What a Georgia Strip Club Can Teach Us About Independent Contractors

© Stas Perov - Fotolia.com
© Stas Perov - Fotolia.com

By Eric B. Meyer

Meet Karenza Clincy. She, along with other “nude, female exotic dancers,” sued The Onyx, an Atlanta nightclub, for wage and hour violations.

The club claims that the dancers are independent contractors. The plaintiff-dancers claim that they are employees — and employees get minimum wage and time-and-a-half for overtime.

Who wins? We all do. The pertinent (and gratuitous) facts of this case, which come directly from the court’s opinion in Clincy v. Galardi South Enterprises, Inc., are as follows:

  • Onyx features nude dancing [pertinent];
  • The main stage is visible throughout nearly all of the club [gratuitous];
  • The club hires “house moms,” who assist the dancers with their various needs [pertinent];
  • Sabrina Swinger has been a house mom at Onyx since 2007 [gratuitous];
  • Onyx does not recruit dancers [pertinent];
  • Onyx frowns on dancers with stretch marks and tattoos [gratuitous];
  • Dancers receive a “Dance Packet,” which includes the rules of the house [pertinent];
  • Dancers may only perform in high heels or stilettos [gratuitous];
  • Dancers must have and pay for an adult entertainment license [pertinent];
  • Onyx has a stash of one-dollar bills for its customers [gratuitous];
  • Dancers pay Onyx an admission fee in order to perform [pertinent];
  • Customers may throw money on stage [gratuitous];
  • Money thrown on stage is divided up evenly, with a percentage kicked to the house [pertinent];
  • House dances are $10; private dances are $20 [gratuitous];
  • Dancers can negotiate their own rates [pertinent];
  • Onyx has bottle service [gratuitous];
  • Dancers have limited discretion over scheduling and are fined for failing to appear for scheduled appearances or violating certain other house rules[pertinent];
  • You can purchase a CD called “Strip Club Classics” on Amazon.com [gratuitous and has nothing to do with this case].

Get those W-2’s ready

Based on the facts above, the court determined that the exotic dancers here were, indeed, employees. The Overtime Law Blog offers this brief summary of the court’s legal analysis.

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Significantly, none of the plaintiffs were paid any direct wages by the club in which they worked. Instead, they paid defendants for the right to perform in their club. The plaintiffs’ each were required to sign independent contractor agreements as a prerequisite to beginning work for the defendants.

Further, the defendants claimed that since the dancers were independent contractors because they were paid directly by customers and did not receive paychecks. They also claimed that the club did not profit from the dancers and that the dancers did not necessarily drive the club’s business.

However, based on evidence that the defendants set the prices for tableside dances and how much of their gross receipts dancers were required to turn over in the form of “house fees” and disc jockey fees, as well as the fact that the defendants set specific schedules for the dancers, created rules of conduct (subject to discipline), check-in and check-out procedures and otherwise controlled the method and manner in which plaintiffs worked, the court held that the defendants were plaintiffs’ employers under the FLSA (Fair Labor Standards Act).”

Put even more simply, the club controlled the manner in which the dancers worked and the dancers were integral to the club’s business.

Takeaways for employers

Yes, there are takeaways.

  1. Treat independent contractors like independent contractors (and employees like employees). If you enter into an independent contractor agreement, the agreement won’t mean much if you are treating the independent contractor like an employee.
  2. Con—tro—ol. Janet Jackson sang it much better than I ever could. If you control the time and manner in which an independent contractor does work for you, then that independent contractor isn’t an independent contractor, baby. It’s an employee.
  3. Economic realities matter. Ask yourself these questions: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) If the “independent contractor” is getting reimbursed for costs and expenses to the point where the “independent contractor” has no “skin” in the services agreement, then signs point to an employer-employee relationship.

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.

You know that scientist in the action movie who has all the right answers if only the government would just pay attention? Eric B. Meyer, Esq. gets companies HR-compliant before the action sequence. Serving clients nationwide, Eric is a Partner at FisherBroyles, LLP, which is the largest full-service, cloud-based law firm in the world, with approximately 210 attorneys in 21 offices nationwide. Eric is also a volunteer EEOC mediator, a paid private mediator, and publisher of The Employer Handbook (www.TheEmployerHandbook.com), which is pretty much the best employment law blog ever. That, and he's been quoted in the British tabloids. #Bucketlist.

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4 Comments on “What a Georgia Strip Club Can Teach Us About Independent Contractors

  1. Wonder it Clincy bothered to tell the dancers that they will have to pay income tax on their tips. Waitresses sometimes end up paying more in taxes than they earn because the IRS “assumes” they get 15% in tips. Maybe the house will have to charge a flat fee/dance so they can report how much the dancers earned in tips. Be careful what you ask for, you might get it. LOL

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