Don’t Be a Health Club!

A New Regulatory Problem For Yoga

As yoga has become a mainstream practice and turned into a multi-billion dollar industry, many regulatory agencies have taken note and are regulating yoga. Both the IRS and state taxing authorities are auditing yoga studios over the classification of teachers as independent contractors, state education boards have sought to regulate yoga teaching programs as secondary education schools, local sales taxes are being imposed on yoga studios, and ASCAP is collecting royalties from studios for performing music during yoga classes.

There is a new regulatory concern that may affect yoga studios across the country. Almost all states have laws that regulate the health club, gym and spa industry (“Health Clubs”). Health Clubs have a history of using unfair membership agreements, engaging in deceptive trade practices, and going out of business (which has caused their members to lose their advance payments).

Consequently, most States have passed laws that regulate the agreements that Health Clubs require their members to sign and require Health Clubs to post bonds to protect members in case they go out of business.

These laws require that specific legal language must be contained within membership agreements. They also prevent certain kinds of provisions-such as waiving legal rights-from being included within membership agreements.

New York has sought to impose its Health Club laws on yoga studios. Since New York is seeking to regulate yoga studios as Health Clubs, there is a risk that this will spread to other states. We have seen this occur in other regulatory areas.

Regulation in New York

In New York, the Attorney General sent a letter to a yoga studio asserting that it was in violation of the New York Health Club Services Law (the “Law”).  The Law defines a “health club” as a business offering instruction or facilities for the development of “physical fitness or well being.” The Attorney General took the position that the yoga studio was a “health club” within the meaning of the Law. As a “health club,” its membership agreement must comply with the requirements of the Law.

These requirements are: (i) posting a bond in case the Health Club goes out of business; (ii) including language in a membership agreement that paying the full amount in one payment is risky, (iii) giving members the right to cancel their agreement for a three day period; (iv) requiring that certain language be in bold face type; and (v) prohibiting provisions that waive a member’s legal rights.

There are civil penalties of $2500 for each violation.

If a “health club” loses it case before the Attorney General, it must also send a notice to its members that it has revised its agreement to comply with the Law and that the new agreement will be in effect in the future.

My Argument to the Attorney General

The Attorney General of New York permitted me to file a brief that argued yoga studios are exempt from the Law.  I am happy to report that the Attorney General was convinced by my brief and we won the case. However, it is important to note that this decision was based on the specific facts concerning the business of this studio. Other studios with different business models in New York may violate the Law. Also, studios located in other states may also be in violation of the local Health Club laws.

I have outlined the arguments that I made to the Attorney General below. I am providing this so you will have some insight into how you might present your case if you are contacted by the Attorney General in your home state. Naturally, you should hire a lawyer, but this should give you a head start on building your case!

Here is my argument:

1. I defined “yoga” as a spiritual rather than a physical practice. I relied upon the Yoga Sutras as authority. In Yoga Sutra 1.2, Patanjali defined yoga as the cessation of the fluctuations of the mind. Yoga Sutra 1.3 says that, when the mind becomes still, one becomes unified with the true Self. Thus, the principal concern of yoga is the transformation of consciousness. It is not physical fitness. I observed that, out of the 196 Yoga Sutras, only three referred to a physical practice. I also noted that “asana” (the basis for physical movement in classical yoga) refers to “seat” within the context of a meditation practice.

I quoted Dr. David Frawley, Nayaswami Gyandev McCord and Swami Ramananda who are included in the discussion of yoga on the Yoga Alliance website. All of these experts view yoga as a spiritual discipline to strengthen the point.

2. I compared my definition of yoga with quotations from the offerings of several gyms, health clubs and spas in New York City which all emphasize physical training, physical fitness and sports. This yoga studio does not offer the same types of classes or services as gyms, health clubs and spas

3. The Law defines a “health club” as a business offering instruction or facilities for the development of “physical fitness or well being.” This includes such businesses as health spas, sports, tennis, figure salons, health studios, gymnasiums, weight control studios, martial and “any other similar course of physical training.” By definition, a yoga studio is not within the list of businesses that are “health clubs.” I did make some technical arguments to show that this yoga studio is not in the business of developing “well being.”

Based upon my definition of yoga as a spiritual discipline, I argued that yoga studios are not “health clubs” within the meaning of the Law.

4. I  found surveys of the Health Club industry that the Attorney General and the City of New York had conducted. None of these surveys included any yoga studios. This made it clear that, based on precedent, they did not consider yoga studios to be Health Clubs. The New York State Department of Taxation and Finance also published some rulings that did not include yoga studios within the definition of Health Clubs.

5.  Based on an analysis of the Law, defining yoga as a spiritual rather than a physical practice and relying upon precedent, I concluded that the yoga studio did not violate the Law because it is not a “health club” nor does it enter into “contracts for services” within the meaning of the Law.

I want to emphasize that this studio is small and devotional. It does not offer any hot yoga, power classes, spinning classes, pilates or other classes that emphasize the fitness side of yoga. It is not a combination of a yoga studio and a gym.  If your studio has these types of offerings, it would be much harder to argue that you are not a “health club”.  Of course, this will depend upon the laws of the state where your studio is located.

Action Item

I recommend that you run  a search in your home state to see if it has any Health Club laws. The search can be as follows:  “_______ (name of your state) health club regulation.”

If you state does not regulate Health Clubs, then you are in luck.

However, if your state does regulate Health Clubs, they you can either (i) hire a lawyer to advise you if you are subject to the laws; or (ii) read the law and make your own determination.

The benefit to using the lawyer is that he or she can advise you if your studio is covered by the law. If you are covered, you will need the lawyer to amend your membership agreement so that it contains the required language and complies with the law. If you are not covered, then you do not need to do anything at all.

If you decide to make your own determination, take the most conservative view. You may find that the law is ambiguous as to whether you are covered or not. In that case, the safest approach is to comply with the law. It may be fairly simple to include the required provisions in your membership agreement and they are designed to protect your members anyway.

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