Discrimination Laws and the Effect on Private Clubs

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1 May/June 2002 Discrimination Laws and the Effect on Private Clubs By Deborah G. Means, Esq., Addison Law Firm Recent high-profile discrimination cases, such as the ruling allowing handicapped professional golfer Casey Martin an accommodation to participate in professional golf tournaments, have caused many private clubs to reevaluate how discrimination laws apply to their facilities. Even though the Casey Martin case has little, if anything, to do with private clubs, the issue of discrimination laws is one that clubs should carefully examine before relying on the assumption that all private clubs are exempt from federal regulation. Two federal laws, Title VII of the Civil Rights Act of 1964 (Title VII) and the Americans With Disabilities Act (the ADA), prohibit discrimination against protected classes of persons in places of public accommodation. Title VII prohibits discrimination on the grounds of race, color, religion or national origin, and the ADA protects individuals with physical or mental disabilities. Both of these federal laws provide an exemption for private clubs. But there has been considerable case law interpreting place of public accommodation, and most of these decisions have ruled that a club must meet an extremely high standard to qualify for the private club exemption under these federal laws. The Legal Newsletter is meant to inform clubs of legal issues relevant to the private club industry. The contents are presented with no warranty, either expressed or implied, by the Club Managers Association of America. No legal responsibility is assumed for the outcome of decisions, commitments or obligations made on the basis of this information. If your club is faced with a question concerning specific legal issues, you should contact the club s legal counsel for the specific application of the law to your situation. Special thanks to Deborah G. Means and Addison Law Firm for the material within this newsletter. One of the most significant rulings on this issue involved a local ordinance that attempted to enforce more stringent rules on private clubs. In the 1998 United States Supreme Court case of New York State Club Association, Inc. v. City of New York, a consortium of private clubs argued that the local law was unconstitutional on the basis of the First and Fourteenth Amendments guaranteeing freedom of private association. The court upheld the local law, stating that the law did not affect, in any significant way, the ability of individuals to form associations that advocated public or private viewpoints. Even though this case did not involve a challenge to the two federal laws described above, the decision attempted to set a standard for what would be considered a true private club under these federal laws. In order for a club to maintain its public accommodation/ private club status, several court decisions have stated that numerous issues must be considered. One such issue is the process by which members are chosen. Selectivity is the most important criterion in evaluating whether a club is truly private; therefore, the selection process must be carefully monitored if a club desires to preserve its private club status. Considerations of selectivity include (i) a permanent mechanism in place to evaluate prospective members, (ii) consistent adherence to admission policies and (iii) clear standards and qualifications for membership other than characteristics protected by various anti-discrimination laws. Should members seem to be selected at random, there is a strong possibility that a club will be perceived as public, not private. Accordingly, blind newspaper advertisements that seem, either directly or discreetly, to indicate that anyone may join are not advisable. By the same token, corporate memberships are very difficult to implement and maintain as most evaluate the corporation as a member instead of the individuals who will actually be socializing at the club. A strong argument can be made that corporate members cannot advance the social purpose and nature of the club; only individuals can do that. In addition to the type and selection of the members, the size of the membership has also been described as an important factor. Although the Supreme Court in the New York State Club Association, Inc., case did not state a concrete membership number for clubs to remain under, it upheld that the 400-member club in the case was not too large on its face to be considered a private club. Clubs with large membership rosters are less likely to be able to argue a private club status exemption. Premier Club Services, CMAA, 1733 King Street, Alexandria, VA 22314, (703) , Deborah G. Means, Addison Law Firm, Quorum Drive, Suite 650, Dallas, TX 75240, (972)

