Exotic Dancers Spotlight Independent Contractor Classification Misstep

drawing or sketch of a woman dancer

From SHRM, Scott M. Wich discusses a case in which the 4th Circuit Court of Appeals upheld a decision that exotic dancers were improperly classified as independent contractors.  Scott writes:

The appeals court undertook an illustrative analysis of a Fair Labor Standards Act (FLSA) employee/independent contractor six-factor test, which looks at:

  • The degree of control that the putative employer has over the manner in which the work is performed.
  • The worker’s opportunities for profit or loss dependent on his or her managerial skill.
  • The worker’s investment in equipment or material, or his or her employment of other workers.
  • The degree of skill required for the work.
  • The permanence of the working relationship.
  • The degree to which the services rendered are an integral part of the putative employer’s business.

As for the degree of control, the appeals court highlighted that the clubs took attendance, dictated work schedules, maintained several rules of conduct during working hours, set the fees dancers could charge, counselled dancers on proper behavior, and maintained control of decisions concerning music and lighting for the performances. Given the extent of control over the dancers at the clubs, the appeals court concluded that the first factor of the six-factor test weighed in favor of a finding of employee status.

However, the appeals court cautioned that its conclusion did not “suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him.” The appeals court noted that the appropriate focus of inquiry should be on the degree of control.

The second and third factors, the appeals court found, were largely two sides of the same coin. The clubs controlled the prices dancers could charge and paid for rent, utilities, insurance, advertising and wages for other workers at the clubs. Investment by dancers was limited to their outfits and items they brought to the clubs for their dances. The appeals court noted that the proper analysis of these criteria should address “the worker’s contribution to managerial decision-making and investment relative to the company’s.” It held that the “ratio of managerial skills and operational support” by the clubs, in comparison to the dancers, weighed against an independent contractor classification.

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