Independant Contractor

Strippers & Exotic Dancers: Independent Contractors or Employees?

Answering the issue of whether strippers and exotic dancers are independent contractors or employees, in a case entitled Thompson v. House, Inc., the United States District Court for the District of Columbia ruled that exotic dancers in a Washington, DC gentleman’s club were employees and not independent contractors. The judge ruled that the gentleman's club did control the activities of the dancers sufficiently to evidence an employee/employer relationship.

The dancers were paid by the hour, earned $30-50 per hour and usually worked four shifts of ten hours per week.  The club also maintained a number of work rules and forced the dancers to pay the club and the disc jockey.  The dancers were also penalized for calling in sick or being tardy.  These are all evidence of “control,” which cuts against independent contractor status.

There have been a number of similar lawsuits under the FLSA and virtually all of them have resulted in findings of employee status for the strippers.   If you believe that you are being improperly classified as an independent contractor, please contact us.  We can help.

Independent Contractor vs. Employee -- Exotic Dancers Recover $1.55M in Misclassification Case

Independent Contractor vs. Employee Exotic Dancers Recover $1.55M in Misclassification Case

Clincy v. Galardi South Enterprises, Inc. was brought by a group of exotic dancer/entertainers who alleged that they had been misclassified as independent contractors rather than employees. The Defendants required that the dancers pay a fee to the club for the privilege of dancing as an independent contractor.

The trial court explored the question of whether the dancers were employees or independent contractors under the FLSA and ruled that the dancers were employees rather than independent contractors.  Prior to the trial on the second issue, the defendants settled the action. They agreed to pay a $1.55 million settlement to the class of strippers.

Ultimately the employee versus independent contractor issue is a complicated one.  Courts often rule based on a variety of factors including (1) the nature and degree of control over the work, (2) the employee's opportunity for profit or loss depending on her skill, (3) who pays for equipment, (4) whether the services require special skill, (5) the permanency and duration of the working relationship, and (6) the extent to which the services are integral to the business.

In this case, none of the plaintiffs were paid any direct wages by the club in which they worked.  Instead, they paid defendants for the right to perform in their club.  The plaintiffs’ each were required to sign independent contractor agreements as a prerequisite to beginning work for the defendants.  Defendants claimed that the dancers were independent contractors because they were paid directly by customers and did not receive paychecks.  They also claimed that the club did not profit from the dancers and that the dancers did not necessarily drive the club’s business.  However, based on evidence that the defendants set the prices for tableside dances and the amount of gross receipts dancers were required to turn over in the form of “house fees” and disc jockey fees, as well as the fact that the defendants set specific schedules for the dancers, created rules of conduct (subject to discipline), check-in and check-out procedures and otherwise controlled the method and manner in which plaintiffs worked, the court held that the defendants were plaintiffs’ employers under the FLSA.

The take home point is this – just because your employer calls you an independent contractor, that does not necessarily make you and independent contractor.  This is true even if your employer makes you sign an “independent contractor” agreement.  If you think you may have been misclassified as an independent contractor, contact us for a free initial consultation.

Click Clincy v. Galardi South Enterprises, Inc. to read the entire opinion.

 

 

Independent Contractor or Employee?

Independent Contractor or Employee? Far too often, employers erroneously misclassify individuals as independent contractors or employees.  In an attempt to save money, many businesses use independent contractors to serve functions typically served by employees. Classifying someone as an independent contractor often means the business does not have to pay minimum wage or overtime to the individual.

In determining whether someone is an independent contractor or an employee the U.S. Department of Labor uses what is known as the "Economic Realities Test," which contains the following factors:

  • the degree to which the person's work is controlled by the organization;
  • the individual's investment in facilities and equipment, if any;
  • the individual's opportunities for profit or loss, if any;
  • the amount of any initiative, judgment, or foresight the person uses in open-market competition;
  • the permanency of the relationship; and
  • whether and to what extent the individual's work is an integral part of the organization's business or activities.

If you have any questions about your classification as an independent contractor, please contact us for a free initial consultation.

Overtime Violations and Misclassification Issues

OVERTIME VIOLATIONS Unless you are specifically classified as an “exempt” worker, your employer must pay you overtime wages for any hours you work over 40 hours in a workweek (see this prior blog entry). Your employer must pay overtime wages at a rate of at least one and one-half times (150%) your regular hourly rate.