2 Another category of factors considered by courts in distinguishing private clubs from places of public accommodation involves the question of who controls the operations of the establishment and who or what provides the funds for such operations. If the club is operated for profit, as a commercial enterprise operated for the benefit of one person or a small group, it is not considered to be a private club. A number of courts have looked at whether control changed hands at all when an establishment becomes a membership corporation and whether any members are on the organization s board of directors or trustees or some similar governing body. Even where club members do serve on the Board of Directors or other governing body, this factor alone does not compel a conclusion that a club is a private one. For example, although club members were elected to and did in fact control the club s Board of Governors, the court in Bell v. Kenwood Golf & Country Club, Inc. nevertheless concluded that the club was not exempt as a private club because the board was subject to the complete and undisputed authority in all matters of the corporation that owned the club. In addition to the considerations cited above, the classification of a club as a taxable or non-taxable entity and how the club operates under the guidelines of the Internal Revenue Service (IRS) are key areas that also must be addressed, but are too lengthy and complex to discuss in this article. Even though clubs should maintain proper corporate practices, it is especially important that private clubs observe formalities such as having bylaws and rules, a roster of members and formalized selection and expulsion procedures if it hopes to maintain its private club exemption status. In addition to maintaining proper accounting and bookkeeping practices, how a club operates its business is also noteworthy. Characteristics of a true private club include, but are not limited to, a lack of advertising, the charging of items, goods and services purchased at the club rather than immediate cash payments and the existence of reciprocal arrangements with other private clubs. Although the following is not intended to be a comprehensive list of dos and don ts, many courts have found that each of these uses of club facilities by nonmembers contributes to a finding that the club is a place of public accommodation, rather than a private club: Use of banquet and meeting rooms by civic groups or other non-members, unless sponsored by a club member, with all charges billed to that member s account; Purchase of food in the club s restaurant by nonmembers; Purchase of merchandise in the club s pro shop by nonmembers; Golf play by non-members who are not bona fide guests of a member in good standing, including golf play by hotel guests pursuant to usage agreements with area hotels; and Use of club facilities by golf teams. In short, the fact that a club operates or classifies itself as a private club does not ensure that a court would rule that the club is truly private for the sake of the exemption from Title VII or the ADA. The burden of proof rests on the club claiming the private club exemption to demonstrate its truly private character. Because a very small number of clubs would qualify as truly private clubs in order to fall under the protection of these exemptions, clubs choosing to operate under the assumption that they are exempt from these laws should further examine these issues and all applicable case law and verify their findings with qualified legal counsel. Commonly Asked Questions and Answers Taken from CMAA s publication, The ADA and Private Clubs Handbook. General Question: What is meant by the term substantially limits one or more major life activities? Answer: The effect that an impairment has on an individual determines whether this impairment is considered a disability under the ADA. Major life activities refer to those functions most people do on a regular basis without much difficulty. These include walking, standing, sitting, breathing, hearing, seeing, reading, learning, caring for oneself and working. In general, the impairment must substantially limit one or more of these activities. There are three factors that are considered in determining the effect of an impairment: (1) Its nature and severity; (2) How long the impairment is expected to last; and (3) Its permanent or long-term effect(s). Question: Who is not covered under the ADA? Answer: The ADA states that individuals with the following conditions are not covered under the ADA: Current users of illegal drugs; 2

3 Homosexuals or bisexuals; Individuals with sexual behavior disorders; Compulsive gamblers, kleptomaniacs or pyromaniacs; and Individuals with psychoactive substance use disorders resulting from current illegal use of drugs. Additionally, certain characteristics are not covered under the ADA, such as: Simple physical characteristics such as blue eyes, black hair or left-handedness; Pregnancy (however, pregnant individuals are protected by other civil rights laws); Merely being overweight (morbid obesity, however, has been found to be a disability); Advanced age, in and of itself (although conditions commonly associated with age such as hearing loss or arthritis could be covered under the ADA); Environmental, cultural or economic disadvantages; Personality traits such as quick temper; and Characteristic predisposition to illness or disease. ADA Compliance Question: Is our club required to abide by the ADA? Answer: Unless you are a bona fide private club and have had your legal counsel analyze this issue thoroughly, you need to abide by the ADA. If you are not legally required to comply, your club may want to consider voluntary compliance in order to avoid potential problems with club members and their guests in the future. You may also be covered by state laws similar to the ADA. Question: How do I determine what is a reasonable accommodation or an appropriate auxiliary aid? Answer: Usually, the person requesting an accommodation or aid will suggest ways in which you can assist them with their needs. For example, you may simply ask, How can we, as your club host, make your experience better? to achieve this goal. To determine effectiveness, make sure that the accommodation or aid enables the person with a disability to perform the job function or enjoy the service. The employer has discretion in choosing options to allow for effective work performance. Question: Will the ADA