Exotic Dancers Are Employees Under FLSA: Judge

www.law360.com

Law360, New York (September 8, 2011) -- A Georgia federal judge said Wednesday that a class of 80 current and former exotic dancers should be classified as employees and not independent contractors in their suit over unpaid wages against Galardi South Enterprises Consulting Inc., proprietors of Atlanta’s Club Onyx.

U.S. District Judge Richard W. Story granted the dancers' motion for partial summary judgment, holding that their relationship with club owners and operators constituted an employee-employer relationship under the Fair Labor Standards Act. Judge Story ordered the parties to mediate the rest of the claims in the case.

“We are thrilled with the court’s decision, which, like numerous decisions before it, recognizes that the relationship between a club and its dancers is an employer-employee relationship,” plaintiffs’ counsel Anna Prakash of Nichols Kaster PLLP said in a statement.

Susan K. Murphey of Schulten Ward & Turner LLP, an attorney for the defendants, said Thursday that they were disappointed by the decision and were exploring their options.

"We believe that we raised novel but valid arguments, and further believe that if neither party desired or intended to create an employment relationship then one ought not be created by operation of law," Murphey said.

The defendants — Galardi South, Pony Tail Inc., CEO Jack Galardi and COO Michael Kap — claimed that since the dancers were paid directly by customers and did not receive paychecks, they should be considered independent contractors. They also claimed that Onyx did not profit from the dancers and that the dancers did not necessarily drive the club's business.

Depositions from both plaintiffs and defendants, however, suggested otherwise. While the parties disagreed over who set the prices for tableside dances and how much of their gross receipts dancers were required to turn over in the form of “house fees” and disc jockey fees, about $94,000 in fees were paid to LVA Management, a company controlled by Galardi.

While accounting ledgers showed that the club made most of its money from alcohol sales to customers, Clifford I. Adams, an Onyx manager, testified that he never fired an exotic dancer because “girls make the club busy, as far as if you don't have enough girls in the building, your customers won't stay,” according to the order.

“To believe defendants' statement that 'Club Onyx does not profit from the dancers,' would require a juror to believe that the club's profit would be the same regardless of whether the club had any nude entertainment. The record presents no logical path to such a conclusion,” Judge Story said.

The defendants also said that they had made no real investment in the dancers' employment, since the dancers themselves paid to have their hair, nails and bodies look a certain way in order to pass “body checks” conducted by managers. Accounting ledgers showed that from 2007 to 2009, the club spent about $900,000 per year on equipment, advertising, maintenance and alcohol, but the most a plaintiff spent on her appearance was $50,000 per year.

The defendants argued that the definition of “employee” was broad but not intended to cover people who work for their own advantage at the establishment of another. But Judge Story said that was not the case here because of the degree of control the club owners and operators had over the work of the dancers.

“This is a trend we're seeing in these types of exotic dancer misclassification cases. These are very positive developments and we're seeing the trend move in favor of plaintiffs in these types of cases,” Prakash said Thursday.

On Aug. 1, a California judge gave preliminary approval to a settlement that would reimburse exotic dancers at a club in Los Angeles who claim they were erroneously classified as independent contractors and pressured into giving other employees a cut of their tips. And in April, a Washington judge ruled that five dancers at a Washington strip club were considered employees and were entitled to minimum wage.

Counsel for the defendants in the immediate suit did not immediately respond to requests for comment Thursday.

The plaintiffs are represented by Anna P. Prakash, Donald H. Nichols, E. Michelle Drake and Steven A. Smith of Nichols Kaster PLLP as well as by Jenny K. Mason of Campano & Sperling LLC.

The defendants are represented by Dean R. Fuchs and Susan K. Murphey of Schulten Ward & Turner LLP.

The case is Clincy et al. v. Galardi South Enterprises Inc., case number 1:09-cv-02082, in the U.S. District Court for the Northern District of Georgia.

--Additional reporting by Jonathan Randles. Editing by Eydie Cubarrubia.