ACE Personal Trainer Manual 4 th edition Chapter

ACE Personal Trainer Manual, 4 th edition Chapter 17: Legal Guidelines and Professional Responsibilities 1

Course Objectives § Based on Chapter 17 of the ACE Personal Trainer Manual, 4 th ed. , this session covers legal and business issues related to personal training. § After completing this session, you will have a better understanding of: – The legal responsibilities of a personal trainer – The differences between independent contractors and employees – The elements of a binding contract – The types of business structures available to personal trainers, as well as the advantages and disadvantages of each – Basic legal concepts and defenses

Introduction § Oftentimes, filed lawsuits are the first indication that a personal trainer has a legal problem. § The guidelines offered in this chapter are not intended as legal advice, but rather as guidance. § As a personal trainer’s knowledge of the law increases, the ability to anticipate potential legal concerns is heightened. § Ideally, a personal trainer should regularly consult with an attorney who is aware of the unique laws governing the trainer’s city, county, and state.

Business Structure § The size and scope of the business—both in the short- and long-term—will be important factors in the initial selection of the business entity. § The business can be altered if conditions warrant. – However, legal issues arising at a time when one structure was utilized cannot simply be mitigated by switching to a different structure. § Typically, personal-training businesses operate under one of the following structures: – Sole proprietorship – Partnership – Corporation

Sole Proprietorships § The vast majority of businesses in the United States operate as sole proprietorships. – Owned and operated by one person – Owner makes all the decisions – Does not require any formal paperwork, and there is minimal ongoing paperwork – Profits from the business belong to the owner § However, financial losses and liabilities are also the sole responsibility of the owner. – No corporate veil exists to shield the actions of the business from the personal responsibility of the owner.

Drawbacks to Sole Proprietorships § The likelihood of injuries in personal training results in a greater opportunity for clients to potentially seek financial remuneration. § Since the business is owned by one individual, it can be more difficult to raise capital. § Often the business cannot effectively function without the presence of the owner. § Newly established personal trainers often maintain consistent contact with their clients. – This can create difficulties if the personal trainer is sick or has to attend to an emergency.

Partnerships § Two or more people who agree to operate a business and share profits and losses may form a partnership. § Any partnership should have legal documents that establish the rules of operation. § As potential partners plan and design their business, the type of partnership should be identified. – General partnership – Limited partnership

General Partnerships § General partnerships are merely the joining of two or more individuals to own and operate a business. – Most attorneys will advise against operating a business as a 5050 partnership because neither partner can institute policy without the permission of the other. § General partnerships can be established either formally or informally. – An express partnership can be created by a contract between the parties. – An implied partnership is recognized if individuals act as partners, such as by sharing a company checking account or jointly signing for a business loan.

Limited Partnerships § Personal liability for company losses or judgments is retained by the partners. § In some cases, minority partners may be personally liable for a greater share of the companies’ liabilities than their percentage of ownership. – For this reason, some partnerships involve limited partners who are only liable for their direct financial contribution. § However, in exchange for this limited liability, limited partners do not retain any formal managerial input regarding the operation of the business. § Limited partners may retain more than 50% of the ownership in the company.

Drawbacks to Partnerships § Ultimately, any potential partnership can become contentious. § A partnership ends when: – A partner dies or becomes bankrupt – Its partners engage in any illegal activity – A partner is deemed to be mentally incapacitated § Ultimately, if the business cannot make any the partnership will be dissolved. money, – If one or more partners wish to continue the business, but one or more other partners do not, a resolution must occur. § Split decisions regarding continuing the business often require court intervention.

Flow-through Taxation § Sole proprietorships and partnerships provide potential benefits from flow-through taxation. – Profits are taxed at lower personal rates rather than higher corporates. – Yearly losses can flow-through to be used by the owner to offset profits from other income. § Potential investors often desire to take a position as a limited partner in a business. – The limited partnership protects them from personal liability (beyond their initial investment), but allows them to: • Have a low tax rate on profits if the business is successful • Use the losses during poorly performing periods to offset income from other investments

Corporations § Corporations are designed to create a “separate” entity from the investors and operators of a business. – Exist as distinct legal entities – Regulated by state and federal (and in some cases international) laws – Investors own shares of the corporation, which limits the investors’ personal liability. – The corporate veil protects investors from personal liability. § It is critical that investors in a corporation do not “act” as the corporation, or the corporate veil may be pierced.

