.
The Pokémon GO Privacy Policy grants Niantic wide latitude to disclose user data to “third-party service providers,” “third parties,” and “to government or law enforcement officials or private parties as [Niantic], in [its] sole discretion, believe necessary or appropriate.” Niantic also deems user data, including personally identifiable information, to be a “business asset” that it can transfer to a third party in the event the company is sold. This issue has been identified as a particular concern to another non-profit organization – Common Sense Media, an independent non-profit organization focusing on children and technology. According to Common Sense Media, location information and history of children should not be considered a “business asset.”

EPIC’s Request to the FTC

Based on the issues highlighted above, EPIC requested that the FTC use its authority to regulate unfair competition under the Federal Trade Commission Act (15 U.S.C. § 45) to prohibit practices by Niantic and other similar apps that fail to conform with FTC’s Fair Information Practices and the principles set forth in The White House 2012 report, “Consumer Data Privacy In A Networked World.”

According to EPIC, Niantic’s unlimited collection and indefinite retention of detailed location data, violates 15 U.S.C. § 45(n) because it is “likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.”

EPIC also contends that the unlimited collection and indefinite retention of detailed location data violate the data minimization requirements under the Children’s Online Privacy Protection Act (COPPA), which requires providers to “retain personal information collected online from a child for only as long as is reasonably necessary to fulfill the purpose for which the information was collected.” 16 C.F.R. § 312.10.

Private Lawsuit Filed Against Niantic

Subsequently, a Pokémon GO user has filed suit in Florida State Court alleging that the terms of service and privacy policy are deceptive and unfair, which violates the Florida Deceptive and Unfair Trade Practices Act. Beckman v. Niantic Inc., case number 50-2016-CA-008330, Fifteenth Judicial Circuit for Palm Beach County, Florida.

Practice Pointer

The issue of consumer privacy continues to garner significant attention. Whether you are an app developer or any other company that collects and retains personal information, it is time to review your applicable policies and take appropriate steps to ensure that your company is not the subject of government agency inquiry, litigation, or a data breach.

For employers whose employees may be bumping into each other in the hallway while playing the game, consideration should be given to ban or otherwise regulate employee involvement. Certainly a drop in productively is a concern. However, even if accessing the game during work time is barred, employers should be concerned about the potential compromise to proprietary and confidential information that could occur as the result of data breaches or through counterfeit games that are designed to allow hackers access to your protected information.

ARTICLE BY Jeffrey M. Schlossberg of Jackson Lewis P.C.

Quota Reserved for Most Desired Immigrant Applicants Retrogresses for Natives of India and China!

The Department of State published its August 2016 Visa Bulletin and it has a few impactful surprises. This is not good news for companies and foreign nationals. Indian and Chinese foreign nationals, as usual, are the hardest hit. Specifically, the historically open First Preference Employment Based Category (EB-1) retrogressed to January 1, 2010 for Indian and Chinese nationals. We can’t recall the last time the EB-1 category was not current.

This is astonishing when you consider that the EB-1 group represents some of the most talented foreign nationals that are immigrating to the US. Specifically, the EB-1 category includes:

Individuals of Extraordinary Ability – to qualify the individual must be able to demonstrate extraordinary ability in the sciences, arts, education, business, or athletics through sustained national or international acclaim.
Outstanding Researchers – to qualify the individual must demonstrate international recognition for his/her outstanding achievements in a particular academic field. The individual must have at least 3 years’ experience in teaching or research in that academic area and must be in the United States in order to pursue research in the field.
Multinational Managers/Executives – to qualify the individual must have been employed as a manager or executive outside the United States in the 3 years preceding the petition for at least 1 year by a parent, affiliate or subsidiary of a U.S. company where they will serve in the U.S. in a managerial or executive capacity.

There are additional delays for other nationalities and categories as well see: https://travel.state.gov/content/visas/en/law-and-policy/bulletin/2016/visa-bulletin-for-august-2016.html. The most common employment based visa categories, beyond EB-1, are Second (EB-2) and Third (EB-3) preference. EB-2 is applicable for jobs that require an advanced degree or equivalent as a minimum, exceptional ability in the arts, sciences or business, and National Interest Waivers for individuals whose work is in the national interest. The EB-3 classification is for skilled workers, professionals and unskilled workers.

