Owners and operators of gentleman’s clubs recently received a new arrow in their quiver in the ongoing dispute over a question that has created a barrage of lawsuits across the industry – “Are exotic dancers employees?” A decision from the United States District Court for the Eastern District of Arkansas on July 12 answered this question in the negative, holding that exotic dancers were not employees under the FLSA or Arkansas Minimum Wage Act.
Lawsuits asserting that exotic dancers are employees, rather than independent contractors, have increased in recent years, in part due to the varying answers courts have given on this question, the media attention these cases receive, and the substantial amount of potential damages such cases can place at issue. As a result, club owners have been left with inconsistent guidance on this issue, which has been framed by some courts as a determination between whether these entertainers should be viewed as independent “booked acts” or more like servers who provide customers with drinks. Club owners and dancers have traditionally treated the relationship as one between independent contractors because the realities of the adult entertainment industry provide club owners with very little control over the dancers who perform at their clubs, often on a very itinerant basis.
In Hilborn v. Prime Time Club, Inc., the court looked at several factors to determine whether entertainers who performed at Prime Time met the definition of “employee” under the FLSA, such as: who controls the manner in which the work is performed; who assumes the risk of loss or reward; who invests in the equipment and materials required to perform the work; whether there are special skills possessed by the worker; the degree of permanence of the working relationship; and whether the workers perform integral tasks of the business. The entertainers in Hilborn agreed on several key points that ultimately tipped the scales in favor of Prime Time, including the fact that they kept approximately 75% of the fees they collected, submitted a schedule of the days and hours that they preferred to perform, largely controlled the number of performances they conducted and for whom, were responsible for providing their own supplies and equipment, and were free to perform at other clubs that were direct competitors of Prime Time. The court also found that the entertainers possessed and exhibited special skills with respect to their activities at the clubs, even though none of those skills required a certification. In analyzing whether the entertainers were integral to the business, the court noted that the entertainers were directly responsible for no more than one-quarter of Prime Time’s overall sales and revenues. Based on these factors, the court concluded that the entertainers were not Prime Time’s employees for purposes of the state or federal wage and hour laws and dismissed the claims asserted in the lawsuit with prejudice.
Even in states that have more burdensome laws pertaining to the use of independent contractors, courts have found reason for hesitation in concluding that exotic dancers are employees of the clubs at which they perform. Massachusetts, for example, has a stringent independent contractor regime that requires workers to be classified as employees unless, among other requirements, the workers’ services are “performed outside the usual course of the business” of the putative employer. Plaintiffs’ attorneys have argued that “strippers” working at a “strip club” are necessarily performing within the usual course of the club’s business and are therefore necessarily employees under this test. However, as detailed in an opinion from the Massachusetts Superior Court in a case captioned Cruz v. Kings Inn, the analysis is not so simple. Analogizing to comedians working in a comedy club and actors performing in a dinner theater, Judge Raymond Veary noted that the specifics of the parties’ relationship are still critical to determining the relationship between a worker and the usual course of business of the facility in which the worker plies his or her trade. Based on this more nuanced analysis of the governing statute, Judge Veary denied the plaintiffs’ motion for summary judgment on the question of their employee status.
Although the debate is likely to continue for some time, decisions like those in Hilborn v. Prime Time Club, Inc. and Cruz v. Kings Inn provide additional ammunition for club owners in litigating this issue.