Violations of the Fair Labor Standards Act of 1938 are more common than people realize — if they realize it at all. For the most part, employers follow labor laws, compensating their employees fairly for the work performed. However, there are some unscrupulous employers who are looking to maximize their profits by not following the labor laws. Of course, there are stiff penalties if a company or business is found to be discriminating against employees. However, employers are relying on the ignorance of their employees to skirt the labor laws and to never get caught.
One of the most prevalent violations is been denied a fair statutory minimum wage. Other FLSA violations include failure to pay overtime or being subjected to unfair fees. One of the most taken advantage of industries is the exotic entertainer industry. Though dependent on facts demonstrating the particular clubs control over the entertainer, the vast majority of courts to have found dancers to be employees of clubs as a matter of law. See Harrell v. Diamond A Entm’t, Inc., 992 F. Supp. 1343 (M.D. Fla. 1997); Shaw et. al. v. The Set et. al., 241 F.Supp.3d 1318 (S.D. Fla. 2017); McFeeley v. Jackson St. Entm’t, LLC, 825 F.3d 235 (4th Cir. 2016); see also Reich v. Circle C. Invest., Inc., 998 F.2d 324 (5th Cir. 1993); Foster v. Gold & Silver Private Club, Inc., 2015 WL 8489998 (W.D. Va. Dec. 9, 2015); Degidio v. Crazy Horse Saloon & Rest., Inc., 2015 WL 5834280 (D.S.C. Sept. 30, 2015); Mason v. Fantasy, LLC, 2015 WL 4512327 (D. Colo. July 27, 2015); Berry v. Great Am. Dream, Inc., 2014 WL 5822691 (N.D. Ga. Nov. 10, 2014); Verma v. 3001 Castor, Inc., 2014 WL 2957453 (E.D. Pa. June 30, 2014); Stevenson v. Great American Dream, 2013 WL 6880921 (N.D. Ga. Dec. 31, 2013); Collins v. Barney’s Barn, Inc., 2013 WL 11457080 (E.D. Ark., Nov. 14, 2013; Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 901 (S.D.N.Y. 2013); Thornton v. Crazy Horse, Inc., 2012 WL 2175753 (D. Alaska June 14, 2012); Clincy, 808 F. Supp. 2d 1326; Thompson v. Linda and A., Inc., 779 F. Supp. 2d 139 (D.D.C. 2011); Morse v. Mer Corp., 2010 WL 2346334 (S.D. Ind. June 4, 2010); Reich v. Priba Corp., 890 F. Supp. 586 (N.D. Tex. 1995); Martin v. Priba Corp., 1992 WL 486911 (N.D. Tex. Nov. 6, 1992); Martin v. Circle C Invest., Inc., 1991 WL 338239 (W.D. Tex. Mar. 27, 1991); Donovan v. Tavern Talent & Placements, Inc., 1986 WL 32746 (D. Colo. Jan 8, 1986); Jeffcoat v. Alaska Dep’t of Labor, 732 P.2d 1073 (Alaska 1987); Milano’s Inc. v. Kan. Dep’t of Labor, 231 P.3d 1072 (Ct. App. Kan. 2010); Smith v. Tyad, 209 P.3d 228 (Mont. 2009); Terry v. Sapphire Gentlemen’s Club, 336 P.3d 951 (Nev. 2014) (adopting economic realities test); Club Paradise, Inc. v. Okla. Emp’t Sec. Com’n, 213 P.3d 1157 (Ct. Civ. App. Okla. 2008); Oregon v. Bomareto Ent., Inc., 956 P.2d 254 (Ore. Ct. of App. 1998).
However, due to the nature of the business, many entertainers are reluctant to say anything if they feel they are being treated unfairly under the FLSA laws. Moreover, many employees are young and don’t know their rights. They are afraid of repercussions by their employer who may have threatened their jobs (which is another violation of the FLSA and other state labor laws).
John B. Gallagher, PA, is a law firm that specializes in wage discrimination and wage violations against exotic dancers throughout the state of Florida, endeavors to educate those in the adult entertainment industry about their rights under the FLSA and the fair statutory minimum wage laws. In today’s blog post, we will detail the difference between a contract worker (or independent contractor) and an employee in hopes to educate strippers, exotic dancers, and others in the adult entertainment industry of their rights.
When it comes to employers paying those who work for them, there are two classifications employees fall into: contract workers and employees.
WHAT IS A CONTRACT WORKER OR INDEPENDENT CONTRACTOR?
There is a long history of legal precedents that have set down what is an independent contractor, from the FLSA and common law practices to a multitude of court decisions.The IRS along with many states has adopted common law principles to define an independent contractor. Common law practices focus on if the employer defines what is contracted for and how the employee is being paid.