Chinese nationals are being treated the same this August, whether first, second or third preference. All three categories have a January 1, 2010 priority date. For Indian nationals, EB-1 is still the best category, but with the January 1, 2010 priority date – the news is not good! The EB-2 and EB-3 categories have a priority date of November 2004. Can you imagine waiting more than twelve years to complete a process once started?

Notably, the EB-2 “all other” category retrogressed to February 1, 2014 which is worse than the third preference category at March 15, 2016. So, EB-3 all other is better than EB-2! We haven’t see this type of movement in the “all other” category for a significant period of time.

What this Visa Bulletin represents is a “shutting off” of the flow of immigrant visas being issued for what is expected to be the remainder of the fiscal year. Fiscal Year 2017 starts on October 1, 2016 and new visa numbers will be available. In the August Visa Bulletin, the Department of State indicates that the EB-1 category will be opening back up in October. Assuming the State Departments calculations are generally on target, we should see movement in October or later in the fall that will resemble the dates where we left off in July 2016.

The Visa Bulletin and lack of visa numbers for skilled workers continues to be a daunting problem for employers and foreign nationals alike. The system for foreign nationals who want to “follow the rules” has broken down. Further, there is no relief, or comprehensive immigration reform, in sight. Expect more whiplash inducing movement in the future.

ARTICLE BY Valarie H McPherson of Proskauer Rose LLP

800-Meter Champion Berian Eventually Outpaces Nike Endorsement Suit… Or Did He?

World 800-meter champion Boris Berian is seemingly capable of out-running just about anything these days. Berian is just a year removed from sprinting out of a McDonald’s kitchen and into track lore – essentially trading a fry cook apron for track shorts and blowing away the competition en route to gold at the 2016 world indoor championships. Some months later, the American track star appears to have, at least for the moment, finally put some distance between himself and his former sponsor with the news last month that Nike has decided to drop its breach of contract lawsuit against the soon-to-be Olympian. So, why did Nike split with this up-and-coming track star?

The relationship between Berian and Nike started, as these things typically do, quite harmoniously. After an unexpected second place finish at the Adidas Grand Prix in June 2015, Berian, until then having attracted attention largely for his previous work as a McDonald’s fry cook, caught the eye of several suitors hoping to sponsor him, ultimately selecting the Oregon shoe giant because it came in with the highest offer.

Yet just as quickly as runner and corporate sponsor fell in love, they puzzlingly split. As early as January 2016, Berian was spotted racing in New Balance gear. At the time, Berian’s agent explained that his client’s contract with Nike had expired and that any contractual restrictions against signing another footwear endorsement contract had lapsed.

If the middle distance champion thought he had left Nike in the dust, he was quite mistaken. In April, Nike dashed to court and filed a breach of contract lawsuit. (Nike USA Inc. v. Berian, No. 16-00743 (D. Or. filed April 29, 2016)). Berian was served with notice of the suit seemingly during the only time Nike could catch him: while the runner stood still and watched others compete at a track meet in Los Angeles.

In the complaint, Nike claimed that it had a right of first refusal to match a $125,000 sponsorship deal that Berian had signed with New Balance. Nike further alleged that it had exercised its right of first refusal and matched the New Balance offer, which included $125,000 a year plus a performance bonus, and that therefore Berian had breached the endorsement deal in eloping with New Balance. Nike further asserted that its offer was a match even if it contained reductions (which Nike stated are standard in track and field endorsement contracts) because the New Balance offer was only a brief term sheet (with omitted reductions) and not a complete contract. As a result of the alleged violation, Nike sought an order enjoining Berian from entering into an endorsement relationship with any Nike competitor and from competing while wearing or otherwise endorsing any Nike competitor’s product. Nike claims that it would suffer irreparable harm if Berian is allowed to compete in a competitor’s product, particularly in an Olympic year.

In a response in opposition to a motion for an expedited hearing and discovery on the injunction issue, Berian maintained that he had not breached the deal because Nike did not truly match New Balance’s offer. The crux of Berian’s argument focused on the insertion of the reductions clause in Nike’s offer that allowed Nike to reduce Berian’s compensation in certain circumstances relating to performance, as opposed to New Balance’s offer, which did not contain any reductions.

