An exotic dancer was an employee of an adult entertainment club under the Fair Labor Standards Act ("FLSA"), even though a written agreement disclaimed an employment relationship. The evidence showed that the economic reality of the relationship was one of employer and employee given the degree of control over the dancer's work exercised by the club, among other factors.
An exotic dancer who worked at an adult entertainment club sued for a ruling that she had been misclassified as an independent contractor, that she was the club's employee, and that she was entitled to employee's protections under the FLSA. The evidence showed the club used a list of dancers present at the club on a given shift to set up a rotation for performances. Each dancer would perform for about two and a half minutes to music she had preselected.
Club patrons could purchase a lap dance in an open booth or time with a dancer in a private VIP room. An employee would schedule these activities and collect the money before the activity took place.
The club did not pay the dancers. An agreement signed by both parties said the relationship was Licensor-Lessor and Licensee-Temporary Space Lessee. It said that no employment relationship existed. The dancers kept whatever tips they made for dancing on stage, for lap dances, or in the VIP rooms.
To determine whether an employer-employee relationship exists under the FLSA, courts look to the economic reality of the relationship between the parties and whether that relationship demonstrates dependence by one upon the other. Labels used by the parties are not dispositive. The factors considered by the courts include (1) the nature and degree of control over the worker, (2) the worker's opportunity for profit or loss, (3) the worker's investment in equipment or materials, (4) whether the service rendered requires a special skill, (5) the degree of permanency and duration of the working relationship, and (6) the extent to which the service rendered is an integral part of the business.
Most district courts have held that exotic dancers are employees of the clubs in which they perform. This court determined that the economic status of the dancer here was inextricably linked to conditions over which the club had complete control like advertising, customer flow, overall club atmosphere, and facility maintenance. Although the dancer set her own schedule, decided whether to dance on the stage or pursue private dances, chose her own choreography, costume, and music, and determined for which customers she would perform, she did not exercise any meaningful control over the business.
The court then explained that in applying the profit-or-loss factor, the focus should be on the worker's contribution to managerial decision-making and investment relative to the company's contribution. Because the club was primarily responsible for attracting customers and setting minimum fees for services, it exercised significant control over the dancers' opportunity for profit. The only risk of loss a dancer could incur was the nightly lease fee of $10 to $20, depending on when she arrived for work. The club's risk of profit and loss thus far exceeded that of its dancers.
The dancer's investment in equipment and materials was indisputably minimal compared to the club. Although the club asked potential workers about their prior experience, it did not require dancers to have any formal training, certification, license, or any experience at all. No special skill was involved. The factor of the degree of permanence tipped in favor of the club, but it meant little given the inherently itinerant nature of exotic dancer work.
The service of the dancers was unquestionably essential to the club's business. Without it, the club would have been just a restaurant and bar.
With five of the six factors weighing in favor of the dancer, the court held she was an employee of the club within the meaning of the FLSA.
Why This Is Important…Cases questioning the status of exotic dancers are being brought in state and federal courts around the country. Almost uniformly, the courts are ruling these workers are employees subject to the protections of both state and federal employment law.
The new standards states are using to determine whether a worker is an employee or independent contractor almost exclusively center on whether the worker is involved in the production of what the business sells (only one of the factors under the federal law). Winning the argument that these workers are independent contractors with these new rules is exceedingly difficult.
It has always been the case that what employers and employees call their relationship has very little to do with how the decision on status is actually made in court. These cases are a reminder of this difficulty and show that the law continues to move strongly in the direction of finding employee status whenever the facts are such that it is indicated.