Refund Policy: When Should You Give Customer Refunds And Accept Returns?

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refund policy for customer returnsThere’s a lot of confusion on what type of refund policy, if any, business owners should have. And there’s no single one-size-fits-all answer to that question either.

Business-To-Business (B2B)

As a practical matter, a “no refunds” policy is typically okay from a legal standpoint if it is a B2B transaction. Of course, you’d want to make it clear to the business customer prior to purchase that all sales are final and there are no refunds.

However, if that’s not the norm in your industry, you may be at a competitive disadvantage by having a no-refunds policy. It’s more a question of testing the market than a legal one in the B2B arena.

Business-To-Consumer (B2C) Refund Policy

It gets a lot more complicated if it’s a consumer purchasing your products or services.

Retail Shops

If you’ve got a brick-and-mortar retail store, the first thing you’ll want to do is see if your state has a specific law covering refunds and product returns. Some states not only have specific refund and returns policies protecting consumers but they also require you to post that policy by the cash register and/or put the policy on the customer’s receipt.

For certain large purchases (e.g. car purchases, gym memberships, etc.), there’s a federal “cooling off” rule and some states have similar laws. The most popular version of this is a 3-day cooling off period where the consumer has a right to cancel the purchase within 3 business days of signing the contract.

Online B2C Businesses

If you’re selling products or services online to consumers, there’s a risk that a government agency in another state will attempt to apply its laws to the purchase to protect consumers who bought from you in that state. And with 50 states in the U.S. alone (plus Washington, D.C.), that’s a lot of laws, rules, and regulations to figure out.

As a general rule of thumb, however, you can reduce your legal risks online by making it clear that the laws of your state apply to the transaction (including dispute resolution) and U.S. federal law too. Then have a website refund and returns policy that reflects federal and your state’s laws for returns and refunds, including any cooling off period right to cancel.

Marketing Reasons For A Generous Refund Policy

Note that this discussion of refund and returns policies focuses on the legal requirements for B2B and B2C transactions.

Yet there may be marketing reasons why it makes sense to offer a generous refund and returns policy even if not legally required to do so.

For example, you may have higher sales conversions without increased demands for a refund if there’s a 30, 60, 90+ day refund policy that partially reverses risk. And, of course, the person who promptly receives a refund is less likely to smear your business online by posting negative reviews that are nearly impossible to get taken down.

An experienced business lawyer can draft a refund and returns policy that’s right for your business while taking into account your marketing and online reputation concerns.

Texas Personal Trainer Insurance And Gym Owners

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Texas Personal Trainer Insurance And Gym OwnersMany Lone Star State gym owners leave themselves needlessly exposed to lawsuits because of personal trainers who contract to provide fitness training to gym members and guests. If someone gets seriously injured or dies during training, there will be a lawsuit. The simple solution is to have the instructor’s independent contractor agreement with the gym require Texas personal trainer insurance.

What Type Of Insurance Should A Personal Trainer Be Required To Carry?

At a minimum, the fitness instructor should have a commercial general liability insurance policy. If the trainer has a vehicle that’s used on the gym’s premises (e.g. fitness center parking lot), there should also be commercial automobile liability insurance.

The Texas Gym Owner As An Additional Insured

It’s not enough for the personal trainer to have such insurance. The policies must also name the gym owner as an additional insured.


Because if a gym member is injured while receiving personal trainer services, it’s highly likely the gym will be named as either the sole defendant or a co-defendant in the subsequent civil lawsuit for damages.

Proof Of Texas Personal Trainer Insurance

The personal trainer’s contract with the gym should require the instructor to provide proof of such insurance naming the Texas fitness center owner as an additional insured before the trainer can provide services to gym members and guests.

Is this redundant if the gym already carries its own general liability and auto insurance?

No. At a minimum, it’s an extra pocket for a plaintiff to tap for compensation if there’s been an injury or death on your gym’s premises. And the trainer’s policies may be able to cover any gaps in your gym’s insurance that you didn’t even know existed.

An experienced Texas business contracts lawyer can ensure that these insurance issues, Texas Health Spa Act compliance, biometrics privacy issues, and other legal risks are addressed in your gym’s contracts, waivers, and other legal documents.

Are You Collecting Biometrics From Your Texas Employees?

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texas employee biometrics fingerprint scanIf you’re collecting Texas employee biometrics, be sure to comply with the state’s biometrics privacy law.

