Even an Exotic Dance Club (a.k.a. Strip Joint) Can Comply with Independent Contractor Laws – And Avoid or Defend Against Class Actions

by Pepper Hamilton LLP

A number of our blog posts since October 2010, including our monthly updates beginning in November 2012, have included reports on class action lawsuits by exotic dancers against strip clubs.  This industry has, by far, the most such lawsuits involving allegations and findings of independent contractor misclassification.

In the last year alone, we reported in our December 2014 update that a strip club in Texas agreed to settle an independent contractor misclassification class action in Texas for $2.3 million; in our November 2014 update that a strip club in New York was ordered to pay $10.9 million for misclassifying exotic dancers; in our September 2014 update that the Nevada Supreme Court reversed a lower state court decision that exotic dancers were independent contractors and not employees, that a New York strip club settled a misclassification case for $4.3 million, and that a Florida court granted class action status to a group of 500 dancers; in our June 2014 update that an Arkansas court ruled that exotic dancers classified as independent contractors were actually employees under the federal wage and hour laws; and in our January 2014 update that a Georgia court granted summary judgment in favor of a class of exotic dancers, concluding that they had been misclassified as independent contractors.

As recently as this past Thursday, February 5, 2015, a 41-page, ten-count class action complaint was filed in federal court in New York against Cheetah’s Gentlemen’s Club & Restaurant in midtown Manhattan. The lawsuit alleged that the club misclassified exotic dancers as independent contractors and, in so doing, violated the federal Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL) by failing to pay minimum wages and failing to pay overtime; and further violated the NYLL by, among other things, misappropriating tips, making unlawful deductions from the dancers’ pay, and requiring them to purchase and wear uniforms and failing to reimburse for laundering their outfits. Evelyn Rodriguez, Janine Bonderenko, Jennifer Eller and Kayla Atkins v. Three Amigos SJL Inc., Times Square Restaurant No. 1, Selim “Sam” Zherka and Dominica O’Neill, No. 15 CV 823 (S.D.N.Y. Feb. 5, 2015).

Legitimate Independent Contractor Relationships Remain Lawful

All but a few industries are capable of operating in a manner consistent with independent contractor laws in general. As the Administrator of the Wage and Hour Division of the U.S. Department of Labor, Dr. David, Weil, has stated recently, while misclassification of employees as independent contractors “deprives workers of rightfully earned wages and undercuts law-abiding businesses,” business models that “attempt to change . . . the employment relationship through the use of independent contractors are not inherently illegal, . . . [and] legitimate independent contractors are an important part of our economy . . . .”

Exotic dancers who provide services as 1099ers, like other workers retained on an independent contractor basis, want to have flexibility in their choice of working hours or days, wish to be able to legitimately deduct business expenses, and prefer to decide how they will perform their services consistent with what is expected in their particular industry.

It is evident, however, that some businesses that use independent contractors to supplement their workforce or are built on a 1099 model, including many exotic dance clubs, have not structured, documented, and implemented their operations to comply with federal and state labor, employment, tax, and benefit laws governing independent contractors. The question arises: can those businesses, even exotic dance clubs, be operated in compliance with such laws?

Yes. Businesses Can Comply With Independent Contractor Laws and Effectively Avoid or Defend Against Class Actions – Even Exotic Dance Clubs.

The answer to that question, of course, depends on which federal and state laws govern and how the independent contractor relationship in a particular company is structured. As set forth in our White Paper, most laws governing independent contractors, including those recently enacted by many states, permit the continued use of independent contractors. Nonetheless, lawyers and legal commentators routinely advise businesses to cease using independent contractors if their current structure is inconsistent with such laws and to reclassify their independent contractors as employees going forward to avoid the potential for misclassification liability.

There are, however, a number of alternatives that permit companies to minimize or avoid future liability. Those alternatives include bona fide restructuring and re-documenting of the relationship between a business and its independent contractors; re-distribution of independent contractors through a reliable and knowledgeable workforce management or staffing company; or reclassification, either voluntarily or under a governmental program.

In deciding which alternatives are suitable for any particular business, an assessment of the specific business, its current structure, and the states in which it operates must first be conducted. “One size fits all” solutions are generally likely to be ill-fitting for most businesses and do not meaningfully minimize or eliminate independent contractor misclassification liability. Many businesses prefer a customized and sustainable approach   to enhance their independent contractor compliance, such as IC Diagnostics™.

There is no question that some businesses are neither willing nor interested in any of the foregoing alternatives, preferring instead to maintain the status quo.  Such businesses, like those that have been sued in the exotic dance club industry, remain highly susceptible to becoming a target of a plaintiffs’ class action lawyer or some state or federal workforce agency. Although optimally designed to minimize the likelihood of future legal challenges, IC Diagnostics™ can also be useful in formulating comprehensive and effective defenses to new and existing court and administrative challenges to a company’s classification of certain workers as independent contractors.

Absent change among many businesses in industries where misclassification of employees as independent contractors has been and remains prevalent, state legislation may well be enacted to further curtail misclassification in those industries – such as the passage of recent independent contractor laws focused on the construction industry, the commercial goods transportation industry, the landscaping industry, and other industries that have drawn the attention of legislators.


Written by:

Pepper Hamilton LLP

Pepper Hamilton LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.