Strippers Are ‘Employees' Under State Law, And Due Minimum Wage, Nevada Court Rules

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Kevin McGowan

Oct. 31 — Dancers who perform at a Nevada strip club are employees, not independent contractors, and therefore are entitled to the minimum wage under state law, the Nevada Supreme Court ruled Oct. 30.

Reversing a lower court's dismissal of a class action filed by dancers at Sapphire Gentlemen's Club, the seven-member supreme court said the “economic realities” test used under the Fair Labor Standards Act should also be used to determine whether an employment relationship exists under Nevada's minimum wage law.

Applying a non-exhaustive six-factor test, the court said although Sapphire appears to give dancers autonomy over work schedules, methods of payment and whether to dance for individual patrons, the economic realities are that Sapphire exerts significant control over the dancers, who are integral to the club's business and must be deemed “employees.”

Its ruling that the dancers are employees rather than independent contractors conforms to the “great weight of authority” from other jurisdictions in strip club wage and hour cases, the court said.

Lower Court Denied Employee Status 

Sapphire, located in Las Vegas, bills itself as the “World's Largest Strip Club” and contracts for semi-nude entertainment with approximately 6,600 performers, the court related.

Those contracts provide that performers: determine their own schedules but agree to work a minimum six-hour shift any day they decide to work; set their own prices for private dances with customers, as long as they meet the club's minimum charge; control “artistic aspects” of their performance although a club disc jockey chooses the music; and must obey house rules regarding costumes, minimum shoe heel length, payment of a “house fee” and at least two dances per shift on a main stage.

The dancers receive no wages from Sapphire so their income depends on customers' tips and private dance fees. They are free to perform at other clubs while dancing at Sapphire.

Six Sapphire dancers sued on behalf of themselves and a class of strippers, alleging they are “employees” under Nev. Rev. Stat. 608.010 and therefore guaranteed a minimum wage. A state district court applied a test drawn from Nevada's workers' compensation law, Nev. Rev. Stat. Chapters 616A-616D, to decide the performers weren't “employees” within the meaning of the minimum wage law.

FLSA Standard Applies 

Section 608.210 defines employees as “persons in the service of an employer” under any “contract of hire,” express or implied, oral or written, “whether lawfully or unlawfully employed.”

Sapphire argued the dancers had no “contract of hire” and weren't “in the service of” the club, but the state supreme court rejected those arguments. The performers' signed entertainment agreements are express contracts of hire, and the dancers indisputably are “in service” to Sapphire, the court said.

Under Section 608.210, whether the dancers are employees turns on whether Sapphire is their “employer,” the court said. But state law and dictionary definitions fail to provide a precise definition of employer, the court said. Whether Sapphire is the dancers' “employer” requires an “interpretive aid—one extrinsic from Nevada's statutory and constitutional minimum wage framework,” Justice Kristina Pickering wrote.

On an issue of first impression, the Nevada Supreme Court decided for state minimum wage purposes, the FLSA's “economic realities” test should be used to decide if an employment relationship exists.

“This reality undermines Sapphire's characterization of the ‘choices' it offers performers and the freedom it suggests that these choices allow them; the performers are, for all practical purposes, ‘not on a pedestal, but in a cage,' ” Pickering wrote. The other economic realities factors also tip toward employee status, the court said.

Although the state court previously “has signaled its willingness to part ways with the FLSA when the language of Nevada's statutes so required,” Pickering said, nothing in the state's minimum wage law is “so materially different” from the FLSA that state law requires a test distinct from the federal standard.

Rather, the Nevada legislature apparently intended the state's definition of employer for minimum wage purposes “would encompass as many or more entities as the FLSA definition,” the court said.

“[T]he economic realities test examines the totality of the circumstances and determines whether, as a matter of economic reality, workers depend upon the business in which they render service for the opportunity to work,” Pickering wrote. “[T]his court has difficulty fathoming a test that would encompass more workers than the economic realities test, short of deciding that all who render service to an industry would qualify, a result that NRS Chapter 608 and our case law specifically negate.”

The state legislature “has not clearly signaled its intent that Nevada's minimum wage scheme should deviate from the federally set course, and for the practical reasons examined above, our state's and [the] federal minimum wage laws should be harmonious in terms of which workers qualify as employees under them.” Pickering wrote. “We therefore adopt the FLSA's ‘economic realities' test for employment in the context of Nevada's minimum wage laws.”

Balance Tips Toward ‘Employee.'

While the FLSA test refers to the “totality of circumstances,” Pickering wrote, courts applying the economic realities test “nearly universally consider” six factors: the alleged employer's right to control the manner in which the work is performed; the alleged employee's opportunity for profit or loss depending upon her managerial skill; the alleged employee's investment in required equipment or materials; whether the service rendered requires a special skill; the degree of permanency of the working relationship; and whether the service rendered is “an integral part” of the alleged employer's business.

The “control” factor initially appears mixed as Sapphire theoretically allows the dancers to work any day they want, provided they meet a six-hour shift minimum or receive permission to leave early, the court said. Performers also theoretically can choose whether or not to stage dance and whether to accept or reject a patron's private dance request, the court said.

But Sapphire's “supposed lack of control” actually reflects “a framework of false autonomy” because performers face “a coercive choice” between being indebted to the club if they forgo stage dances or refuse private dances and “redrawing [their] personal boundaries of consent and personal integrity,” the court said.

By forcing dancers to make such choices, Sapphire actually closely monitors its performers, including “dictating their appearance, interactions with customers, work schedules and minute to minute movements when working,” the court said.

“This reality undermines Sapphire's characterization of the ‘choices' it offers performers and the freedom it suggests that these choices allow them; the performers are, for all practical purposes, ‘not on a pedestal, but in a cage,' ” Pickering wrote.

The other economic realities factors also tip toward employee status, the court said. Regarding the parties' relative investments, Sapphire funds all the risk capital, advertising costs and facility maintenances. Performers pay only for their costumes, appearance-related expenses and house fees, the court said. The dancers therefore are “far more closely akin to wage earners toiling for a living, than to independent contractors seeking a return on their risky capital investments,” the court said.

Sapphire argued the dancers' ability to “hustle” and maximize their customer tips and private dance fees is a “special skill” that sets them apart from “employees.” But the court said Sapphire doesn't appear to interview prospective dancers for this skill and it's not clear “their work actually requires such initiative.”

“[T]hough it may well be that a good ‘hustle' is a considerable boon in the field, ‘the ability to develop and maintain rapport with customers' is not the type of ‘initiative' contemplated by this factor,” Pickering wrote.

The court acknowledged that “the temporary nature” of many performers' working relationships with Sapphire weighs against employee status. But “this factor carries little persuasive value in the context of topless dancers and the clubs at which they perform and cannot alone tilt the scales in Sapphire's favor,” the court said.

Sapphire argued that “exotic dancing” is “customarily performed” by independent contractors, but the court said scant legal or factual authority backs up that assertion. In any event, the dancers certainly are “integral” to Sapphire's business, the court said.

“Given the Sapphire bills itself as the ‘World's Largest Strip Club,' and not, say, a sports bar or night club, we are confident the women strip-dancing there are useful and indeed necessary to its operation,” Pickering wrote.

Christensen Law Offices LLC, Rusing & Lopez and the Law Offices of Robert L Starr represented the dancers. Greenberg Traurig LLP and Mark E. Ferrario and Tami D. Cowden in Las Vegas represented Sapphire.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the opinion is available at http://www.bloomberglaw.com/public/document/ZURIKINSHASA_MARIA_TERRY_V_SAPPHIRESAPPHIRE_GENTLEMENS_CLUB_No_59.