There are many aspects of running a health and fitness business that can open up the potential for legal liability if not managed correctly. Anyone who has operated a membership- based business will have come across the issue of membership contracts, and the complexities surrounding them when a dispute arises. In this article, we’ll cover the key aspects health and fitness business owners need to consider when drawing up membership contracts and we asked fitness industry risk management expert, Dr Betul Sekendiz to offer her insights and recommendations.
Common problems encountered with gym membership contracts
Membership agreements offered by gyms and health clubs have attracted attention from the Australian Consumer Affairs Commission (ACCC) and Fair Trading agencies in the past, particularly given that members often lack commercial leverage to negotiate the terms and conditions offered.
Key contractual terms, which often cause problems can include:
a) Minimum term and Automatic renewal / Cooling-off period: these provisions need to be clearly stated and carefully tailored so that they do not create a significant imbalance between the rights of the parties. The cooling-off period needs to be clearly stated in a contract and comply with applicable fair-trading regulations or industry codes of practice. Issues often arise where cooling-off periods or termination rights are not appropriately outlined.
b) Payment default: the rights of the gym and the obligations of the member if they fail to pay on time need to be clearly set out and drafted in a fair and reasonable way.
c) Terminating membership agreements/ Cancellation fees: any cancellation fees applied under a membership contract will need to be reasonable and appropriate in the circumstances (particularly in light of any administration and other expenses actually incurred by the gym).
d) Changes to services provided: you will need to ensure that members are appropriately informed of their rights where there is a change to the services provided (including allowing them to terminate their membership in some circumstances).
e) Limitations of liability / waivers: limitation and waiver clauses must be carefully drafted to ensure maximum protection for the business without being excessively broad (which can cause them to become unenforceable).
f) Direct debits: this is an often overlooked area, however businesses must be mindful to not breach consumer laws in relation to ‘third line forcing’ (i.e. requiring customers to use a certain third party direct debit provider) when agreeing to a direct debit arrangement.
What do health and fitness business owners need to consider with their membership contracts?
Clear, transparent membership terms:
Using plain, natural language in your terms and conditions will help in avoiding confusion or misinterpretation by members. Explain aspects of the membership terms such as fees, membership duration, and cancellation policies as clearly and simply as possible.
It is always a good idea to seek out expert legal advice when drawing up contracts, but some experts can tend to use more formal language or legal terminology. Talk to your consultant about using easy to understand language and try running it past a friend or family member to gauge the clarity of the wording.
Compliance with Consumer Law:
Australian Consumer Law protects consumers against unfair contract terms and misleading agreements. Each state and territory also have their own fair-trading legislation to provide additional consumer protections. In Australian Capital Territory (ACT), Western Australia (WA), South Australia (SA) and Queensland (QLD), there are fair trading regulations specific to health and fitness service providers. Seeking out advice from a professional is the best way to ensure your membership terms comply with consumer protection laws and industry specific fair-trading regulations, and it provides clear, transparent information about the rights, obligations, and potential risks to all parties involved.
Limitation of liability and waivers:
Gym membership contracts will often include clauses that purport to waive the rights of members to bring legal action to seek compensation for damages that arose from from injuries sustained during a workout or while on premises due to negligence. Nevertheless, these exclusion clauses or waivers do not absolve the businesses from maintaining high health and safety standards. Under work health and safety laws, business owners and managers have a primary duty of care to protect the health and safety of their clients by conducting regular risk assessments of their services and facilities and implementing measures according to applicable codes, standards or best practices to eliminate or minimise hazards, so far as is reasonably practicable.
It should be noted, case law has shown that while health and fitness businesses can use waivers as a defence against injury claims, the enforceability or effectiveness of waivers in Australia is complicated. Past court decisions have shown a tendency to lean towards the injured member unless the health and fitness provider can show evidence of reasonable due care to protect the safety and health of participants.
Again, it’s best to seek legal advice to ensure that any exclusion clause or waiver incorporated into a contractual agreement is enforceable and complies with Australian consumer, fair-trading and civil liability laws.
Data and Privacy Protection:
With cyber security and data breaches being high on the radar in recent years, it’s imperative for businesses to demonstrate how they collect and handle member’s personal information. A clear privacy policy should be included in your membership agreement, as well as workplace measures implemented to protect unauthorised access to or breaches of member’s information.
Dispute Resolution:
No matter how clear cut your terms are, there will always be the potential for a dispute. Prepare for this by having a clear process for how disputes will be resolved, such as mediation. Members should have access to a channel whereby concerns or grievances can be raised and addressed.
Do membership contracts need to be updated?
Gym membership contracts should be reviewed regularly to make sure that they remain compliant with any legislation changes and reflect any changes to business operations. If membership agreements are updated or altered, it’s important to notify members in a timely manner.
Business owners should maintain records of past membership contracts, dates that changes have been made, how members were notified and communication relating to such. It’s also important to keep records of any communication relating to disputes or incidents, in case a future legal challenge arises. Professional indemnity insurance can protect against claims arising from negligence or errors.
A final word on membership contracts
When it comes to contracts, seek professional advice from a qualified legal or risk management consultant. Being proactive about addressing all these considerations and ensuring compliance with both legal and industry standards can mitigate the potential for future liabilities associated with gym membership agreements.
Dr Betul Sekendiz is an internationally recognised thought leader in the health and fitness industry on topics related to risk management and legal aspects. As the Chair of the Health and Fitness Industry Standards Council, she provides independent expert advice to AusActive in the development and review of standards, codes, guidance materials, and quality assurance schemes. Dr Sekendiz obtained her PhD from Bond University, specialising in risk management and minimisation of legal liability in the health and fitness industry. She now operates Fitness Industry Risk Management Consulting (FIRMC®), which provides approachable consultancy services to health and fitness businesses to help them develop risk management programs that can meet their unique organisational goals and needs. Dr Sekendiz, also an academic with two decades of experience, serves as the Associate Dean of Scholarship at the International College of Management Sydney (ICMS), where she employs an interdisciplinary research approach for applied outcomes for the industry.
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