Exotic dancers can be properly classified as either employees or independent contractors depending on how the working relationship is structured. But when the independent contractors believe they have been misclassified and should have really been employees, lawsuits may result.

THRESHOLD LEGAL ISSUE: A Florida federal jury (under the U.S. District Court for the Southern District of Florida) has found an adult entertainment club liable (for wages and overtime) to eight exotic dancers for a whopping $1.8 million. Espinoza v. Galardi South Enterprises Inc., No. 14-cv-21244 (S. D. Florida June 27, 2018). The threshold legal issue of this lawsuit was whether the dancers were independent contractors or employees under Federal wage and hour laws (Fair Labor Standards Act).

JURY FOUND DANCERS WERE MISCLASSIFIED; CLUB AND CLUB OWNER FOUND LIABILE: The federal jury found the exotic dancers had been misclassified (by both the club and club owner) as independent contractors. The jury also found that the club and club owner either knew or showed “reckless disregard” for the law (when the club and club owner wrongly classified the dancers as independent contractors). The jury awarded the dancers unpaid wages and overtime. The dollar amount will likely double when the federal court imposes mandatory liquidated damages (because of a finding by the jury of willful violation of the wage and hour law).

As part of the monetary award by the jury, one of the exotic dancers will get an additional $75,000 in lost wages (plus liquidated damages). The jury found the exotic dancer was fired by the club as retaliation because she filed a lawsuit against it and then refused to sign an arbitration agreement afterwards.

CONTROL AND DIRECTION: The exotic dancers alleged in their complaint that they should have been classified as employees (and not independent contractors). The dancers argued that they were controlled by corporate-wide, uniform written rules and guidelines and policies that were established by the club. The dancers alleged that they were penalized by the club for tardiness; were told by the club how much clothing to remove during each song; and were required by the club to show up for unpaid staff meetings.

NEED TO CAREFULLY STRUCTURE AN INDEPENDENT CONTRACTOR RELATIONSHIP: The adult entertainment business has been hit with many independent contractor misclassification verdicts (state and federal) and settlements over the years. Like all other industries that tend to rely on the services of independent contractors, these clubs must carefully structure their independent contractor relationships to avoid undue direction and control (and comply with the relevant “independent contractor legal test”).

KEY QUESTION IN EVALUATING INDEPENDENT CONTRACTOR STATUS: At the heart of most of these kinds of legal challenges is the key question: Is the Independent Contractor actually running his or her own business? And…if the desired answer is “Yes”…how can this be proven?

Questions?: For further information on independent contractor status, various strategy steps to evaluate and strengthen independent contractor status, and assistance drafting independent contractor agreements, please contact Attorney Nancy Joerg at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.