Bad Reviews can sink a business! But can you stop clients of your business giving you a bad review? Testimonials and reviews can carry incredible weight for your potential clients – fitness business owners know the value of good reviews. What this has meant is that fitness professionals, like many other service providers, have sought to prevent customers leaving a negative review through a contractual clause.
Often this “no bad reviews” type clause will levy a penalty on any customer who leaves a negative review. These “penalties” or “fees” run from as small amount <$50, to acceptance of damages up to $100,000 and acknowledgement of the likelihood of legal action. One such example is that of a small hotel in Hudson, NY included a contract provision that fined the bride and groom $500 per negative review written by anyone associated with the wedding party.
For the fitness and sports industry, The Bo Pelini case brought non-disparagement clauses in college coaching contracts to the forefront. While this case to relates to employment contracts, the fitness industry needs to be aware of recent changes that will impact the use of non-disparagement clauses in client contracts. Lawsuits over reviews are nothing new. In March of this year, a New Hampshire health club sued a former member for $750,000 in damages for leaving a bad review following a billing dispute.
You may still be seeing advertisements for online reputation improvement services, or reading about why you should include a “non-disparagement” or “no bad reviews” or “gag” clause in your client contracts and website policies.
The Consumer Review Fairness Act became US Federal Law in mid December 2016. The legislation, “makes certain clauses of a form contract void if it prohibits, or restricts, an individual from engaging in a review of a seller’s goods, services, or conduct.” Despite being law for over 12 months, there still seems to be some confusion about how this impacts the inclusion and enforceability of non-disparagement clauses in client contracts.
The Consumer Review Fairness Act protect the rights of the consumer from businesses seeking to impose stipulations or enforce clauses in contracts limiting reviews published in any forum (whether online or in print). Referred to as “gag-clauses” and “non-disparagement clauses,” these types of contractual clauses have been designed to discourage customers from posting honest reviews that criticize the company – and imposing a financial penalty to dissuade the client from doing so. It doesn’t make it illegal to include these clauses in contracts, but it makes it legally impossible to enforce them. If a business includes such a “gag clause” knowing that it is not enforceable it could void part or all of a client contract. It could also give rise to a change of misleading or deceptive conduct.
The Consumer Review Fairness Act also empowered the Federal Trade Commission (FTC) and the States to be able to take legal action in addition to that brought by individual customers. It remains to be seen how involved the FTC or the States will be in curbing businesses unfairly seeking to limit negative reviews of their products or services by utilizing non-disparagement contractual clauses. Some states, like California and Maine already had preexisting legislation so it is likely that actions could also be brought under those State laws as well.
Remember, this is a federal law, so it less important which state the transaction occurred in – A consumer can now bring legal action against companies who attempt to pressure customers or potential customers into not offering negative reviews.
So what about negative reviews that aren’t based in fact?
We’ve been talking about not being able to contractually prevent a negative review of your goods or services, but what if you have a client (or a competitor) who publishes or distributes a negative review that contains lies, or is designed to damage your business with false statements?
The first amendment protects the client’s right of free expression, including negative statements about your business, however, it does not shield the speaker from legal consequences if that speech constitutes slander, defamation, or libel.
The Consumer Review Fairness Act does not prevent you, as a fitness business owner, from pursuing legal action for reviews that are non-factual and cause harm to your business. If a bad review is not factual, then the business entity can still sue for libel, just as they could before this legislation was enacted.
However, if a client or other business publishes or distributes a bad review about your fitness business because you provided a faulty good, or delivered a service that was not as you promised, then you cannot contractually require a customer to refrain from offering a negative review; or at least you cannot claim damages from any failure to comply with the contractual clause or enforce some form of penalty in accordance with the contractual clause if they do. You could, however, offer a form of compensation and have them sign a document similar to a non-disclosure agreement – if this is something you want to pursue, you should speak to your attorney.
Remember that just because you don’t agree with a reviewer’s perception of your services or fitness facility does not mean that the review is not factual.
What does the Consumer Review Fairness Act mean for your Fitness Business, Gym, or Personal Training Business?
It means that it’s time to take another look at the contracts and waiver forms you are using as part of your fitness business – if you aren’t using any, then we need to have a different conversation.
Review your client contract. Review the client contract document and look for terms like “a no-review policy,” “non-disparagement” and “agree not to disparage” in any of the clauses. Look for anything that discusses negative statements or reviews and indicates that there is a penalty or punishment for making those statements.
You will likely need to revise your contracts if they were drafted with a non-disparagement clause. Speak with you attorney and ask them to make sure your contracts are compliant with the Consumer Review Fairness Act. It is important that you understand which parts of your client contract are enforceable and whether your contract (as a whole) would survive a challenge the enforceability of one clause.
Review your policies and communications strategies for handling negative reviews! Can you prevent them through great customer service and solid business systems before they even happen? Lawsuits are not always the right approach. Can you turn a negative encounter into a positive through great customer service? Defensiveness is not always the best policy for responding to negative feedback.
Bad Reviews are part of business – you may not be able to satisfy every customer – but a heavy-handed approach where you require a client to sign a client contract including a non-disparagement clause is not only a questionable business practice, it is also now unenforceable and potentially increases your risk of liability in some US state jurisdictions.