Working Hard For the Money… as an Employee, Not as an Independent Contractor

November 15, 2013

As a general rule, the states (including Maryland) and the federal government recognize two general categories of working relationships: employer- employee relationships, and independent contractor relationships.  While the majority of persons are employees (and the law presumes as much), employers often miscategorize workers as independent contractors.

Employers do so sometimes unintentionally, but also sometimes intentionally in order to avoid legal requirements such as paying the hourly minimum wage and paying wage taxes.

In recent years, several successful lawsuits have been brought by exotic dancers claiming violations of the federal Fair Labor Standards Act (“FLSA”) and similar state laws.  One such case was brought in Maryland federal court by dancer Ms. Unique Butler against the owner of the Norma Jean Nite Club in Baltimore, Maryland where she danced.[1]  The club provided no compensation to Ms. Butler, but instead allowed her to keep nearly the entirety of her tips.[2]  After her separation from the night club, Ms. Butler sued the company for violation of the FLSA and the Maryland Wage Payment and Collection Law.[3] On November 7, 2013, the Court found as a matter of law that Ms. Butler was an employee as defined by the laws, and not an independent contractor as Defendant argued, making Defendant liable to Ms. Butler for damages.[4]

To determine whether Ms. Butler was Defendant’s employee, the Court applied the well-established “economic reality” factors test.  Those factors include:

1. The degree of control that the supposed employer has over the manner in which the work is performed;
2. The worker’s opportunities for profit or loss dependent on his managerial skill;
3. The worker’s investment in equipment or material, or his employment of other workers;
4. The degree of skill required for the work;
5. The performance of the working relationship; and
6. The degree to which the services rendered are an integral part of the putative employer’s business.[5]

In finding that Defendant exercised a sufficient “degree of control” over Ms. Butler to create an employment relationship, the Court highlighted the following factors: the Defendant’s significant control over the atmosphere of the club, the club’s clientele, and the operation of the club (i.e., advertising, marketing, and managing profits).[6] In light of this, the Court found that the “Defendant exclusively controls the flow of customers, on which Plaintiff depended for her income.” Other factors that different courts have used when analyzing this point include: whether establishments have set behavior guidelines or “codes of conduct” which result in penalties if violated; set prices for lap dances; set work schedules for the dancers; control costume choice; and control music choice.[7]  That Ms. Butler could set her own fee for lap dances, come and go as she pleased, and did not have the “day-to-day aspects” of her performances controlled by the Defendant did not preclude a finding that the Defendant exercised more control over her than she did herself making her economic status “inextricably linked to those conditions over which [Defendant has] complete control.”[8]

In examining the remaining factors, the Court agreed the facts of the case supported the legal conclusion that Ms. Butler was an employee.  The Court noted that none of the dancers at the club, including Ms. Butler, were required to possess skill in order to dance at Norma Jean’s Nite Club.  The lack of skill is indicative of an employment relationship, as independent contractors are generally highly skilled in his or her chosen field.[9]

The Court also found that the services Ms. Butler provided (exotic dancing) was integral to the nature of Defendant’s business as an adult entertainment bar.  Despite the Defendant’s attempt to characterize itself as a “sports bar” and arguing that the existence or non-existence of female exotic dancers was not integral to its business, the Court remarked that “[c]ourts have routinely noted that the presence of exotic dancers are essential, or obviously very important, to the success of a topless nightclub.”[10]

This case is just one in a number of recent wage law suits involving exotic dancers, and it surely will not be the last.  Ms. Butler’s success in her suit does not guarantee that all exotic dancers are “employees” in the eyes of the FLSA, as the existence of an employee-employer relationship must always be determined on a case-by-case basis.  Her victory does, however, demonstrate how important it is that employers correctly categorize workers or face a significant risk of monetary penalties.