Types Of Texas Employee Biometrics Data Covered

  1. fingerprint;
  2. retina or iris scan;
  3. voiceprint; and
  4. record of hand or face geometry.

For now, the most common of these is fingerprint scans. Although as the price of biometric tech drops, you’ll see more of the other types of data collected too.

Fortunately, Texas’ biometric law isn’t as strict as the Illinois statute. For example, Facebook is being sued in a class action for $35 billion for allegedly violating Illinois’ biometric privacy law.

State Attorney General Enforcement

In contrast, Texas doesn’t allow employees to bring a civil suit against an employer for violating the state’s biometric privacy statute. Only the Texas Attorney General has the right to enforce the law against employers (and others).

However, if an enforcement action is brought by the state, there can be a pretty hefty penalty of $25,000 per violation. Arguably each employee’s data would constitute a separate violation. That can add up quickly.

Fix Your Employment Agreements

So, if you’re collecting employee biometrics (or workers based elsewhere who are covered by Texas law), you’ll want to make sure an experienced business contracts lawyer addresses the state’s biometrics law in your employment agreements and/or other employee-related documents.

Texas Health Spa Act Security Exemptions

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texas health spa act security exemptionsMany gym owners in the Lone Star State have to post security with the Secretary of State because of the state’s Health Spa Act. It’s common to post a $20K to $50K surety bond to meet this security requirement. However, there are two Texas Health Spa Act security exemptions that could save you money.

1. Short-Term Contract & Small Payment Exemption

You may be eligible for this exemption if…

A. Your gym contracts are 31 days or less in length;
B. Members don’t sign a note or retail installment agreement;
C. Members don’t authorize you to repeatedly draw membership fees from their bank accounts;
D. You don’t require members to pay initiation fees; and
E. Members prepay for 31 days or less.

This exemption is rare because most Texas gym business models do not fit these criteria.

2. Financially Stable Gym Exemption

You may be eligible for this exemption if…

A. Your gym has $50,000 or more in assets;
B. Your gym has been in business for at least five years without changing ownership/management; and
C. A member hasn’t filed a complaint with the state government that alleges you closed a gym or failed to open a gym.

This exemption is common for Texas gyms that have been in business for five years or more.

Do You Qualify For Texas Health Spa Act Security Exemptions?

If you need help obtaining a security exemption or other compliance with the Texas Health Spa Act, set up a phone consultation with Texas Business Lawyer Mike Young.

Need A Texas Lawyer For A Business Startup?

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lawyer for a business startupWhen you’re planning to set up a new venture in Texas, one of the first tasks is selecting the right lawyer for a business startup.

This begs the question: how do you choose the right business lawyer for your new company?

Eliminate Unqualified Lawyers

It’s fairly easy to get winnow the field of potential attorneys by eliminating from consideration any that practice areas of law unrelated to your venture.

For example, criminal defense attorneys and personal injury lawyers are not particularly suited for representing clients in business transactions.

Even worse is the attorney who claims to practice a half dozen unrelated areas of law because that “professional” is a jack of all trades and a master of none. At best, you’ll get mediocre representation.

You may also want to exclude novice attorneys. While a recent law school graduate may seem eager to help you, you’ll be paying for the lack of real-world knowledge and experience — in time, money, and the quality of advice you receive.

Additional Factors To Consider When Retaining Business Legal Counsel

Once you’ve eliminated the above prospects from consideration, it’s time to narrow the field further.

When looking at business attorneys, consider what type of commercial law they practice. For example, if you plan to spend a lot of time in lawsuits – as either a plaintiff or defendant – then a business litigator should be considered. Trial lawyers who understand business law will be invaluable in protecting your interests if your startup is in court frequently.

However, most Texas new ventures need an experienced transactional lawyer…an attorney who will set up the right type of entity to protect your interests, give you legal advice as-needed, and prepare the contracts you’ll need to conduct business with suppliers, customers, etc.

Related Article – 7 Keys To Picking The Right Internet Lawyer For Your Business

Of course, because of the importance of e-commerce, you should consider the attorney’s experience in representing companies both offline and online. A new attorney may be tech savvy but lack the legal knowledge. On the other hand, a business lawyer who has been practicing 50 years has a wealth of experience but probably knows very little about e-commerce law.

What’s The Next Step In Finding A Texas Lawyer For A Business Startup?

Take a look at Texas Business Lawyer Mike Young’s bio. Then, if you want to see if he’s a good fit for representing your company, click here to use our online booking system or call 214-546-4247 today to set up a phone consultation with him.