By Steve Thorpe
Legal News
Last fall, a collective action lawsuit was filed in Federal Court in Detroit by three current and former exotic dancers against several Detroit adult night clubs owned by Alan Markovitz for intentionally misclassifying exotic dancers and other night club employees as independent contractors instead of employees under the Fair Labor Standards Act (FLSA) and Michigan Minimum Wage Law, refusing to pay statutory minimum wages, unlawfully demanding a portion of gratuities and unlawfully deducting employee wages through rents, fines and penalties. Attorney Megan Bonanni, a partner at Pitt McGehee Palmer Rivers & Golden, P.C., is lead counsel for the plaintiffs. She has extensive experience in employment law including class action litigation, collective actions under the FLSA, disability and accommodations, sex harassment, age discrimination, national origin discrimination, whistleblowers, pregnancy discrimination, wrongful and retaliatory termination, employment contracts and severance agreement negotiations.
Thorpe: At the heart of the suit is whether the exotic dancers and other club employees in the lawsuit will be determined by the court to be employees or independent contractors. What happens if they are found to be employees?
Bonanni: Under the FLSA the club is required to pay its employees at least the minimum wage for each hour worked, and time and one-half the minimum wage for overtime hours (i.e. hours worked over forty in a workweek). Such a wage payment requirement would be in addition to any and all tips club employees receive from customers.
Thorpe: In his autobiography, nightclub owner Alan Markovitz talks about his epiphany as to a different way to hire and compensate dancers by not paying them any wages and having them pay the club to work. What changed?
Bonanni: Throughout the country exotic dancers have successfully challenged this industry wide misclassification of their positions and courts have held that such a classification is erroneous and that the dancers are actually “employees,” as defined by the Fair Labor Standards Act (FLSA). What changed is the filing of this lawsuit challenging these illegal pay practices. The lawsuit alleges that the Clubs intentionally use the misclassification of independent contractor as a mechanism to increase their profit margins at the expense of employee rights. While lawsuits similar to this have been filed and settled across the country, clubs change their pay practices only after being directly challenged in a lawsuit—typically one brought by a dancer who is no longer employed by the club.
Thorpe: A federal judge ruled in a similar case in New York recently. Tell us about that.
Bonanni: In Hart v. Rick’s Cabaret, Judge Paul A. Engelmayer of the Southern District of New York ruled that exotic dancers were employees covered by federal and state wage laws and not independent contractors. Much like this case, Rick’s Cabaret did not pay the dancers any wages, took a portion of the dancers’ performance fees, and imposed fines if the dancers violated any club rules. The adult nightclub claimed unsuccessfully that the dancers were not covered by the minimum wage laws because they were independent contractors. The court determined the exotic dancers were employees, not independent contractors, because of the amount of control the club exercised over nearly every aspect the dancers work life. For example, the club required the exotic dancers to work a certain number of eight hour shifts per week, wear certain footwear, set minimum dance tips, and required dancers to check in and check out at beginning and end of shift and even imposed fines for violating club rules such as chewing gum or being late for a shift.
Thorpe: In addition to charging the dancers, you refer in your complaint to “unlawful tip splitting.” What is that?
Bonanni: Under the FLSA gratuities are defined as pay over and above the cost of goods or services rendered. Gratuities are personal to the individual receiving the tip and generally should not be taken from the individual or split among other employees. In this case, Plaintiffs allege that the clubs disregarded wage and hour laws by engaging tip splitting which required dancers and other club employees to split and share gratuities given to them by customers with the club and other employees, including bouncers, housemothers and disc Jockeys – employees that don’t normally receive tips.
Thorpe: Could a performance fee or tips a dancer receives be used to offset the club’s minimum wage obligations under the FLSA?
Bonanni: This very argument was rejected by the court in the Hart case. The employer argued that performance fees paid to the dancers by customers should be used to meet the employer’s wage requirements because the employer did not make the performance fees part of its gross receipts, and distribute from its gross receipts some of those performance fees back to the exotic dancers. The court held that the performance fees were actually tips in which the club was not allowed share, and were not service fees.
Thorpe: What’s the current status of the case and what’s the next step?
Bonanni: Plaintiffs’ Rule 216(b) Motion for Conditional Class Certification is currently pending and awaiting the Court’s ruling. Should the Court grant Conditional Class Certification, notice will be issued to all former and current exotic dancers (and other misclassified employees) at the Defendant night clubs advising them of the law suit and providing them the opportunity to “opt-in” to the action.
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