Misclassification of independent contractors has come under scrutiny across multiple industries of late to include even strip clubs, which have long categorized performers as independent contractors outside the reach of federal and state minimum wage and overtime protections. Even a muse of Terpsichore may qualify as an employee, however, and now they are bringing wage-and-hour lawsuits (see here and here), under the Fair Labor Standards Act (FLSA), with retroactive paydays amounting to millions of dollars. These cases (examples below) are challenging the long-held business model of treating exotic dancers as independent contractors.
- New York: In November 2014, a federal district court awarded $10.8 million to exotic dancers in Hart v. Rick’s Cabaret Int’l, Inc. The court concluded that the dancers were employees of Rick’s and therefore entitled to a minimum wage under the FLSA and New York state law. The court explained that the “performance fees” dancers received from customers for personal dances or time in private rooms did not offset Rick’s duty to pay a minimum wage, and furthermore would not be applied to reduce the minimum wage obligations.
- Texas: In December 2014, a federal district court in Texas approved a $2.3 million settlement of FLSA claims brought by exotic dancers who worked at Jaguar Gold Clubs. The dancers in Jones v. JGC Dallas, LLC alleged not only that they were misclassified as independent contractors but also that the Clubs did not keep adequate records and retaliated against them for filing the lawsuit. Adding to the indignity, dancers testified they had to share tips with DJs, house moms, and managers (although the dancers’ lawyer asked 40% of the settlement ($920,000) and will receive 33.33%).
- Arkansas: In September 2014, a federal district court in Whitworth v. French Quarter Partners, LLC awarded more than $28,000 to three dancers who were misclassified as independent contractors by the club, French Quarter, in Hot Springs, Arkansas.
- Nevada: In October 2014, the Nevada Supreme Court ruled in Terry v. Sapphire/Sapphire Gentlemen’s Club that performers at the semi-nude Sapphire Gentlemen’s Club were employees. The court rejected the Club’s argument that they had agreed to be independent contractors after finding the Club for gentlemen voyeurs heavily monitored its performers, including dictating their appearance, interactions with customers, work schedules, and minute-to-minute movements when working.
Misclassification can be a latent and expensive problem for any employer under the FLSA, which sets federal standards for minimum wage and overtime pay, but it also can trigger tax liability by the IRS, healthcare compliance consequences, and workers’ compensation issues (although the factors distinguishing employees from independent contractors may vary by agency). In light of the IRS’s scrutiny of employee classifications this year, employers should carefully review their worker classifications, even if they lack terpsichorean aspects.