Nonetheless, in early June, Nike obtained a temporary restraining order barring Berian from wearing New Balance products.

That temporary victory, however, came with rather limited fanfare, a reaction that perhaps served as an indicator of what awaited Nike, both in the courtroom and out. Inside the courthouse halls at oral argument, the judge set to rule on the injunction request reportedly appeared skeptical of the merits of Nike’s case. That perceived skepticism also took the form of criticism in the court of public opinion, with members in the track community decrying the proverbial Goliath for singling out a modern-day David.

Within several weeks, however, Nike had changed course, deciding to drop the suit altogether, in the process adding another chapter to what had quickly become a tumultuous saga. Nike, while maintaining the validity of its breach claims, stated that it opted to drop the suit to eliminate any distraction for Berian who was preparing for the Olympic trials. Berian placed second in those trials and earned a trip to the Rio Olympics at summer’s end. And he did so wearing a New Balance kit.

Ironically enough, Berian’s performance in the trials means that the saga continues into the present.

Nike is the official sponsor of USA Track and Field and, as such, all track and field athletes representing the United States at the Rio Olympics will be outfitted in Nike-branded national team attire in competitions, award ceremonies, official press conferences, and other official team functions.

Berian’s prize, then, for securing a trip to Rio by placing second at the trials?

Glory, sure. And a clean Nike uniform to don at the starting line.

ARTICLE BY L. Robert Batterman, Michael Cardozo, Robert E. Freeman, Howard L. Ganz, Wayne D. Katz and

Joseph M. Leccese of Proskauer Rose LLP

Executive Incentive Pay, Race Discrimination, Pokémon Go, Commercial Non-Competes: Employment Law This Week – August 1, 2016 [VIDEO]

We invite you to view Employment Law This Week – a weekly rundown of the latest news in the field. We look at the latest trends, important court decisions, and new developments that could impact your work.

This week’s stories include . . .

(1) Chamber: Executive Incentive Pay Rule Could Stunt Growth

Our top story: The U.S. Chamber of Commerce claims that the new executive incentive pay rule could stunt economic growth. The proposed rule lays out a tiering system for regulating bonus pay for bank executives and other employees in the financial sector. The Chamber’s 26-page letter argues that the rule could deter the best minds from entering the financial sector and discourage economic growth and job creation. The FDIC has said that the letter will be taken into account during the review process.

(2) Eighth Circuit Rules for Employer in Race Discrimination Suit

The U.S. Court of Appeals for the Eighth Circuit upholds an employer’s win in a race discrimination suit. An African-American employee of medical technology company Siemens was terminated as part of a reduction in force. The employee alleged that his selection was race-based, and he provided evidence of racial discrimination by his direct supervisor. The plaintiff claimed that poor evaluations by that supervisor “duped” the service director into firing him. The court found that the supervisor who wrote the evaluations did not know about the workforce reductions and, therefore, could not have intentionally triggered a discriminatory termination.

(3) Pokémon Go Sparks Privacy Concerns

Pokémon Go creates privacy concerns for employers. The first mainstream augmented reality game is sweeping the nation, and the game never stops, even during work hours. Despite a recent update to the game that reduces its access to players’ Google accounts, Pokémon Go’s data collection practices are under fire from privacy advocates. This week, the Electronic Privacy Information Center joined the fray, calling for the Federal Trade Commission to investigate security risks associated with the game. In light of the popularity of the game, employers should consider adding more detail to their policies about how and where business mobile devices can be used.

(4) Michigan’s High Court Changes Standard for Commercial Non-Competes

The “rule of reason” standard applies to commercial non-competes in Michigan, the state’s highest court says. Innovation Ventures contracted with a manufacturing plant to produce and package the “5-Hour ENERGY” drink. After the relationship was terminated, the plant began to produce competing energy drinks. Innovation Ventures argued that this action violated a non-compete clause in its termination agreement. Lower courts found that the clause was unenforceable under a provision in the Michigan Antitrust Reform Act (MARA). On appeal, the Michigan Supreme Court remanded the case, ruling that the MARA provision applies only to non-competes between employers and employees and that the federal “rule of reason” standard should be applied to commercial non-competes in Michigan.