require me to endure potentially damaging results to our club or property in order to comply with the law? Answer: The ADA establishes limits on the types of modifications required. It does not require modifications to policies that would substantially alter the nature of the business, nor does it require modifications that pose a threat to the health or safety of others. For example, a golf club whose greens would be ruined by the use of a wheelchair or other devices and where there is no modification available as an alternative such as allowing a partner to putt through does not have to modify its policy of restricting access to the greens for such devices. The ADA and Employment Question: How are the employment provisions of the ADA being enforced? Answer: For employment provisions, the law is enforced under the same procedures now applicable to race, sex, national origin and religious discrimination. Complaints are generally filed with the Equal Employment Opportunity Commission (EEOC) or designated state human rights agency prior to any court action. Some state laws allow disabled individuals to bypass the EEOC or the state human rights agency and file a lawsuit directly. Question: What is considered discrimination under the ADA? Answer: The following are examples of actions that may constitute discrimination under the ADA: Classifying a job applicant or employee in a way that adversely affects employment opportunities for the applicant or employee; Participating in a contract or other arrangement that subjects an applicant or employee to discrimination; Denying employment to an individual because of his/her relationship with a disabled person; Refusing to make reasonable accommodations to the known disabilities of a qualified applicant or employee, unless the accommodations would pose undue hardship on the employer; Using employment tests, standards or other selection criteria that tend to screen out individuals with disabilities, unless they are job-related or necessary for business; Using employment tests in ways that do not measure skills and aptitude; and 3

4 Retaliating against an employee or applicant who has filed a complaint, testified, assisted or participated in an investigation, hearing or proceeding on the enforcement of the ADA. Question: What are the specific details of the coverage regarding illegal drug use? Answer: The ADA states that anyone may be excluded from employment for his/her current illegal use of drugs. However, an addict who formerly used drugs, but does not consume drugs currently, is protected under the ADA. Question: Are alcoholics covered by ADA? Answer: Yes. While a current illegal user of drugs is not protected by the ADA, a person who currently uses alcohol is not automatically denied protection. An alcoholic is considered a person with a disability and is protected by the ADA if he/she is qualified to perform the essential functions of the job. An employer may be required to provide an accommodation to an alcoholic. However, an employer can discipline, discharge or deny employment to an alcoholic whose use of alcohol adversely affects job performance or conduct. An employer also may prohibit the use of alcohol in the workplace and can require that employees not be under the influence of alcohol while at work. the individual would pose a direct threat in the workplace (i.e., a significant risk of substantial harm to the health or safety of the individual or others) that cannot be eliminated or reduced below the direct threat level through reasonable accommodation. Such a disqualification is job-related and consistent with business necessity. A post-offer medical examination may not disqualify an individual with a disability who is currently able to perform essential job functions because of speculation that the disability may cause a risk of future injury. After a person starts work, a medical examination or inquiry of an employee must be job-related and consistent with business necessity. Employers may conduct employee medical examinations where there is evidence of a job performance or safety problem, examinations required by other federal laws, examinations to determine current fitness to perform a particular job and voluntary examinations that are part of employee health programs. Information from all medical examinations and inquiries must be kept apart from general personnel files as separate, confidential medical records, available only under limited conditions. Tests for illegal use of drugs are not medical examinations under the ADA and are not subject to the restrictions of such examinations. If the results of a drug test reveal the presence of a lawfully prescribed drug or other medical information, such information must be treated as a confidential medical record. Question: Does the ADA have limitations on medical examinations and inquiries about a disability? Answer: An employer may not ask or require a job applicant to take a medical examination before making a job offer. An employer cannot make any pre-employment inquiry about a disability or the nature or severity of a disability. An employer may, however, ask questions about the ability to perform specific job functions and may, with certain limitations, ask an individual with a disability to describe or demonstrate how he/she would perform these functions. An employer may make a conditional job offer on the satisfactory result of a post-offer medical examination or medical inquiry if this is required of all entering employees in the same job category. A post-offer examination or inquiry does not have to be job-related and consistent with business necessity. If an individual