The Fourth Circuit Court of Appeals has handed down a decision determining that the economic relationship between exotic dancers and the clubs where they danced was one of employer-employee and not one of an independent contractor, as the defendant clubs argued. In McFeeley v. Jackson Street Entertainment, LLC, the dancers -- who worked at two clubs owned and managed by the same person -- sued the clubs for denying them the minimum wage required by the Fair Labor Standards Act (FSLA). The parties filed cross summary judgment motions, with the clubs arguing that the dancers were independent contractors and not entitled to a minimum wage. The trial court disagreed and awarded the dancers both back pay and some of the liquidated damages they sought.
The Fourth Circuit, affirming the trial court's ruling, explained that the employee/independent contractor distinction is not a bright line but a spectrum. Based upon the totality of the circumstances, the dancers fell on the employee side of the spectrum, the Appeals Court said. The most critical factor here was the significant amount of control the clubs had over how the dancers performed their work. The clubs set the hours of operation, coordinated and paid for all the advertising, managed the atmosphere, and paid the rent and the bills. Other factors, such at the minimal degree of skill required for exotic dancing and the fact that the clubs could not function without exotic dancers all spoke to an employee relationship.
Finally, the Appellate Court found that the Defendants were not entitled to the "tip credit". An employer is able to offest the minimum wage they pay an employee who receives tips. However, in this case, the clubs did not pay the dancers anything, so there was no minimum wage to offset.
There is some good news for the clubs, however. The court found that the clubs' reliance on its attorney's advice constituted "good faith and reasonable belief" of compliance with the FSLA. So, from the point the clubs relied on advice of counsel forward, the court found the dancers were not entitled to liquidated damages.
As usual, the take-away is to seek advice of competent counsel and then heed that advice.