(5) Tip of the Week

Ariel Merkrebs-Finkelstein, Director of Human Resources at HelloFresh, is here with some advice on best practices for developing company culture.

“It’s important for you to establish a strong company culture within your organization, because it will help you attract and retain top talent. One thing you can do is call each other a ‘family’ or a ‘team,’ rather than coworkers or colleagues. This will help you break down the barriers and facilitate conversations more easily. . . . Create opportunities for interacting with one another outside of the formal landscape of the office. This might include something like exercise classes, interactive games like ‘Escape the Room,’ or even just a picnic in a nearby park. . . . I also recommend that you recognize your employees. It’s a really great way to make them feel valued, and it’s free. So get creative.”

ARTICLE BY George Carroll Whipple, III of Epstein Becker & Green, P.C.

Time Management for Lawyers: Did You Have a Week or Did the Week Have you?

As a business development coach for attorneys, no one understands the stress and demands placed on a legal practitioner better than I do. Imagine spending your entire day listening to multiple people complain about the demands being placed on them and additional stress that’s created when we discuss investing time in business development. It makes perfect sense why most attorneys shy away from their marketing activities.

Time challenges aside, you must know by now that nothing will have a greater impact on your personal and financial freedom than having your own book of business. Therefore, it’s never been more important to effectively manage your time to ensure you can fit in the billable hours and business development, while still having the balance with your family or personal time. Here are three key tips to ensure you have the growth and balance to create the career you’ve been dreaming of:

Time Tip #1: Have a solid plan for business development

Other than doing nothing, the worst thing you can do as a lawyer is to approach business development willy-nilly. Attending events, writing articles or even speaking can be ineffective if your audience isn’t aligned with your goals. You need to have a plan in place to ensure you are spending your time in the right places with the right people. Think about the types of buyers and strategic partners you need to meet. Ask yourself, where do they spend their time? How do I get in front of them? How many do I need to build relationships with to grow my book?

A good plan should lay out your goals, strategies and tactics to accomplish your objectives in the fastest time possible. Think of the plan as a GPS. Before we had this tool, we would drive miles out of our way before turning around. Now the GPS tells us when we made a bad turn, but how to get back on track. This is what a good plan will do for you.

Time Tip #2: Use your calendar to schedule time for business development

We schedule our meetings for a closing, deposition or a trial, then why not schedule time for business development. They are all important and need to get done, so treat them with equal importance. Based on where you are in your career, how much time you need to carve out and your goals to grow your book, there needs to be an emphasis on carving out time daily or weekly for business development. Here are a couple of thoughts and best practices to think about:

Look at your calendar to find times when you are less likely to be distracted by email, phone calls or other people in your office. Not to boast, but I get into my office three days a week at 6 am. This gives me a solid six hours a week when I can get emails out, leave voice mails or make contacts through LinkedIn. If you’re a night owl, that might be better for you.
Once you do get meetings on your calendar, be sure to use the meeting invite tool to ensure that these meeting stick. Changing schedules and cancellations are sometime inevitable; however we can curtail them slightly by getting into someone’s calendar right away. If you’re not sure how to use this tool, ask the person in the office next to you. It’s become as popular as emailing.
Use the calendar to schedule EVERYTHING! If you have to make a call, write an email or follow up with someone, schedule it. As I mentioned earlier, you need to start treating your marketing activities the same way you treat the law. Think of your schedule like an advanced “to-do” list. The more you use your calendar to schedule things, the more you will actually do. Just seeing a follow up call from a networking event up on your screen will prompt you to follow through.

Time Tip #3: Always pick the low-hanging fruit first

With all of the networking groups, associations and coffee meetings to choose from, you may quickly find your time drained away from you. One of the first things I suggest to attorneys is to look closely at your network and find the easiest way to obtain new business. This might include meeting with existing clients to cross-sell, up-sell or find quality introductions. You also might have some family or friends who are in power positions, but you haven’t tapped into that yet. Whatever the situation, it’s critical to leverage these contacts first.

