Strip club's win vs. 'shooter girl' may mean multiple arbitrations

Woman challenged her classification as an independent contractor

By Jeff Jeffrey
The Daily Record Newswire

COLUMBIA, SC — Candace Sittner, a “shooter girl” at The Masters Club in Myrtle Beach, claims the strip club violated federal labor laws by failing to pay her and her coworkers a decent wage.

But an arbitration agreement Sittner signed when the strip club hired her has derailed an effort to file a collective action against her former employers.

U.S. District Judge Bryan Harwell said the agreement means Sittner’s lawsuit could not proceed in court, despite her arguments to the contrary.

While Harwell’s ruling wasn’t what Sittner wanted, her case raised interesting questions about how federal courts in South Carolina should view collective actions when the class includes individuals who have signed arbitration agreements, as well as those who have not.

The case may also create a “be careful what you wish for” situation for The Masters Club, said Badge Humphries, a plaintiff’s attorney with Lewis Babcock in Charleston.

“Because of the [American Arbitration Association’s] Employment Arbitration Rules and the fee-shifting provisions of the Fair Labor Standards Act, the employee arbitration provision could ultimately prove to be death by a thousand cuts for the employer,” Humphries said.

Shots fired

Sittner’s 2015 complaint alleged that The Masters Club improperly classified her as an independent contractor — not an employee — when she was hired as a shooter girl. In that role, Sittner was required to purchase alcohol from The Masters Club and sell it to the club’s customers.

As a result of the alleged misclassification, Sittner claimed she was paid less than the statutory minimum wage under the FLSA. The complaint included separate claims for failure to pay minimum wage, failure to pay overtime wages, violations of the South Carolina Payment of Wages Act, unlawful kickbacks and retaliation. Sittner filed the complaint in the federal court in Florence on behalf of herself and “other employees similarly situated.”

In addition to The Masters Club, the complaint named its parent company, Country Club Inc., and owner Mike Kap as defendants.

But within days of the lawsuit’s filing, the club’s attorneys filed a motion to compel arbitration under an agreement Sittner signed when she was hired.

In court filings, Sittner has acknowledged that she signed the arbitration agreement. But she argued that the motion to compel was premature because the putative class included at least one person who hadn’t signed an arbitration agreement.

Brittany Sloan filed a consent to join the collective action. But court records say Sloan never signed an arbitration agreement with The Masters Club while working there.

Sittner said that meant Harwell was required to certify the class and distribute notices to potential plaintiffs prior to ruling on the motion.

Sittner is represented by solo practitioner Bruce Miller of Charleston and David Rothstein and Michael Corley of the Rothstein Law Office in Greenville. None of Sittner’s attorneys responded to requests for comment.

Do not pass Go

Sittner’s arguments failed to sway Harwell. In a July 13 ruling, the judge said even if the class is ultimately certified, it really didn’t matter to Sittner’s case. The 4th U.S. Circuit Court of Appeals has made it clear that if a plaintiff signs a valid arbitration agreement, he or she is bound by it, regardless of what happens to the other plaintiffs, Harwell said.

Harwell pointed to the 4th Circuit’s 2002 ruling in Adkins v. Labor Ready, which held that the Federal Arbitration Act requires a court to stay “any suit or proceeding that is pending arbitration of any issues referable to arbitration under an agreement in writing for such arbitration.” Harwell added that the 4th Circuit has held that FLSA claims may be resolved by an arbitrator.

“Certainly, Plaintiff acknowledges that she has signed an arbitration agreement; therefore, regardless of whether a class is later certified, she is subject to the arbitration provision,” Harwell said.

Harwell noted that none of the parties had addressed whether the arbitration agreement applied to the claims brought against Kap, nor have they addressed its applicability to the alleged claims brought by individuals who consented to join the collective action. Harwell stayed those claims, pending the outcome of the arbitration.

The defendants are represented by solo practitioner Trenton Chambers of Myrtle Beach and Dean Fuchs and Stephen Brown of Schulten Ward Turner & Weiss in Atlanta. Fuchs declined to comment on the case, citing the pending nature of the litigation.

 Mixed blessing?

While The Masters Club won the fight to have the case moved into arbitration, litigation attorneys said that might create more problems for the club than it solves.

Rather than fending off a single collective action lawsuit, the club’s employment agreements could set off a flurry of individual arbitrations. And under rules set by the American Arbitration Association, employers are responsible for all administrative fees and expenses associated with the arbitration, as well as the arbitrator’s hourly fees, when the dispute arises out of “an employer plan” and not an individually negotiated agreement.

Humphries said he believes Sittner’s allegations “clearly” meet that definition.

Additionally, because The Masters Club arbitration agreement includes a provision that bars collective actions, Humphries said the club could wind up paying between $2,000 and $3,000 for each employee that takes a claim to final hearing — and even more if the FLSA claims are successful.

Henry Frampton, an employment litigator with McNair Law Firm in Charleston, said if he were representing the plaintiffs’ class, he would attempt to find a plaintiff who was sure they had not signed an arbitration agreement and file a new action.

“That way you could at least allow that group to move forward with their lawsuit contemporaneously while the arbitration plays out,” Frampton said.

Gregory Sloan, a defense-side litigation partner with Gallivan, White & Boyd, said he thinks Harwell got it right when he ordered Sittner’s case into arbitration. He said the defendants met the 4th Circuit’s criteria for granting a motion to compel arbitration, which include a dispute between the parties, a written agreement including a provision covering the issue in dispute, a relationship of the transaction to interstate commerce and the failure or refusal of the plaintiff to arbitrate the dispute.

“The moral of the story is if you bring a claim that is clearly subject to mandatory arbitration, you’re probably going to lose if you try to keep it in court,” Sloan said.
 

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