Exotic Dancing for Only Tips Found Illegal Under Federal Law
The Fair Labor Standards Act (“FLSA”), or federal wage law, requires that an employer pay its employees the Federal Minimum Wage of $7.25 an hour, and an overtime rate of at least one and one half times that employees' regular rate for each hour worked over 40 each week unless the employer can prove that they are exempt from overtime. This amount must be “free and clear” of any impermissible deductions. While in many cases impermissible deductions are the cost of operating a vehicle, tools, cost of food and lodging while an employee is traveling, for exotic dancers these impermissible deductions are house fees, tip outs, and fines incurred.
Many exotic dancers are not paid a direct wage from the club and to add insult to injury, are charged as much as $80.00 in house fees per shift. At the end of an exotic dancers’ shift, the exotic entertainer typically has to pay the manager, house mom, DJ, and security a “tip out.” While strip clubs argue that the “tip outs” are not mandatory, the exotic entertainers say otherwise. If the exotic entertainer does not tip out, they fear retaliation by the club. Some strip clubs charge the exotic dancer a percent of the total tips earned during the dancers’ shift. This is all while not paying the exotic dancer a direct wage. Another way the strip clubs make money from the exotic dancer is imposing a fine for a violation of the clubs’ “dancer rules.” Some dancers are fined for skipping the stage rotation, arriving late to their shift, sitting on the stage, not being on the dance floor in time, not selling a promotional item or dance, or leaving early from their shift. Fines have been found to be impermissible deductions recoverable as back wages under federal wage law.
SEVERAL COURTS FIND THAT EXOTIC DANCERS ARE ENTITLED TO MINIMUM WAGES, OVERTIME, RETURN OF THEIR HOUSE FEES, RETURN OF THE FINES THEY PAID, AND RETURN OF THEIR TIP OUTS. READ A CASE HERE.
The key issue in exotic dancer cases is whether the exotic dancer is an employee or an independent contractor. If an employee, they are entitled to the protection of the FLSA discussed above. Whether an employee is an independent contractor is a fact question that depends on a variety of factors. Some courts use the “economic realities test” to determine whether someone is truly in business for herself.
The Economic Realities Test looks to the following factors:
the degree of control exercised by the alleged employer;
the extent of the relative investment of the putative employee versus the employer;
the degree to which the “employee’s” opportunity for profit and loss is determined by the “employer;”
the skill and initiative required in performing the job; and
the permanency of the relationship.
The majority of strip clubs classify the exotic dancers as independent contractors. When employers misclassify their workers as “independent contractors,” the employer typically does it to cheat their employees out of overtime. However, the overwhelming majority of courts which have looked at this issue find that exotic entertainers ARE employees entitled to the protection of federal wage law. The strip clubs may argue that a dancer signed a contract to be an independent contractor. However, under federal wage and hour law, you cannot contract away your rights to earn minimum wage and overtime. An employer-employee relationship is not limited by contractual terminology, agreements, or by labels put on the parties’ relationship. In other words, the exotic dancer, if found to be an employee, cannot sign an agreement to work for tips only. The agreement would be invalid.
Another argument made by strip clubs is that the exotic dancer set their own schedule. While most of the time this is not true, even if the exotic entertainers set her own schedule, she can be found to be an employee. As one court put it, “[Although], Defendant does not exercise control over the day-to-day decisions and work of its dancers, it exercises significant control over the atmosphere, clientele, and operation of the club. Thus, this factor likely tips in favor of economic dependence, as Defendant exclusively controls the flow of customers, on which Plaintiff depended for her income.”
Moreover, some strip clubs argue that while they have rules regarding the exotic dancer’s conduct, they do not really enforce them. Again, courts have seen past this argument and said that the fact they could enforce them, means there is control over the exotic dancer’s conduct. A federal court in New York said, “[t]he mere threat of imposition of such a fine realistically operated as a sword of Damocles over the dancers, helping ensure dancer compliance with the Guidelines…Control may be restricted, or exercised only occasionally, without removing the employment relationship from the protections of the FLSA, since such limitations on control do not diminish the significance of its existence.”
Attorney Sosa-Morris and Attorney Neuman have represented exotic entertainers across the country in recovering their unpaid wages. Previously, Attorney Bea Sosa-Morris has been appointed as Class Counsel for thousands of exotic entertainers in a lawsuit against a strip club which you can read about here.
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