Misclassified Exotic Dancers Not Stripped of FLSA Rights

Misclassified Exotic Dancers Not Stripped of FLSA Rights

A group of exotic dancers prevailed in federal court this month when a Judge in Georgia ruled that the dancers are "employees" within the meaning of the Fair Labor Standards Act ("FLSA"), and that the dancers are therefore entitled to the FLSA'sminimum wage and overtime protections.

The plaintiffs were exotic dancers who worked at Club Onyx, an Atlanta nightclub that featured dancers, a bar, music, and billiards. Nine dancers filed a complaint initially, but once the case was certified as a collective action, the lawsuit was joined by a large number of other dancers currently and formerly employed by the club. In total, eighty dancers became plaintiffs in the suit. The defendants were the club and its corporate owners.

The Club did not pay the dancers directly. Instead, customers paid the dancers by giving them money personally or by throwing money on stage during the stage performances. In fact, the club not only avoided direct payment of the dancers, but the dancers paid the club. At the beginning of each shift, the dancers were required to pay "house fees" ranging from $29 to $100. The dancers also paid the club's DJ $20 or 10% of their tips at the end of every shift. The DJ, in turn, paid the club 40% of the money he received from the dancers. Though the club argued that the dancers were not required to pay the DJ, club employees acknowledged that the club fined or fired dancers who failed to do so. Additionally, the dancers tipped the club's "house moms" at the end of every shift, though it was unclear whether such tips were compulsory. On slow nights, the dancers paid the Club and its employees more than they earned dancing, resulting in a net loss for the night.

In their lawsuit, the dancers alleged that these payment arrangements violated the FLSA's minimum wage and overtime requirements. The FLSA requires most employees to be paid at least the minimum wage for all hours worked. Also, the FLSA's "tip credit" provisions provide that tipped employees may receive as little as $2.13 per hour from their employer, as long as their hourly wages plus tips average at least the minimum wage for all hours worked in each workweek. Finally, the FLSA requires that most employees receive an overtime rate of pay (one-and-one-half times the employee's regular rate of pay) for time worked in excess of forty hours per week.

The club claimed that the dancers were not covered by these FLSA provisions since the FLSA covers "employees" while these dancers were independent contractors. The dancers asserted this was simply an instance of unlawful misclassification on the club's part. Because both sides acknowledged that dancers were not paid minimum wage and overtime, the heart of the lawsuit was the issue of whether the dancers were "employees" or independent contractors. Plaintiffs moved for summary judgment on this issue, asking the judge to declare that no reasonable jury could find the dancers to be anything other than "employees" covered by the FLSA based on the evidence.

In considering whether to grant the dancer's motion, the court engaged in a six-factor analysis that courts routinely use to separate "employees" from independent contractors. The analysis determines the "economic realities" of the relationship between the workers (the dancers) and their boss (the club) by examining the facts and circumstances of the working relationship between them. Here, the analysis focused on (1) the nature and degree of the club's control over the dancers' work, (2) the dancers' opportunity for profit or loss, (3) the relative investment of the dancers' and the club, (4) the necessity of special skill to dance at the club, (5) the permanency of the dancers' employment at the club, and (6) the dancers' importance to the club.

The court's findings on five of the six factors favored the dancers: (1) The club exercised substantial control over when and how the dancers performed, (2) the club bore substantially more risk for profit or loss than the dancers, (3) the club invested more money in the performances than the individual dancers, (4) though the club preferred experienced dancers, experience or training was not required to dance for the club, and (6) the dancers were essential to the club's profitability. The court found that the fifth factor was not clearly resolved either way.

After finding that the factors greatly favored the dancers, the court granted them summary judgment. The court stated clearly that the club had misclassified its dancers, and that the dancers were "employees" entitled to the wage and hour protections of the FLSA.

The court remanded the lawsuit to a magistrate judge for mediation of the remaining claims and defenses. Mediation is a less formal process than litigation, and is intended to save time and money by enabling the parties to a lawsuit to reach an agreement through supervised negotiation. Although the summary judgment ruling did not immediately result in an award of money damages, the knowledge that the dancers are covered by the FLSA will substantially enhance the dancers' negotiating position during mediation.

If you perform work for a company as an "independent contractor," you may in fact be an employee who is entitled to minimum wage and overtime pay under the FLSA. For more information, you should contact a St. Louis overtime lawyer.

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