Law Alert: Overtime Grind – Wage and Hour Risks in Adult Entertainment
As with much of the hospitality industry, adult entertainment establishments are ripe to be hit with wage and hour cases. From tip pooling to contractor vs. employee misclassification issues, “strip clubs” are an industry that is seeing increasing litigation filed by workers at the clubs.
Last month, the Judge in the case Sabrina Hart et al v. Rick's Cabaret International Inc., pending in the U.S. District Court for the Southern District of New York ruled that the plaintiff-dancers at the adult entertainment establishment, who claimed they were denied certain minimum wage protections, were employees rather than independent contractors, as the club had attempted to classify them. This case found much attention on various national news websites. With that finding, all wage and hour laws apply to the dancers, including minimum wage and overtime pay.
Whether as a direct result or purely coincident, at least four cases against adult establishments in Atlanta were filed in the Northern District of Georgia over the past three weeks, two of which were filed last Friday, October 11, 2013.
The first issue that has arisen in the past few years is the classification of the dancers as independent contractors instead of employees. While the dancers tend to maintain an amount of control over where they work and how they choreograph their performances, the club also maintains supervision and management over the hours of operation, who is scheduled to work during each shift, expectations pertaining to the dancer appearances, and even the genre of music the dancer uses. This level of control has lead courts to find that dancers are not contractors, but rather employees. Once this determination is made, issues of minimum wage, overtime, tax withholding and reporting, and employee benefits arise.
Dancers must track their hours, report their tips, and be paid overtime in compliance with state and federal laws. As many restaurants have learned recently, tip-pooling can be a tricky part of the business. Do the dancers and servers tip out the bartenders? Do the dancers tip the hostess or manager for referring customers? Is the cost of any uniform or equipment deducted from their pay?
These are the issues that are blooming in hospitality industry, including adult entertainment establishments across the country. Naturally, these issues might also affect and impact other industries outside the adult entertainment industry, especially if there are similar trends in treating workers as independent contractors and the wage and hour issues that ride on misclassification coattails. Now is the time to assess your exposure or bring your establishment into compliance.