Forming a Corporation § Corporations are formed and registered in the office of the secretary of state. § A person forming a corporation must select a name that has not previously been registered in that state. § The appropriate notice of incorporation forms must be completed, fees must be paid, and a registered agent must be identified. § The registered agent should be readily accessible.

Types of Corporations § Once the incorporation is complete, the shareholders will elect a board of directors who will hire the executive management team. § Once established, the company must annually complete and file operational paperwork with the state and federal governments. § There a variety of corporate structures and potential types of shareholders. § The main corporate structures include: – Subchapter S-corporations – Limited liability corporations (LLCs) – Limited liability partnerships (LLPs) – C-corporations – Franchise operation business models

Subchapter S-Corporations § In subchapter S-corporations, or S-corps, profits flow through the business to the shareholders and are taxed as ordinary income. § S-corps are the most “typical” type of corporation used by personal-training businesses. – Shareholders are shielded from personal liability—beyond their investment—by the corporate veil. – Must be based in the United States – Can only issue one form of stock, meaning that every share must have the same voting rights and dividend allotments

Limited Liability Corporations and Limited Liability Partnerships § Many small business owners have chosen to operate as LLCs or LLPs. – Profits flow through to the investors and are taxed as ordinary income. – Provide a corporate veil against personal liability – Can be established by filing simple paperwork in the state where the LLC/LLP will initially operate – Forms for taxes are much easier to fill out and file than those for a subchapter Scorporation § Individual states govern LLCs/LLPs in a variety of ways. § As consistent guidelines regarding LLCs and LLPs are established, they will likely become the preferred operating structures for personal trainers. – They combine the limited liability and flow-through taxation of the S-corp with easier creation and operation requirements.

C-Corporations § Many of the 500 largest companies in the United States operate as C-corps. – Allows the company to seek investors and conduct business activities around the world – Retain the corporate veil that protects investors from company liability – However, unlike an S-corp, C-corps are taxed as a company first and then any profits that are remaining may be provided to shareholders. – Since the shareholders must then pay taxes on their dividends, C-corps are said to provide “double taxation. ” § C-corps must annually file extensive paperwork in their home state and in countries where they conduct business.

Deciding on the Appropriate Business Structure § Personal trainers must contemplate the advantages and disadvantages of their business structure, as listed on the following slide. § In most cases, consultation with an attorney who specializes in this area can assist in: – Reducing potential liability – Mitigating potential tax payments § The proper business structure will enable the personal trainer to properly prepare to expand the business if necessary.

Advantages and Disadvantages of Various Business Structures

Franchise Operation Business Models § Owning and operating a franchise provides some of the advantages of both an independent operation and a multiplefacility operation. § A franchisee (the owner of a franchise) has the right to use an established brand name, trademark, logo, and business model. § A franchisee can purchase a specific location or the rights to open a number of locations for a specific market. § Most franchise operations charge an individual franchisee an upfront fee and annual fees of a percentage of revenue earned from the business. – Other costs include purchasing operational and retail products through the franchiser’s business structure.

Independent Contractors versus Employees § Once the business structure has been identified and implemented, personal trainers need to address their employment structure. § Of particular note for the personal-training industry is the definition of an employee versus an independent contractor. § Employees “regularly” work for their employer. § Independent contractors typically are hired on a shortterm basis to perform a specific task or series of tasks.

Responsibilities of Employers § In most cases, employers are responsible for: – Training and supervising their employees – Maintaining records regarding their employees’ work – Withholding and matching the employees’ FICA taxes for Social Security and Medicare – Unemployment coverage, workers’ compensation coverage, and medical benefits – Providing justification for firing an employee § Conversely, someone hiring an independent contractor simply negotiates the job and the final compensation.

Criteria for Independent Contractors § Companies should ensure that they are properly classifying and utilizing independent contractors at all times. § The main criteria for independent contractors is “control. ” – Work details – Payment – Length of relationship – Training and retraining – Equipment – Number of clients – Nature of the work – Intention of the parties

Personal Trainers as Independent Contractors § A majority of trainers work with clients at an established fitness center. – The relationship between the center and the trainer needs to be clearly defined. § Personal trainers who work with clients at fitness centers typically do not provide their own equipment. § A personal trainer who brings clients to a fitness center is operating in a different environment than one who trains existing gym members. § A personal trainer who is an independent contractor should be able to: – Choose when and where to work – Charge variable fees for different situations – Begin working without extensive guidance – Maintain autonomy in training decisions

