In a purported class action, Jessica Mason et al. v. Fantasy LLC et al., five adult dancers have sued the Fantasy Gentlemen’s Club in Colorado federal court for misclassifying them as independent contractors, alleging they were in fact employees.  The dancers claim that, as employees, they were entitled to back wages, overtime, and other benefits.

Plaintiffs allege that they were paid no wages, but were in fact required to pay for the right to dance at the club.  As employees, they allege, they were entitled to wages, overtime, and to retain the totality of their tips, among other things.

The Complaint states that dancers were forced to comply with various rules of the establishment, or else pay fines.

For example, they were prohibited from having any kind of sexual contact with customers, from touching themselves in too explicit a manner, from going home with clients, or from engaging in prostitution.  They were required to pay fines if they missed their appointed times for dancing. They were forced to share 14% of their tips with DJs and with bouncers.  They were also to be fined $30 for complaining about their personal lives to customers, since, an informational sign explained in block letters, customers “came here to have a good time not hear about your [expletive].”

The lawsuit is based on the Fair Labor and Standards Act (FLSA) as well as Colorado common law.

Under the FLSA, whether a worker in an employee or an independent contractor revolves around multiple factors, including the:

  • degree of the principal’s control over the worker;
  • worker’s opportunity for profit or loss and his or her investment in the business;
  • degree of skill and independent initiative required to perform the work;
  • permanence or duration of the working relationship; and,
  •  the extent to which the work is an integral part of the employer’s business.

Although the Complaint succeeds in painting a picture of an unpleasant working environment, it is not at all clear that Plaintiffs will prevail.

Defendants may have some strong arguments that the strippers are independent contractors, not employees.  The club established various rules for conduct, but it may be that many of those rules (though not all, obviously) are dictated by anti-prostitution ordinances.  The facts that develop during the lawsuit will inform how much control the owners really exercised over the details of the strippers’ work.  Were they told how to dance, how to move, and so forth?  Or were they allowed to make up their own routines?  Such facts may prove to be of central importance.

As for the other facts, it can be argued that many point in favor of independent contractor status, not employee status.  Since the strippers pay to dance, it can be argued they are “investing” every time the go on stage.  Their opportunity for profit may be variable but real, depending upon their skills as dancers or their attractiveness.  As for the degree of skill and initiative, defendant may be able to point to the unique skills and attributes which make for a successful dancer. Likewise, the facts will show how “permanent” the work was.

Of course, the question of whether a worker is an independent contractor or an employee always depends upon the specific facts of the case, so, without more, it is not possible to predict how the case will resolve.

But one thing is certain:  Cases alleging misclassification will continue and will only increase as time goes on.  The question of whether a worker is an employee or independent contractor is increasingly important and increasingly contested in courts.  The Affordable Care Act alone has made the status of employee a central issue, and many other laws and regulations create vast distinctions between independent contractors and employees.  All of this makes it crucial for business owners to carefully consider the question of classification.  The penalties for getting it wrong can be extreme.

One ray of hope for principals was provided by the California Court of Appeal’s recent published decision in the case of Beaumont-Jacques v. Farmers Group, Inc., et al., a misclassification dispute in which the author was counsel for the prevailing defendants.