is not hired because a post-offer medical examination or inquiry reveals a disability, however, the reason(s) for not hiring must be job-related and consistent with business necessity. The employer also must show that no reasonable accommodation was available that would enable the individual to perform the essential job functions or that the accommodation would impose an undue hardship. A post-offer medical examination may disqualify an individual if the employer can demonstrate that Question: When can an employer ask an applicant to selfidentify as having a disability? Answer: Federal contractors and subcontractors who are covered by the affirmative action requirements of section 503 of the Rehabilitation Act of 1973 may invite individuals with disabilities to identify themselves on a job application form or by other pre-employment inquiry to satisfy the section 503 affirmative action requirements. Employers who request such information must observe section 503 requirements regarding the manner in which such information is requested and used and the procedures for maintaining such information as a separate, confidential record, apart from regular personnel records. No individual may be forced to provide such information. A pre-employment inquiry about a disability is allowed if required by another federal law or regulation such as those applicable to disabled veterans and veterans of the Vietnam era. Pre-employment inquiries about disabilities may be necessary under such laws to identify applicants or clients with disabilities in order to provide them with required special services. 4

5 Question: Does the ADA require employers to develop written job descriptions? Answer: No. The ADA does not require employers to develop or maintain written job descriptions. However, a written job description that is prepared before advertising or interviewing applicants for a job will be considered as evidence in the event of a lawsuit, along with other relevant factors. If an employer uses job descriptions, they should be reviewed and updated periodically to make sure they accurately reflect the actual functions of a job. A job description will be most helpful if it focuses on the results or outcome of a job function, not solely on the way it customarily is performed. Question: What kinds of documents must an employer have as evidence of undue burden? Answer: The ADA requires that an employer must have solid evidence to show undue burden. The employer must provide documents, data, records and financial information to prove his/her claim of undue burden. It is advisable for the employer to estimate the costs of generating such proof before claiming undue burden. Question: How does the ADA affect workers compensation programs? Answer: Only injured workers who meet ADA s definition of an individual with a disability will be considered disabled under the ADA, regardless of whether they satisfy criteria for receiving benefits under workers compensation or other disability laws. A worker also must be qualified (with or without reasonable accommodation) to be protected by the ADA. Work-related injuries do not always cause physical or mental impairments severe enough to substantially limit a major life activity. Also, many on-the-job injuries cause temporary impairments, which heal within a short period of time with little or no long-term or permanent impact. Therefore, many injured workers who qualify for benefits under workers compensation or other disability benefits laws may not be protected by the ADA. An employer must consider work-related injuries on a case-by-case basis to know if a worker is protected by the ADA. An employer may not inquire into an applicant s workers compensation history before making a conditional offer of employment. After making a conditional job offer, an employer may inquire about a person s workers compensation history in a medical inquiry or examination that is required of all applicants in the same job category. However, even after a conditional offer has been made, an employer cannot require a potential employee to have a medical examination because a response to a medical inquiry (as opposed to results from a medical examination) shows a previous on-the-job injury unless all applicants in the same job category are required to have an examination. Also, an employer may not base an employment decision on the speculation that an applicant may cause increased workers compensation costs in the future. However, an employer may refuse to hire or may discharge an individual who is not currently able to perform a job without posing a significant risk of substantial harm to the health or safety of the individual or others, if the risk cannot be eliminated or reduced by reasonable accommodation. An employer may refuse to hire or may fire a person who knowingly provides a false answer to a lawful post-offer inquiry about his/her condition or workers compensation history. An employer also may submit medical information and records concerning employees and applicants (obtained after a conditional job offer) to state workers compensation offices and second injury funds without violating ADA confidentiality requirements. Question: What financial assistance is available to employers to help them make reasonable accommodations and comply with the ADA? Answer: A special tax credit is available to help smaller employers make accommodations required by the ADA. An eligible small business may take a tax credit of up to $5,000 per year for accommodations made to comply with the ADA. The credit is available for one-half the cost of eligible access expenditures that are more than $250 but less