A few concerns that you might have with this approach is the possibility of “blowing” the opportunity or “disrupting” the relationship. While this is always a remote possibility, here are some soft and gentle approaches that might ease your mind when venturing into uncharted territory:

Be curious. You’re a lawyer right? Use that as your excuse to ask a thousand questions about this person’s business. Everyone has goals and challenges that they’d be more than happy to share with you. Just be a great listener and ask deeper open-ended questions to find a way to add value. Value might be discussing the law in your office over coffee and value might be referring them to someone who can help solve a problem today. Either way, you will have a much better idea of the opportunity for you to do business now or in the future.

An example of this would be at a family function where you see Uncle Dan every year. He owns a $20 million dollar website company. You can ask him, “What do you love about your business?” and “What types of challenges do you have running a company of that size?” Once you start Uncle Dan talking about his favorite subject, himself, you can keep asking deeper questions to identify a possible need or a question he might have for you on the legal side.

Ask for Advice. In this scenario, you are looking to better understand the mindset of a business owner or GC as you are working to grow your own practice. Ask some great questions to obtain their advice and help. It’s then possible that they might try to help you with your goals, make an intro to someone they know or allow you to share your knowledge to help with a problem within their own company.
Look to obtain an introduction from an existing client. Look, you’re good at what you do and your client is very happy. In addition, you’ve invested time taking her to lunch, a game, golfing, etc. Maybe it’s time to ask for a high level introduction to someone in her network that might want to have a similar experience.

It might make sense to schedule a lunch with your client, and before getting off the call say, “I’m looking forward to our lunch on Friday. I do have a favor to ask that would be really meaningful to me. I know you are well connected and have been very happy with my work. Would you be open to introducing me around to one or two of your business associates?” This type of question is permission based and should be received positively. The worst that can happen is that she will say “no.” The best thing can be an intro to a new client that could make your year! Plus, if she does say “no,” it might be a wake-up call that you might need to work on your relationship building skills.

One way or another, you have to get your time under control. You can create a more focused approach to business development, utilize your calendar at a higher level or focus on low-hanging fruit. Whatever the case, don’t wait. Sometimes you just have to draw a line in the sand and say, “no more.” The best thing you can do is to schedule time to get organized with your time.

ARTICLE BY Steve Fretzin of Sales Results, Inc.

Upcoming European Chemical Restrictions in Apparel Raise Concerns

The European Commission intends to ban the use in apparel of hundreds of Cat. 1A and 1B carcinogenic, mutagenic and toxic for reproduction substances (“CMRs”) within the next year. To do so, the Commission expects to use the so-called “fast-track” procedure to ban CMRs under Regulation 1907/2006 (“REACH Regulation”), instead of the standard procedure for prohibiting substances. Historically, the fast-track procedure has been reserved for mixtures that contain CMRs and are intended for the general public. The Commission has indicated that its proposal to ban the use of CMRs in apparel is a “test-case” of its intention to also ban Cat. 1A and 1B CMRs in articles (i.e., objects) intended for consumers on a regular basis in the near future. This fast-track procedure allows less scientific input from the European Chemicals Agency (“ECHA”) and industry, and the related restrictions would create significant barriers to international trade.

“Standard” vs. “Fast-Track” Procedure

Title VIII of the REACH Regulation empowers the European Commission to restrict the use in mixtures (e.g., inks, paints) and articles (e.g., apparel) of substances that pose an unacceptable risk to human health or the environment. Restricted substances are listed in Annex XVII of the Regulation, which is regularly updated.

There are two different procedures for adding new restrictions: the “regular” and the “fast-track” procedure. In both cases, the Commission proposes the restrictions, and its final proposal is then adopted through “comitology” (i.e., a process involving the input of Member States). The road towards the final Commission proposal, however, is very different for each procedure:

Standard procedure: The standard procedure is generally highly regarded for the sound scientific input it gathers. Articles 69 – 73 of the REACH Regulation include important steps, such as ECHA’s or a Member State’s preparation of an Annex XV dossier analyzing the restrictions, assessments by the Agency’s Risk Assessment Committee (“RAC”) and Socio-Economic Assessment Committee (“SEAC”), and consultation of the Forum for Exchange of Information on Enforcement (“Forum”).
Fast-Track Procedure: Article 68(2) of the REACH Regulation, however, empowers the Commission to ban the use of substances that are classified as Cat. 1A or 1B CMRs in mixtures and articles that could be used by consumers without the preparation of a dossier, the opinions of the RAC and SEAC or the consultation of the Forum. As the Commission recognized in its Article 68(2) Paper of 2014, the legislation provides little to no guidance on the use of this procedure.