Contracts § Contracts are the best method to ensure that all aspects of a relationship are properly established. § The following elements are necessary to create a binding contract: – An offer and acceptance with a mutual agreement of terms – Consideration (an exchange of valuable items, such as money for services) – Legality (acceptable form under the law) – Ability of the parties to enter into a contract with respect to legal age and mental capacity

Written Contracts versus Oral Contracts § Some personal trainers may feel that written contracts are unnecessary. – In the case of scheduling clients, that is often the standard practice. § A potential misunderstanding may result in problems. – Any oral contract is subject to misinterpretation by the involved parties. § In the event of an oral contract dispute, conflicting stories may be settled in a courtroom without sufficient evidence to support the trainer’s account of what transpired.

Issues to Cover in a Comprehensive Contract § Considerations to include in a personal-training contract: – Payment terms – Rescheduling – Bounced checks – Agreements to follow instructions and adhere to proper techniques – Confidentiality – Termination of the agreement § Using valid contracts can save businesses money and mitigate a tremendous amount of time and stress.

Negligence § Failing to perform as a reasonable and prudent person would under similar circumstances is considered negligence. § In the case of personal trainers, a reasonable and prudent person is someone who adheres to the established standard of care. § Since standards of care can and do change, it is critical that personal trainers stay abreast of new guidelines through continuing education. § A negligent act can occur if a trainer fails to act (act of omission) or acts inappropriately (act of commission). § To substantiate a charge of negligence in court, the plaintiff must establish four elements: – The defendant had a duty to protect the plaintiff from injury – The defendant failed to uphold the standard of care necessary to perform that duty – Damage or injury to the plaintiff occurred – This damage or injury was caused by the defendant’s breach of duty (proximate causation)

Vicarious Liability and Waivers § Vicarious liability (also known as respondeat superior) means that employers are responsible for the employment actions of their employees. § If an employee is negligent while working within the normal scope of employment, it is likely that the injured party will sue not only the employee, but also the employer or employers. § The use of waivers is critical in personal training, as a properly worded exculpatory clause bars the injured from potential recovery. § There are some potential issues that every personal trainer must investigate with an attorney prior to crafting a waiver. – State-specific validity – Types of activities and potential risks of injury that would be barred from recovery § Waivers typically do not protect the personal trainer from injuries directly caused by gross negligence.

Contributory versus Comparative Negligence § A personal trainer may successfully defend against a negligence lawsuit, even if he or she is partially at fault. § Courts will typically examine every aspect of the scenario to determine who was at fault. § Contributory negligence – Prevents a plaintiff in a lawsuit who has played some role in the injury from receiving any remuneration. – The majority of states do not use the contributory negligence standard, instead utilizing comparative negligence when deciding negligence cases. § Comparative negligence – When multiple parties may have caused injuries, the court will apportion guilt and any subsequent award for damages. – There a variety of state standards regarding comparative negligence and its potential impact upon monetary awards.

Agreements to Participate, Informed Consent, and Waivers § Personal trainers should understand the use of agreements to participate, informed consent, and waivers. – They can be important defenses in litigation for negligence. § Ideally, each of these forms should be printed (avoid handwritten agreements) and signed by all clients before beginning the first exercise session. § Before a personal trainer begins using any of these documents, it is critical that legal counsel specializing in health and fitness in the personal trainer’s state be consulted.

Agreement to Participate § Personal trainers should have a process to formally warn their clients about the potential dangers of exercise. § An agreement to participate serves to demonstrate that: – The client was made aware of the “normal” outcomes of certain types of physical activity – The client willingly assumed the risks of participation § The agreement to participate should detail: – Nature of the activity – Potential risks to be encountered – Expected behaviors of the participant § Typically, agreements to participate are incorporated into other documents, such as informed consent forms and waivers.

Informed Consent § An informed consent form can be utilized to demonstrate that a client acknowledges that he or she has been specifically informed about the risks associated with the activity in which he or she is about to engage. – Client gives consent to participate in an exercise program and/or have something done to him or her by the personal trainer (e. g. , fitness assessments), and therefore can differ slightly from an agreement to participate – Primarily intended to communicate the potential benefits and dangers of the program or exercise testing procedures to the client – Should detail the possible discomforts involved and potential alternatives § The informed consent form, combined with oral communication, prepares the client for the positive and negative effects of certain types of exercise.

