$2.3 Million Settlement Resolves Misclassification, Overtime Dispute Between Exotic Dancers and Clubs, Leaves Question of Whether They Were Employees or Independent Contractors Unanswered

JustShootMe-337.jpgThe plaintiffs in a putative collective action under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., have settled their dispute with the defendants, which included allegations of misclassification and failure to pay overtime wages. A federal magistrate recommended approval of a settlement in which the defendants agreed to pay $2.3 million to the plaintiffs. Jones, et al v. JGC Dallas LLC, et al, No. 3:11-cv-02743, findings, conclusions, and recommendation (N.D. Tex., Nov, 12, 2014). The district court approved the settlement, with some adjustments, on December 24, 2014.

The initial plaintiffs in Jones worked for clubs owned and operated by the defendant throughout Texas and in Phoenix, Arizona. They added additional club owners in several amended complaints. They alleged that their primary job duties were to dance on stage and to perform individual dances for customers. They received no payment from the defendants, but instead had to pay a fee to the defendants for each shift. The defendants also allegedly required them to share the money they received from customers with other employees, such as managers and DJs. The defendants set the rates for all of the services expected of the plaintiffs.

The lawsuit was one of many brought by people, mostly women, who work or have worked as exotic dancers at clubs around the country, claiming that the clubs misclassified them as independent contractors instead of employees in violation of the FLSA. Employees are subject to the FLSA’s protections regarding wages and hours of work, while independent contractors are not. Courts around the country have reached different conclusions regarding whether exotic dancers are independent contractors or employees, although the trend seems to be in favor of considering them employees.

Courts have developed several tests to identify whether an individual is an employee or an independent contractor. The Second Circuit Court of Appeals, which includes New York, has adopted the “economic realities test” (ERT). This five-prong test looks at (1) the amount of control exercised by the employer, (2) the worker’s “opportunity for profit and loss” and “investment in the business,” (3) the “degree of skill and independent initiative” expected for the job, (4) whether the job is considered permanent or temporary, and (5) whether the job is “an integral part of the employer’s business.” Hart v. Rick’s Cabaret Int’l, 967 F.Supp.2d 901, 912 (S.D.N.Y. 2013), quoting Brock v. Superior Care, 840 F.2d 1054, 1058-59 (2d Cir. 1988).

The test for determining whether a worker is an employee or an independent contractor in New Jersey is currently under review. The Third Circuit Court of Appeals certified a question to the New Jersey Supreme Court, whose ruling imposes a stricter standard than the ERT for identifying a worker as an independent contractor, known as the “ABC test.” A worker is presumed to be an employee unless the employer can show that (1) it neither exercised nor had the ability to exercise control over the individual’s work, (2) the worker’s services were “outside the usual course of business” or “performed outside of all the places of business of the enterprise,” and (3) the worker’s profession will “plainly persist” even if the employer terminates their relationship. Hargrove v. Sleepy’s LLC, Nos. A-70 Sept. Term 2012, 072742 (N.J., Jan. 14, 2015).

The Resnick Law Group’s employment law attorneys represent employees in New Jersey and New York. To schedule a confidential consultation with a member of our dedicated team, contact us today online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

Court Rules that Restaurant Franchise Must Pay Employees in Money, Not Pizza, The New Jersey Employment Law Firm Blog, September 18, 2014
Current and Former NFL Cheerleaders Sue Teams for Wage Violations, The New Jersey Employment Law Firm Blog, September 9, 2014
Strippers Win Employee Misclassification Case in New York, The New Jersey Employment Law Firm Blog, November 5, 2013
Photo credit: By Polenastics (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons.

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