If you think wage and hour class actions aren’t very sexy, you’re wrong.
A class of exotic dancers in California and other states have received preliminary court approval of a $10 million settlement of their class action suit in which they claimed that their adult nightclub employers misclassified them as independent contractors. Trauth v. Spearmint Rhino Companies Worldwide, Inc.pdf (Case No. 5:09-cv-01316) (C.D.Cal).
The representative plaintiffs of the class of approximately 11,000 females who perform live nude and semi-nude dance entertainment alleged that their employers violated the Fair Labor Standards Act (FLSA), the California Labor Code and Unfair Competition Act and other states’ wage and hour laws when they allegedly failed to pay them minimum wage and split their tips to pay for “stage fees” and compensate other nightclub employees such as managers, doormen, and disc jockeys.
While this case may attract a peculiarly prurient interest, it ought to strip all employers of the notion that they are immune from similar suits. Courts have been approving multimillion-dollar settlements involving employers of all stripes, including the pharmaceutical, banking, health club, energy, telecommunications, casino and health care industries.
The authors of Employment Class Action blog have written about many of these cases in the past. Some arise when former “independent contractors” file for unemployment benefits and then argue that they are really employees. Class actions are now also being filed when a large number of independent contractors in a particular line of work — such as tech support or computer programmers, sales representatives, maintenance workers, nurses and construction workers — work exclusively for one employer over a significant period of time and perform duties similar to that of workers traditionally classified as employees.
Often, the employers getting into the most trouble are those that have laid off a large group of employees only to re-hire them as independent contractors so that they can avoid paying employment taxes, overtime wages and benefits.
The Internal Revenue Service, U.S. Department of Labor and many state labor departments also are looking to lay bare employers who they claim are misclassifying their workers. In an effort to collect more employment tax revenue, over the next three years, the IRS plans to randomly select and audit up to 6,000 businesses that use contractors. The DOL stated in its 2011-2016 strategic plan that it will partner with the IRS to root out employers who continue to misclassify employees as independent contractors.
The government efforts likely will arouse the interest of workers eager to seek unpaid minimum wage and overtime pay through class action filings.
The Bottom Line: An employer can be nakedly exposed to a wage and hour class action unless workers are properly classified.