Procedures § Valid agreements to participate, informed consent forms, and waivers must be administered properly to clients. § Minors cannot legally sign a contract, so in most cases a waiver signed by a child will be invalidated by the courts. § Personal trainers should remember to have every member of a family sign an individual waiver. § The personal trainer should retain the paperwork on file at least until the statute of limitations—the time allotted to sue for damages— has elapsed.

Legal Responsibilities § The personal trainer should prepare for each training session with safety as the first priority. – This provides a better experience for the client and increases the likelihood that the client will continue to utilize the trainer’s services. § An inspection of facilities and equipment and a review of the protocols regarding supervision and instruction should be regularly performed.

Facilities § Personal trainers have an obligation to ensure that the facilities used are free from unreasonable hazards. § At the very least, the physical environment should be inspected each day prior to beginning any training session. § The inspection should consider the following issues: – Trainers should ensure that floor surfaces will cushion the feet, knees, and legs from excessive stress. – There should be sufficient free space available to protect the client from other patrons and from hurting him- or herself on equipment. – Functional lighting must be sufficient for chosen exercises. – There must be functional heating and air conditioning systems. – Proximity to drinking fountains and bathrooms is important for some clients.

Use of Public Spaces § In some jurisdictions it is illegal to train clients on public beaches, parks, or trails. – It is the trainer’s responsibility to know the local laws prior to using these areas. § Once a “legal” outdoor area has been selected for a training session, the trainer should understand the potential dangers of the area. – Weather – Potential acts of God § It is the trainer’s responsibility to ensure that the activities will not pose a significant risk for clients.

Equipment § All equipment should meet the highest safety and design standards and should be purchased from a reputable manufacturer. § Equipment must be regularly inspected and properly maintained. § Protocol for broken equipment – Once something is deemed unsafe, the personal trainer should immediately remove the equipment from the training area. – If quick removal is not feasible, the equipment should be disabled to prevent further use until repaired. – “Do not use” signs easily fall off and unsuspecting patrons may be injured when trying to use the broken equipment. § Manufacturers typically provide maintenance schedules for equipment.

Supervision § General supervision – Overseeing a group of people, such as when a group fitness instructor leads a large class § Specific supervision – Occurs when an individual is supervised while performing a specific activity, such as what typically occurs during a personal-training session § A trainer should never leave a client when there is a potential for injury. § Trainers who work with two or more clients should design the workouts to alternate between activities requiring general and specific supervision. § Trainers should eliminate any time that a client is not in their direct view. § Before beginning any session, the trainer must adequately plan for any emergencies that may arise. § Personal trainers should also be aware of the actions of their employees.

Instruction § Personal trainers should utilize instructional techniques that are consistent with current professional practices. § Proper instruction also means individualizing workout routines for each client. § Personal trainers should insist on proper use of equipment and performance of activities at all times. § Trainers should avoid touching clients unless it is essential for proper instruction. – Clients should be informed about the purpose of potential touching before it occurs. – If a client objects, an alternative exercise should be utilized.

Safety Guidelines § Be sure that all sessions are well-planned, appropriate, and documented. § Communicate and enforce all safety rules for equipment use. § Ensure that equipment meets or exceeds all industry standards. § Inspect all equipment prior to use and document adherence to maintenance schedules. § Never allow unsupervised activity by the client. § Limit participation to those under contract. § Clearly warn clients about the specific risks of planned activities. § Only select activities within the defined scope of practice and appropriate areas of expertise. § Ensure that clients wear any necessary protective equipment. § Review the emergency plan [access to a phone and 911 for emergency medical services (EMS)]. § Stay up-to-date with certifications and education in the field.

Scope of Practice § A personal trainer must recognize the extent of his or her professional qualifications, which include: – Providing exercise programs rather than “prescriptions” – Using the health-history form to screen the client for appropriate placement and/or referral – Following the exercise program guidelines recommended by leading professional organizations such as ACE, NSCA, ACOG, ACSM, and AHA – Administering appropriate fitness assessments – Avoiding giving advice on fitness products and/or diet supplements – Recognizing clients’ physical and psychological problems that might interfere with safe and effective exercise – Respecting confidentiality standards with clients

Liability Insurance § Even after taking precautions, personal trainers should obtain professional liability insurance. § ACE recommends retaining at least $1 million in coverage, as medical expenses can easily cost hundreds of thousands of dollars. § The American Council on Exercise has established relationships with reputable insurance carriers who specialize in the fitness industry. – Visit www. acefitness. org/pdfs/personal-trainer-insurance. pdf for more information. § Owners who will use their own homes or clients’ homes should ensure that a specific insurance rider will cover those activities. § Specific language should provide liability protection for trainers who utilize outdoor settings for their training activities. § For trainers who own their own fitness clubs, insurance should be retained that covers potential problems with the facility as well as the instruction and supervision of the trainer.

