Opening or operating a health club in New Jersey involves more than maintaining equipment and offering fitness classes. Operators must also comply with strict consumer protection laws governing how they sell and market memberships.
Health club operators who sell memberships must conform with several state laws governing registration, contracts, cancellation rights and consumer protections. Failing to do so can result in costly litigation.
The risks are highlighted by a recent New Jersey appeals court decision that revived a long-running class-action lawsuit alleging health club members were charged hidden fees that inflated the cost of monthly memberships.
The New Jersey Office of the Attorney General also makes it easy for consumers to file complaints. Its website features a “Complaint” button that allows residents to report businesses with a click of the mouse.
A successful complaint can trigger civil or criminal investigations, damages, attorneys’ fees and other penalties.
To mitigate these risks, health club operators must understand their obligations under several state laws, including the Trust in Consumer Contract, Warranty and Notice Act, the Retail Installment Sales Act, the Consumer Fraud Act and the Health Club Services Act. Here are some key points every health club operator needs to consider.
What is a health club under New Jersey law?: Under state law, a health club is any establishment that devotes, or plans to devote, 40% or more of its square footage to services or facilities related to physical fitness or wellbeing.
This definition generally includes gyms, health studios and health spas, regardless of how the business is branded.
Registration requirements: Anyone offering health club services in New Jersey must register with the New Jersey Division of Consumer Affairs and renew the registration every two years.
Health clubs that offer memberships lasting longer than three months must also post a security bond or letter of credit with the division.
Membership contract requirements: Businesses classified as health clubs must maintain member service contracts that comply with state law. Some of the requirements include:
- Membership terms cannot exceed three years;
- Members must have the right to cancel within three operating days after receiving the contract;
- Members who cancel within three operating days are entitled to a full refund;
- Members must be allowed to cancel if they relocate or become disabled;
- If a health club allows members to sign up online, it must also allow online cancellations.
Additional contract provisions: Membership agreements should also clearly outline several additional provisions, including:
- Price change clauses;
- Assumption of risk and waiver of liability language;
- Warnings related to personal property, medical representations, and fitness to participate;
- Indemnification clauses;
- Dispute resolution terms;
- Guest policies;
- Age requirements.
These provisions help clarify the rights and responsibilities of both the business and its members.
To reduce their risk of costly litigation or government enforcement actions, health club owners should consult legal counsel to ensure their contracts and operations comply with New Jersey law to reduce the risk of litigation and fines.
Marissa Koblitz Kingman is a partner at Fox Rothschild.
