Last week the Fourth Circuit Court of Appeals issued a unanimous decision protecting the employment rights of exotic dancers under the federal Fair Labor Standards Act and Maryland wage and hour laws. The decision upheld a previous district court ruling in Maryland finding that the group of dancer plaintiffs were employees, not independent contractors, and thus entitled to the applicable legal protections.
In this lawsuit, McFeeley v. Jackson Street Entertainment, the dancers alleged that the clubs where they worked had improperly classified them as independent contractors. The dancers claimed that the clubs owed them, and other exotic dancers in similar situations, unpaid wages and additional monetary penalties because they had not been paid minimum wage. The clubs claimed that the dancers were in fact independent contractors and not their employees so they did not have a legal obligation to pay minimum wage.
In deciding whether the dancers were employees or independent contractors the court looked at the “economic realities” of the relationship between the club and the dancers. The court reviewed several factors to determine the nature of the relationship, however, the most important was how much control that the clubs had over the dancers. In this particular case, the dancers signed in to work each day on a schedule created by the clubs. Policies for fees and customer tipping were also established by management. While they were working, the clubs had strict rules for the dancers to obey and they were “coached” to use a certain type of behavior with clientele. Although the clubs contended that they had a relaxed atmosphere where they did not exert much control over the dancers who used their own “skills and abilities” to bring in clients, the court found otherwise.
In addition to wage and hours laws that establish the minimum wage and overtime payment requirements, the distinction between employee and independent contractor has several other important implications for workers’ rights. When a worker is classified as an independent contractor instead of an employee, the employer is not required to pay her Social Security tax and may avoid payment of payroll taxes and other payroll- associated liabilities. Further, when employers classify individuals as independent contractors they are not obligated to pay benefits such as unemployment and workers’ compensation insurance, health care costs, and family and medical leave that they may otherwise be required to pay under state and federal laws. Last but certainly not at all least, independent contractors generally are not covered by anti- discrimination laws.
This case is not the first lawsuit brought by dancers fighting to be properly classified as employees. For example, in 2012 a federal judge in Manhattan awarded nearly $10.9 million to a group of dancers at a popular midtown nightclub and another nationwide class action lawsuit against the “Spearmint Rhino” chain settled for $12.97 million dollars, both due to their misclassification of dancers as independent contractors.
The misclassification of employees as independent contractors is not unique to the nightclub industry. It is a rampant issue in diverse industries across the country. According to the Department of Labor, the problem is ”one of the most serious problems facing affected workers, employers and the entire economy” as it “generates substantial losses to the federal government and state governments in the form of lower tax revenues, as well as to state unemployment insurance and workers’ compensation funds.”
This particular victory is an important one in the fight for workers who are particularly vulnerable to other workplace abuses. As the court noted in the McFeeley decision, the “Fair Labor Standards Act was specifically created by Congress to provide ‘fair labor standards’ for employees, including those marginalized workers unable to exert sufficient leverage or bargaining power to achieve adequate wages in the absence of statutory power.”