Shutdown: What Clubs Should Know

How a closed government impacts our industry

On Friday, President Trump and Congress agreed to a deal that funds the federal government through February 15, halting the country’s longest shutdown after 35 days, and allowing roughly 800,000 federal employees to go back to work and receive pay. The impacts of the shutdown have been felt throughout the country, affecting families, travel, parks, tourism and even clubs.

H-2B Relief Stalled
The area that impacted clubs the most by the shutdown is H-2B visa reform. As previously reported by NCA, prior to the shutdown, language had been included in the FY19 Department of Homeland Security (DHS) funding bill that would double the number of H-2B visas available for clubs. The measure increases the number of H-2B visas to 132,000, and these new visas would be available retroactively to the start of FY19. That 132,000 number would be divided into quarters (rather than in half as is done now). If there are more requests than visas in a given quarter, then visas would be granted to employers on a proportional basis to ensure that everyone gets at least some H-2B workers.

NCA supports these revisions to the H-2B program as they give much needed staffing relief to clubs. However, the bill did not pass because of the focus on the $5.7 billion border wall issue.

While the stopgap bill includes language to negotiate funding the border wall, Trump does not seem optimistic that the money to pay for the wall will be in the DHS funding legislation. If a deal can’t be done, we may see another government shutdown after February 15 and further delays to H-2B visa reform. NCA will continue to push for the inclusion of the H-2B visa program fix during DHS funding negotiations.

Pros and Cons of No Legislation
The government shutdown has also stalled key legislation from moving through Congress. In some respects, this has been a positive for the private club industry as House leadership has prioritized the shutdown over other legislative issues that would negatively impact private clubs. In particular, labor issues like minimum wage, which the House has already addressed through a proposed a bill that would increase the wage to $15 by 2024, will be unable to move through Congress without the shutdown threat fully resolved.

Conversely, with no ability to pass legislation through either chamber, any pro-club legislation is unable to become law during this time.

Overall, it is unlikely that we see movement on any legislation other than bills that address government funding. NCA expects further delays regarding legislation that affects clubs. 

Key Regulations
The shutdown has also slowed the review process of two rules. The new Overtime Exemption Rule is being reviewed by the Office of Management and Budget; however, with a short staff, this process has been slowed. In the Environmental Protection Agency, the comment period for its Waters of the U.S. (WOTUS) Rule has been disrupted by the shutdown. 

While movement has stalled on these two regulations, the delays will ultimately have little impact on when they will be implemented.

Relatively Unscathed
Fortunately, the private club industry has been relatively unscathed by the shutdown. Bills that would either benefit and hurt our industry cannot move, and regulations that would impose higher costs and administrative burdens to clubs have been delayed. As always, NCA and our allies continue to fight for pro-club issues during this stalemate. We will keep you posted on further developments.

Laws and Regs

Courts Side With Clubs on Membership Cases

A pair of recent North Carolina court cases regarding private club membership terminations have gone in favor of the clubs.

The first case involved a member who was expelled without having been given any notice. The club’s bylaws did not require any notice or hearing, and the member turned down an opportunity for a hearing. The court referred to North Carolina Nonprofit Corporation Act and determined that the law did not require a notice or hearing.

In a second member termination case, the club’s bylaws did have specific procedures that required due notice and a hearing. The plaintiff argued that the club did not follow its own rules and did not provide an opportunity to be heard by an “impartial tribunal.”

The judge ruled that courts should not interfere with internal affairs of voluntary associations which includes member disciplinary matters at private clubs such as suspensions or expulsions. The court also ruled that it is not necessary for private clubs to have an impartial decision maker determine any discipline if the club’s bylaws provide otherwise.

These N.C. rulings indicate that as long as clubs in that state adhere to their bylaws, they should be able to determine their own internal policies without interference from the courts. As always, NCA strongly recommends that all clubs across the country create clear procedures regarding member discipline. Those policies should be effectively communicated and followed by the club.

NLRB Reinstates Traditional Independent Contractor Test

Last Friday, the National Labor Relations Board (NLRB) overturned a 2014 decision that permitted workers labeled as independent contractors to be seen as employees and permitted to vote in union organizing campaigns. NCA and our allies on the Coalition for a Democratic Workforce had urged the NLRB to reconsider this decision for four years, and we finally got a more appropriate result.

The NLRB indicated in its ruling that workers who owned SuperShuttle airport transportation franchises could not be classified as employees. They leased or owned the vans they used, did not have SuperShuttle corporate supervisors, established their own pay rates and were granted complete control over their work schedules and working conditions such that they had “significant entrepreneurial opportunity for economic gain.” As such, they could not be employees under the National Labor Relations Act.

This case brings back the traditional common-law test for establishing independent contractors. While this decision does not immediately impact the determination of independent contractor status in a Fair Labor Standards Act situation, it does help to reaffirm how independent contractors should be treated and how clubs can ensure they classify their workers correctly. Most importantly, should your club be engaged in a union organizing campaign, this ruling will help you ensure the right workers vote in the election.

New Jersey Inches Closer to $15 Minimum Wage

New Jersey lawmakers are considering a bill to raise the state minimum wage to $15 an hour by 2024. If passed, New Jersey would join California, Massachusetts and New York phasing in a $15 hourly wage.

The proposal would raise the current rate from $8.85 to $10 by July 1, increasing by $1 annually until reaching $15 in 2024.

Missouri Bill Broadens Discrimination Protection

A bill proposed in Missouri seeks to prohibit discrimination based on sexual orientation and gender identity. Much like with minimum wage, more state legislatures are opting to modify their own discrimination laws when the federal government has not acted.

Fortunately, this expansion would not apply to truly private clubs. NCA recommends clubs review their policies and procedures to ensure they comply with private status regulations in order to avoid unnecessary litigation.

House and Senate Propose Minimum Wage Increase

Earlier this month, Sen. Bernie Sanders (I-Vt.) and Rep. Bobby Scott (D-Va.) introduced companion bills in the Senate and House that would increase the federal minimum wage to $15 per hour by 2024.

Scott is the new chairman of the Education and Labor Committee, so there is a strong likelihood the bill will pass his committee and reach the House floor. Speaker of the House Nancy Pelosi (D-Calif.) has supported such a measure in the past and is expected to do so again this year. And as a potential candidate for president in 2020, NCA expects that Sanders will be a strong advocate for this measure in the upper chamber of Congress.

 For most private clubs, the actual minimum wage rate is not the main issue when an increase is proposed. Traditionally, private clubs do not start their entry-level employees at minimum wage; clubs usually offer more. However, an increase in the minimum wage can place upward pressure on wages by club employees who earn at or near the new wage rate. This can artificially inflate wages and that can have a significant impact on a club’s bottom line.

These bills likely will not be successful until there are some benefits for the business community to deal with the financial issues that are expected to arise with this increase. We will continue to monitor the Democratic moves and work with our allies in Congress to present an alternative that will help to satisfy the needs of both sides.