Strippers Win Worker Status Misclassification Claims

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By Jon Steingart

June 8 — Exotic dancers in Maryland who were compensated only with customer tips were incorrectly classified as independent contractors rather than employees and should have been paid hourly wages and overtime, a federal appeals court ruled ( McFeeley v. Jackson St. Entm't , 2016 BL 182204, 4th Cir., No. 15-1583, 6/8/16 ).

Worker classification is important because there are a “variety of workplace protections for employees, not the least of which is wage and hour laws,” Gregg Greenberg, an attorney for the dancers, told Bloomberg BNA June 8.

“If we call them a contractor, businesses don’t have to follow those rules or pay payroll taxes and other withholdings associated with employees,” Greenberg said.

Attorneys for the clubs didn't respond to requests for comment.

The “economic reality of the relationship” between the dancers and the clubs where they performed shows they should have been classified as employees under the Fair Labor Standards Act and state law, Judge J. Harvie Wilkinson III wrote for the U.S. Court of Appeals for the Fourth Circuit. Judges Roger L. Gregory and Albert Diaz joined the June 8 opinion.

The case attracted the attention of the Department of Labor, which filed a brief and appeared at oral argument in support of the dancers. The department joined the case as part of its effort to combat worker misclassification, it said in its brief.

Clubs' Control Shows Employee Status

The “economic realities” test includes six factors courts consider when classifying a worker, Wilkinson said. “Most critical” for the dancers' case is the amount of control the clubs exerted, Wilkinson said.

For example, the clubs established the fees that dancers were required to charge for private performances, Wilkinson said. It disciplined them when they didn't “have the right attitude or were not behaving properly,” he said.

A worker isn't automatically classified as an employee as soon as the putative employer asserts any control, Wilkinson said. But the amount of control the clubs exercised over how the dancers “performed their work bore little resemblance to the latitude normally afforded to independent contractors,” he said.

The DOL issued an administrator's interpretation on worker classification in July, in which it said that “most workers are employees under the FLSA’s broad definitions.” A DOL spokeswoman didn't immediately respond to a request for comment about the dancers' case.

“We must be mindful in the end that we are applying a statute which Congress thought was necessary to provide ‘fair labor standards,'” Wilkinson said. “To rule for the clubs under the circumstances here would run too great a risk of undercutting the Act’s basic aim.”

Zipin, Amster & Greenberg LLC represented the dancers. Smith Graham & Crump LLC represented the clubs. Attorneys from the Solicitor of Labor's office represented the Department of Labor.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

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