Hallmarks of an independent contractor:
- The person supplies own equipment such as tools and materials for the job
- The person is under no obligation to show up to work
- The person can be fired at anytime
- The person sets own hours and how many hours it takes to complete the job
- The work is temporary in nature
- The person works for multiple employers
- The person works out of his or her own home or office
- The person receives no benefits from employer(s)
- The person already is trained for the job with a specialized skill set
- The person pays self-employment tax
- The person is not eligible for unemployment benefits
- The person is not eligible for worker’s compensation benefits upon leaving a job or termination
- The person is not eligible for overtime pay
- The person is not protected by employment anti-discrimination and workplace safety laws
An independent contractor is classified as self-employed by the IRS and is subject to the Self-employment tax.
WHAT IS AN EMPLOYEE?
Traditional hallmarks of an employee:
- The person is on payroll, meaning he or she is paying taxes
- The person receives a paycheck regularly
- The person performs work integral to the daily operations of a business
- The person usually works for only one employer or company
- The person works certain, predetermined hours
- The person works at employer’s location
- The person often receives employer benefits, such as health insurance and retirement plans
- The person receives training from the employer
- The person would likely qualify for unemployment compensation if fired or left the company
- The person would receive workman’s compensation for any on-the-job injuries
- The person can be fired only for a good reason (exemptions include “at-will” employees)
- The person is covered by all federal and state labor laws and is entitled to minimum wages and overtime
- The person is protected against employment anti-discrimination laws
Like most laws, the Fair Labor Standards Act is unclear and can be interpreted. In an effort to somewhat standardize interpretations, courts and some federal agencies have stepped in and come up with the “economic realities test.” This test takes the perspective of the worker and asks the question, “How dependent is this person upon the income of the employer?” If the person relies upon that income in large part to live and it is the majority of their income stream, then odds are the worker is an employee. Using some of the above factors as well such as how much the work the employee performs is integral to the operation of the business, the economic realities test also takes into consideration other factors:
This reality is examined by using six factors:
- The degree of control that the putative employer has over the manner in which the work is performed;
- The workers opportunities for profit or loss dependent on [her] managerial skill;
- The worker’s investment in equipment or material, or [her] employment of other workers;
- The degree of skill required for the work;
- The permanence of the working relationship; and
- The degree to which the services rendered are an integral part of the putative employee’s business.
See, e.g., McFeeley et al v. Jackson Street Entertainment, LLC et al, 825 F.3d 235, at 241 (4th Cir. 2016). (applying this test to exotic dancers and finding them employees of the club).
- “No one factor is determinative, and each factor should be given weight according to how much light it sheds on the nature of the economic dependence of the putative employee on the employer.” Clincy, supra, 808 F. Supp. 2d at 1343 (citing cases). It is the totality of the circumstances that must be measured.
- And further, it is generally agreed that “…the court must adapt its analysis to the particular working relationship, the particular workplace, and the particular industry in each FLSA case.” (emphasis added). McFeeley, supra, at p. 241.
- Finally, employment status is a matter of economic reality that cannot be waived by contract. See Scantland v. Jeffry Knight, Inc., 721 F. 3d 1308, 1311–12 (11th Cir. 2013). See also McFeeley, supra, at p. 239 (where to court found dancers to be employees of the club pursuant to the economic realities test despite the fact that they had all entered into a “Space/Lease Rental Agreement of Business Space” which explicitly categorized dancers as independent contractors).
Another test used by the courts includes the “right to control” test. If the employer controls how the work is carried out and the end product, then the person is an employee. If the employer has no control over how the work is done, then the person is an independent contractor.
WHY DOES IT MATTER IF THE WORKER IS AN EMPLOYEE OR AN INDEPENDENT CONTRACTOR?
The answer is what makes the world go around: money. If the person is an independent contractor, the tax liability falls on their shoulders. He or she is responsible for reporting their income earned and is responsible for paying taxes on that amount. The employer pays no taxes on behalf of the employee to the government entities (federal and state). However, if the person is classified as an employee, employers must pay state and federal taxes, including federal unemployment tax, social security taxes, and workers’ compensation and disability payments. Thus, the employer’s tax liability is determined by the worker’s employment status.
When employers fail to classify employees as such, they are subject to paying past taxes. When employers fail to pay their employees minimum wage as required by labor laws, classifying them as independent contractors in order to avoid tax liability and thus underpaying their employees, then a phone call is in order to John B. Gallagher, PA. We specialize in helping exotic dancers and adult entertainers who have been denied their rights to a fair statutory minimum wage under FLSA gain the compensation they deserve. We also help strippers and exotic dancers who may not have been paid overtime and who have lost income due to unfair house fees and tip outs. You are entitled legal compensation without the fear of retaliation (being threatened or being fired).
HOW JOHN B. GALLAGHER, PA CAN HELP
John B. Gallagher, PA, has extensive experience in successfully pursuing those who are practicing minimum wage discrimination and gaining fair compensation. Everyone is entitled to be paid fairly for the work they do (hence the labor laws that are in place) no matter the work. We treat all of our clients with respect and dignity and hold the employers who are violating the laws accountable for their actions. John B. Gallagher, PA has built a reputation for fighting for the rights of exotic dancers and adult entertainers in the state of Florida. Contact us today to get started!