Given the extensive use of euphemisms in the exotic dancing trade, we’ll apologize in advance for any unintended puns.

We’ve written on the issue of the classification of exotic dancers or strippers in the past [April 8, 2011, October 19, 2011, November 21, 2012], but the question continues to ripple through the courts.  While the industry practice has been to classify the performers as independent contractors, the trend is strongly in favor of their being treated as employees.

Most recently, in Zuri-Kinshasa v. Sapphire, Case No. 59214 (Nevada Oct. 30, 2014), the plaintiffs sought to represent a class of over 6,000 semi-nude performers working at the Sapphire Las Vegas Club claiming entitlement to the minimum wage under Nevada law.  According to the court, the performers received no wages but worked solely for tips and dancing fees paid by patrons.  They had generally flexible schedules subject to the requirement that they work at least 6 hours on any given day.  The club’s rules established minimum prices for private performances (presumably lap dances), required a certain number of stage performances, and governed a minimum heel height, and the music was selected by the club DJ.  The club charged a daily house fee to the performers under a written “entertainer” agreement. The performers largely controlled the “artistic” aspects of their performances and were free to work for other establishments.

After determining that Nevada law would follow the Fair Labor Standards Act’s “economic realities” test, the Nevada Supreme Court found that the performers were employees.  The court found that the club provided significantly all the capital and the dancers provided little more than their own services within controlled bounds.  While the dancers could work at other locations, that was no different from waiters, ushers, or bartenders who could also work at multiple establishments.

Perhaps the strangest argument made by the club was that “exotic dancing … is not an integral part” of its business.  Citing the club’s own advertising in which it billed itself as the “World’s Largest Strip Club,” the court noted with admirable restraint that “we are confident that the women strip-dancing there are useful and indeed necessary to the operation.”

The Sapphire case is significant in several respects.  First, it is a unanimous decision from a state supreme court in which “gentlemen’s clubs” are a significant industry.  While the defendant had argued that independent contractor relationships were common in that industry, the court at least indirectly noted that even if that were so, it was likely due to wide-scale misclassification.  Sapphire is also interesting in that the court essentially found that the performers were misclassified on a class-wide basis.

The repercussions of Sapphire may be significant.  Some of the performers made as much as $100,000 per year in tips, but the club may not have taken the steps necessary to preserve the tip credit under federal law, and even then the performers still would have been entitled to half the minimum wage.  Given the amounts involved, there may also be significant tax issues for both the performers and the club, including for FICA and Medicare.  If the performers are classified as employees, there may also be additional issues under the various anti-discrimination statutes.  The Sapphire decision may result in changes to the way in which this entire industry operates.

The bottom line: Industry practices regarding classification may prove a feeble defense to a class-wide challenge.