than $10,250. A full tax deduction, up to $15,000 per year, also is available to any business for the expenses of removing qualified architectural or transportation barriers. Expenses covered include costs of removing barriers created by steps, narrow doors, inaccessible parking spaces, restroom facilities and transportation vehicles. Information about the tax credit and the tax deduction can be obtained from your local IRS office or by contacting the Office of Chief Counsel, Internal Revenue Service. Consult with your club s attorney for information on your club s eligibility. The ADA and Public Accommodations Question: How are public accommodation requirements enforced? Answer: Private individuals may bring lawsuits to obtain court orders to stop discrimination. The Attorney General may also bring suits in grievous cases of discrimination and can seek monetary damages and civil penalties. The law capped civil penalties at $50,000 for the first offense and $100,000 for any subsequent violations. 5

6 Question: What kinds of modifications are necessary in order to comply with the law? Answer: For an existing facility, the modifications are mostly simple, such as the ramping of steps, the installation of grab bars in rest rooms, the lowering of a pay telephone and other similar, modest adjustments. If a club has a growing population of members who are senior citizens, these modifications may, in fact, be in its best interest. According to the ADA, there are more than 40 million Americans with disabilities, some of whom may already be members of your club and others who may be related to or friends of existing members. Question: What does the ADA require in new construction? Answer: The ADA requires that all new construction of places of public accommodation, as well as of commercial facilities such as office buildings, be accessible. Elevators are generally not required in facilities under three stories or with fewer than 3,000 square feet per floor, unless the building is a shopping center or mall; the professional office of a health care provider; a terminal, depot or other public transit station; or an airport passenger terminal. The Department of Justice has published regulations concerning the specifications that buildings must meet in order to be accessible. Question: What factors are considered when determining if an accommodation would pose an undue hardship on a private club? Answer: The ADA leaves many questions unanswered about undue hardship. For example, the ADA states that undue hardship will be judged on the basis of the resources of the facility involved in the case. This provision s intention was to ensure that large firms with many small facilities are not held to an unreasonably high standard of compliance just because of their size. The ADA, however, states that only financial resources and local resources will be looked at and weighed to determine the reasonability of the undue hardship claim. When evaluating the claim of an undue burden, the Department of Justice considers the following factors: The overall size and type of the club, number and type of sites and facilities, number of workers and the size of budget; Nature and cost of the accommodation needed; Effect of the action on expenses and resources; Legitimate safety requirements that are necessary for safe operation; Impact of the action upon the operation of the site or facility; Geographic placement, number and type of sites and facilities; and Any parent company s overall financial resources, size and number of employees. Question: Will clubs need to install elevators? Answer: Clubs are not required to retrofit their facilities to install elevators unless such installation is readily achievable, which is unlikely in most cases. Send in Your Own Questions to Be Answered Through This Newsletter What topics would you like to see addressed in the PCS Legal Newsletter? Do you have specific questions you d like to see answered? Clubs can submit their questions on any topic via to saleh@cmaa.org or via FAX at (703) As space permits, the questions will be addressed and answered in the format set forth above. Deborah G. Means, one of the founding shareholders of Addison Law Firm, has represented club management personnel for more than 13 years regarding legal issues related to the operation and management of numerous clubs, hotels, restaurants and resorts. Ms. Means experience includes drafting and negotiating operational and employment contracts; preparation of membership documentation, including bylaws and applications; interpretation of lease agreements; and mediation of member-related disputes. Ms. Means has served the unique regulatory needs of the hospitality industry, including liquor licensing, taxation and operations. In addition to obtaining all operational and liquor permits required to open a club or resort facility, she has worked closely with management personnel to address the requirements of maintaining such permits and resolving any violations that occur while such permits are in place. A licensed CPA, Ms. Means earned her undergraduate accounting degree from Texas Tech University in Lubbock and practiced public accounting as a senior auditor with a national accounting firm in Dallas for several years before obtaining her law degree. She completed her legal education at the University of Texas (Austin) School of Law. Ms. Means is a member of the State Bar of Texas, Dallas Association of Young Lawyers, Dallas Chapter of the Texas Society of CPAs and the American Institute of Certified Public Accountants, maintaining her professional accounting license as well as her license to practice law. 6