A federal court in NY has recently granted partial summary judgment to the plaintiffs in a class action lawsuit involving more than 2000 exotic dancers. The dancers alleged that their employers misclassified them as independent contractors in order to avoid paying them the minimum wage. These dancers were not paid any salary for working at the employer’s strip club; instead, they earned “performance fees” and tips from customers. However, the court found that the club exercised a considerable amount of control over the dancers, who did not require any special skills or experience to perform their job duties. Under this “economic realities” test, the dancers were employees, not independent contractors. Based on that finding, the club’s failure to pay them the required minimum wage violated state and federal law.
The employer argued that it should get an offset on the amounts owed, based on the monies that the dancers collected personally from the patrons. However, the court ruled that no offset was available, in part, because directing customers to pay employees their minimum wage would interfere with the goals of the wage and hour laws and fail to ensure that proper payroll deductions were made.
The court found that at least $10.8 million in back wages were owed. The court has scheduled a trial to determine if the dancers are owed another $8 million, plus liquidated damages.
The takeaway from this case is that businesses who employ “artists” (broadly defined) cannot simply call them independent contractors but treat them as employees. There are a number of tests to determine whether an individual is an independent contractor or an employee, and these tests are complicated. If you run a business that employs independent contractors, or if you are currently being classified as an independent contractor by your employer, you may want to consult an employment attorney who can advise you as to your rights and obligations.