Your employer cannot avoid paying overtime by enacting a no-overtime policy or by getting you to agree to a special deal.  Your employer must pay you according to the law.  Set forth below are some common overtime violations:

Unpaid or Improperly Calculated Overtime Pay

Overtime rules are generally based on a single workweek. If you are a non-exempt employee, you may be paid weekly, bi-weekly, or monthly.  But, your employer must calculate overtime based on the actual 40-hour workweek (the pay period does not matter).  Employers cannot average hours over two or more weeks.  Likewise, your employer cannot get you to agree not to follow the overtime rules.

Comp Time Instead of Overtime Pay

Compensatory time is paid time off generally granted to an hourly employee instead of overtime wages.  This is often referred to as "comp time."  Comp time can sometimes be legal, but the employer must pay it at 150%, which is the same rate as overtime wages.

Employees Not Allowed to Report Work over 40 Hours Per Week

Many employers have rules that no overtime work will be permitted or paid for unless authorized in advance.  Some employers choose to ignore overtime hours worked by their employees or do not allow employees to report their overtime hours. These are violations of the overtime rules.

MISCLASSIFIED EMPLOYEE VIOLATIONS

In today’s tough economy, employers face increasing pressure to lower wage and benefit costs. Not surprisingly, some employers do not obey the rules regarding classification of employees, which classification dictates whether its employees are entitled to overtime.

Has your employer not paid you overtime because you are an “exempt” employee? Or, has your employer not paid you overtime and benefits because you are a contract employee or independent contractor?   Your employer may have misclassified you.  And if so, you are losing out on the pay and benefits you deserve.

Misclassification of Employees as Exempt Workers

Exempt employees are employees who are not entitled to receive overtime pay.  Whether or not you are exempt can be confusing.  However, it has nothing to do with your job title or job description, or whether you are paid a salary or hourly. What you actually do at your job on a daily basis determines whether or not you are legally entitled to overtime.  For additional information, please visit www.dol.gov/whd/overtime_pay.htm.

Misclassifaction of Employees as Contract Employees

Contract employees or independent contractors include self-employed workers who are not covered by the tax and wage laws that apply to regular employees. Employers do not pay Social Security, Medicare, or federal unemployment insurance taxes on contract employees or independent contractors.  Thus, employers are strongly motivated to classify workers into this category to save costs.

Whether you qualify as an employee or an independent contractor is not an easy matter.  Three factors are key in determining this:

1.  Control:  Does the company control what you do and how you perform your duties? 2.  Financial:  Do you or the company set the business aspects of your work (method of payment, reimbursement of expenses, etc.)? 3.  Relationship:  Do you have a written contract? Do you receive employee-type benefits, such as a pension plan, insurance, or vacation pay? How long have you been at the company?

You are probably an employee and not an independent contractor or contract employee if the company controls what you do and how you do it, and treats you like other regular employees.  If so, you may be missing out on valuable overtime wages and employee benefits.  For more information on this issue, please see http://www.comptroller.ilstu.edu/downloads/20-factor-test-for-independent-contractors.pdf.

Some other common employer pay practices which may violate the law:

  • Paying you a salary and no overtime when you spend less than 50% of your time managing other employees;
  • Paying you a salary and no overtime with a title like assistant manager, assistant branch manager, or working lead;
  • Paying you hourly and not paying you overtime when you work in excess of 40 hours in any work week;
  • Paying you hourly and not paying you for pre-shift or post-shift work time such as uniform and clothes changing time, the time it takes you to prepare your workstation for the day, or clean up time at the end of your shift;
  • Paying you hourly, but asking you to perform work via cell telephone, email, Blackberry, Twitter, Facebook, etc. when you are not clocked in;
  • Paying you hourly, but asking you to work through your breaks and unpaid meal periods without payment;
  • Rounding you work time down to the nearest 15 minute increment (e.g., you clock in at 7:56 am and your employer rounds your time to 8:00 am); or
  • Hiring you as an “independent contractor,” “contract employee,” or “contingent worker” and not paying you overtime or benefits like regular employees.

Please contact us if you believe your employer has violated the law in paying or classifying you.