Exotic Dancers Covered by Wage Laws

Exotic dancers were employees of de­fendant clubs, and not independent con­tractors, and the dancers are covered by the Fair Labor Standards Act and Maryland wage laws; the 4th Circuit af­firms the district court, which “properly captured the economic reality of the re­lationship here.”

Anyone wishing to dance at either of defendant’s clubs was required to fill out a form and perform an audition. De­fendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that ex­plicitly categorized dancers as indepen­dent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plain­tiffs do here, to have been employees rather than independent contractors. Defendant then consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at the clubs primari­ly involved dancing on stage and in cer­tain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of com­pensation. Rather, plaintiffs’ compen­sation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. A jury found in favor of plaintiffs and awarded them damages for unpaid wages. The court awarded liquidated damages to each of the plaintiffs only for the period prior to September 2011.

Test for employees

Based on the totality of the circum­stances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. We cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical here is the first factor of the “econom­ic realities” test: the degree of control that the putative employer has over the manner in which the work is performed. The district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resem­blance to the latitude normally afforded to independent contractors. We agree. The many ways in which defendants directed the dancers as to performance conduct in the club rose to the level of control that an employer would typical­ly exercise over an employee. The de­gree of control the clubs exercised here over all aspects of the individual danc­ers’ work and of the clubs’ operation argues in favor of an employment rela­tionship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direc­tion. Considering all factors together, particularly defendants’ high degree of control over the dancers, the totali­ty of the circumstances speak clearly to an employer-employee relationship be­tween the parties.

The district court did not err in reject­ing defendants’ good faith defense for the period prior to September 2011 and in awarding plaintiffs liquidated dam­ages for that period. When the current defendant took over management of the two clubs in 2007 and 2009, he changed nothing about the way they had been operated. Since the dancers had always been classified as independent contrac­tors, he assumed that classification was appropriate. He made no effort to look into the law or seek legal advice until he faced a lawsuit in September 2011. If mere assumption amounted to good faith and reasonable belief of compli­ance, no employer would have any in­centive to educate itself and proactively conform to governing labor law.

Finally, the district court did not err in excluding proof of the dancers’ tips and fees, which was irrelevant because the FLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plain­tiffs. Because the clubs paid the dancers no compensation of any kind and afford­ed them no notice, they cannot claim the “tip credit.”

Judgment for plaintiffs affirmed.

McFeeley v. Jackson Street Enter­tainment LLC (Wilkinson) No. 15-1583, June 8, 2016; USDC at Greenbelt, Md. (Chasanow) Michael L. Smith for appel­lants; Greg C. Greenberg for appellees. VLW 016-2-096, 24 pp.