Watch Your Step: Ethical Pitfalls for Today’s Clubs to Avoid

Written by: Daniel Conti Jr., CHAE, CAM

The Covid-19 pandemic has placed a lot of financial pressure on clubs around the country. Many have experienced a shortfall in expected revenues. Club leadership has had to make difficult decisions on how to treat their employees while still being fiscally responsible. With government shutdown orders, various business units of the club were forced to close. The comfort levels of membership to use the club has fluctuated. With all these changes, it has become very difficult to determine the best way to maintain staff morale while dealing with the new financial circumstances.

Has your club encountered any of the following situations? Comment on this post and share what your club did to overcome them.

Ethical Dilemma #1: Staffing and Pay Decisions

Many clubs first decided to pay their employees during the shutdowns before eventually making the hard decision to furlough some. The ethical dilemma at that time was determining who to furlough and who to keep on staff. Often, a manager wants to keep the “all-star” employee who may be newer and furlough the long-term, tenured employee – or in different circumstances, wants to do the opposite. How do you decide? Will there be consistency from department to department? Having a set of guidelines for furloughs is not always easy, and all this has opened up possibilities for ethical issues.

At Jupiter Island Club, all of the seasonal staff was paid through a specific date using a specific set of calculations, which enabled some standards to be set. However, it was difficult to manage the fact that some employees were being paid to sit at home, while other departments were still functioning and making the same rate of pay. Some clubs overcome this by instituting a kicker to the pay rate for the employees who still showed up for work.

Amber Stone, CPA gives her advice on re-opening considerations for private clubs on staffing, social distancing and more.

Ethical Dilemma #2: Use of Government Assistance

With the number of governmental incentives passed to aid businesses and workers, how should a club use them? This is another ethical dilemma that has come about. The U.S. Paycheck Protection Program (PPP) is one example that had potential for clubs. How businesses went about applying for the funds and then using them has led to some issues. A recent New York Times article revealed new fraud charges are emerging against individuals and businesses who have exploited the program or acquired funds dishonestly. A quick Google search of “PPP loan fraud” will yield multiple websites and articles reporting fraud.

As club boards learned about these programs, they may have pushed management to see what they could get. While my club did not ultimately apply for the PPP loan though we were eligible, we did take note of many “gray” areas in the initial loan application. Based on your responses and calculations, you could increase your eligible loan amounts quite substantially. You could also gain complete loan forgiveness if the funds were used in a specific way. This can create ethical pressures to report your spending in a specific way in order to qualify for the loan forgiveness.

Brad Steele, J.D. of Private Club Consultants recently explained new IRS guidance on the U.S. employee social security payroll tax holiday.

Ethical Dilemma #3: Safety and Testing

More ethical issues arise when it comes to the safety, testing and reporting of test results for employees. Most clubs state that if an employee tests positive, they cannot report to work. They must stay home for a specific number of days or until they produce a negative test result – often without pay. If an employee is exposed, tests positive but is asymptomatic, they may not inform the club at all. The ethical issue in this situation is clear. How do you encourage an employee to release HIPAA-protected data to their employer without violating their rights? You want to protect your members and employees, while also recognizing an individual’s rights. This puts your human resources team in a tough spot when it comes to informing others of potential exposure without identifying the individual(s) who have tested positive.

What are other potential situations that warrant testing of employees? A club might require an employee who leaves a particular geographical area to get tested upon their return. This depends on the employee being honest about where they have traveled. Will a manager who knows one of their employees left the area tell HR? Will the manager themselves be honest if they leave the area? All of this poses ethical questions to all levels of the club.

Earlier this year, Ray Cronin with Club Benchmarking presented a data-driven framework to help clubs get through both the short and long-term financial impact of the Covid-19 crisis.

HFTP certification holders agree to follow the ethics policy which includes the principles of credibility, confidentiality and integrity. It is becoming increasingly difficult to determine exactly what each circumstance ethically allows. It is easy to know what is right and wrong in certain situations – but it can be very blurry in others.

With continued financial pressures being placed on club financial leaders, the push to “bend the rules” can escalate. We are the gatekeepers for our clubs, and often it is not easy to be the dissenting voice on a matter. However, it is imperative that as financial leaders, we stay true to our personal ethics and maintain our standards.

Daniel N. Conti Jr., CHAE, CAM is the CFO at Jupiter Island Club and past HFTP Global president. He has over 25 years of hospitality experience in both private country clubs and hotel environments. Previously, Daniel worked for Wyndham Worldwide and the Ritz-Carlton Hotel Company as director of finance, numerous private country clubs as controller, F&G Glass as corporate controller and Applegate Farms as general manager/controller.


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