Indeed, the fast-track procedure was originally intended, and until now has been used solely, to restrict the use of mixtures intended for consumers that contain Cat. 1A or 1B CMRs in concentrations above specific thresholds. Entries 28 to 30 of Annex XVII contain the general ban for mixtures containing Cat. 1A and 1B CMRs, and the Commission has regularly updated them by amending their Appendixes.

The procedure was historically intended for mixtures due to the potential high exposure of consumers using them. In contrast, there is scientific uncertainty on the risk of exposure of consumers to CMRs contained in articles. As the Commission recognizes in its Article 68(2) Paper, the “main difference between articles and substances and mixtures is that there might be cases where there is no or very limited possibility of exposure of consumers to a CMR substance contained in an article.”

The Proposed CMR Restrictions

The Commission’s long term strategy is to use the REACH fast-track procedure to restrict the use of Cat. 1A and 1B CMRs in a broad range of consumer products. The upcoming ban in apparel is intended as a “test-case”.

Following concerns raised by the industry, the Commission recently announced that it intends to restrict the use of Cat. 1A and 1B CMRs in textiles in two phases. First, it will restrict CMRs in textiles that are in direct contact with the skin. This concerns primarily apparel, but also products such as footwear and bed linen. We understand that these restrictions could be adopted by spring or summer of 2017.

Second, the Commission will restrict Cat. 1A and 1B CMRs in textiles that are not in direct contact with the skin, such as accessories (e.g., buttons), floor coverings, and carpets. The Commission will not start this second phase until it presents its final proposal for textiles that are in direct contact with the skin.

It is still unclear which Cat. 1A and 1B CMRs the Commission will target. Initially, it had proposed to restrict 286 CMRs. The Commission should only restrict those substances for which there are validated detection and measurement methods.

Analysis of the Planned Restrictions

The Commission’s initial proposal to restrict no less than 286 CMRs in a wide category of textile products raises significant concerns. These include:

Duplication: Of the CMRs that the Commission intends to restrict under the fast-track procedure, several are already subject to other restrictions in the REACH Regulation. The resulting double bans or restrictions might create confusion and duplication. The Commission indicated last June that it is aware of this issue and that it “is committed to avoid double regulation for the same substance and use.”

Trade implications: Extensive restrictions could create unnecessary barriers to trade and violate the EU’s commitments under the Agreements of the World Trade Organization. The apparel industry is a global industry; a rapidly-imposed ban on CMRs in apparel may lead operators in this sector to temporarily or permanently stop marketing certain products in the EU.
Socio-economic impact: It is questionable whether the Commission has sufficiently considered the cost of compliance with the upcoming restrictions. Widespread and simultaneous restrictions may represent a significant burden for industry, including numerous small and medium-sized enterprises (“SMEs”), and increase the price of apparel for consumers.

Next Steps

What lies ahead? The Commission has agreed to gather additional expert input over the next few months. This will include input from the Forum, ECHA, and a group of experts, including industry representatives. Subsequently, the Commission will open its proposal for a public consultation, likely by the end of 2016 or early 2017. Once this public consultation is closed, the Commission will adopt its final proposal.

Although much remains to be decided, it is clear that a ban of hundreds of CMRs in all skin contact textiles will significantly affect apparel and footwear companies that market their goods in the EU and EEA. In the mid-long term, the Commission’s plans will likely also have a significant impact on the wider global textile and consumer goods industry.

ARTICLE BY Charlotte Ryckman of Covington & Burling LLP
Roberto Yunquera Sehwani, a Stagiaire at Covington & Burling LLP and attends the Universidad Autónoma de Madrid, also contributed to this post.

The National Law Forum

Compliance with Health and Fitness State Laws: Background, Best Practices and Key Takeaways for Health and Fitness Club Owners

I. Where Can Business Owners Find the Applicable State Laws?

II. How Do States Define “Health and Fitness Facility”?

III. What are Some of the More Common Health and Fitness Statutes?

IV. Key Takeaways for Health and Fitness Clubs

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