Other Types of Insurance Policies § Umbrella liability policy – Provides added coverage for all of the other insurance that a person may have in place. – When purchasing an umbrella policy, personal trainers should be sure that it covers professional activities associated with personal training. § Product liability insurance – Trainers who sell products may need to secure product liability insurance in the event a product fails to perform properly. – Particularly important for personal trainers who own and operate fitness centers § Keyman insurance policy – May be appropriate for personal trainers who form partnerships or corporations – Designed to compensate the business for the loss of a person who performs a unique and valuable function – Pays a specified amount to assist the business in its recovery from losing a critical human resource

Employees and Independent Contractors § Many fitness employers now require their employees to demonstrate proof of liability insurance when they are hired. – Employers should ensure that employees renew and verify their policies annually. – Potential employees may wish to verify that the fitness center has adequate coverage. § Independent contractors must maintain adequate insurance. § The employment or independent contractor agreement between the fitness center and the personal trainer should contain language detailing insurance requirements and responsibilities.

Other Business Concerns With Legal Implications § Personal trainers must be aware of the implications of other potential legal issues, including those related to: – Marketing activities – Intellectual property – Transportation – Financing

Marketing Activities § Unfortunately, it has become common for some fitness centers to utilize improper marketing tactics to attract and retain clients. § Personal trainers should understand the marketing and operating activities that their fitness centers may utilize. § If a fitness center is behaving unethically or illegally, the personal trainer may be “associated” with those practices. – Trainers should only associate with fitness facilities that maintain high legal and ethical standards.

Intellectual Property § Music recordings and television programming sold commercially are intended strictly for the private, noncommercial use of the purchaser. – In many cases, copyright violations occur when a fitness center utilizes music or television broadcasts. § ASCAP and BMI issue licenses for the commercial use of broadcasts and recordings, but their fees may be prohibitive. – A good option is to purchase recordings produced specifically for use in fitness facilities. § When training clients in their homes, personal trainers can have clients provide the music for each session.

Proper Use of the ACE Name and Logo § The ACE-certified logo may be used by ACE-certified Professionals only and is a mark of excellence. § ACE encourages its certified professionals to use this mark to promote themselves. § The ACE logo and ACE Logo Usage Guidelines document are available for download by all ACE-certified Professionals at www. acefitness. org.

Transportation § In most cases, personal trainers will meet their clients at a fitness center or some other location. § There may be a situation where the personal trainer provides transportation for the client to or from a training session. – Trainers should be aware that many “standard” automobile insurance policies may not cover injuries sustained by clients riding in the trainer’s vehicle. § If the trainer is going to provide a ride to a client, the trainer should check his or her auto insurance policy to ensure that potential injuries from accidents are covered.

Financing § As personal trainers create and expand their businesses, they may need to seek financing for certain activities. § Banks and other lenders usually will only loan money if it is personally guaranteed by an individual. § Unfortunately, many companies have advertised “business loans” that are in fact personal loans. – Personal trainers who thought that only their businesses were liable for the financial obligation later learned that the lender was able to pursue the trainer for unpaid debts. – Trainers should read and understand the “fine print” of any loan prior to signing.

Risk Management § Exercise programs carry certain special risks due to the physical movement and exertion often required. § Personal trainers should constantly search for methods to make the environment safer for their clients. § Most authorities recommend a risk-management protocol that consists of the following five steps: – Risk identification – Risk evaluation – Selection of an approach for managing each risk • Avoidance • Transfer • Reduction • Retention – Implementation – Evaluation

Assessing Identified Risks § The personal trainer must review each risk, with consideration given to the probability that the risk could occur and, if so, what would be the conceivable severity. § The table below can be used to assess the identified risks.

Summary § In providing quality personalized fitness instruction, legal and business concerns are of paramount importance. § Ultimately, it is the personal trainer’s responsibility to thoroughly understand the legal guidelines that must be followed to create a safe and enjoyable environment for clients. § This session covered: – Business structure – Independent contractors versus employees – Contracts – Negligence – Vicarious liability – Agreements to participate, informed consent, and waivers – Legal responsibilities – Scope of practice – Liability insurance – Other business concerns with legal implications – Risk management