Since the Fair Labor Standards Act ("FLSA") only benefits employees, the status of a business's workers as either "employees" or "independent contractors" is extremely significant in FLSA actions. By misclassifying an "employee" as an "independent contractor," businesses, small and large, may be surprised when they are subject to liability for overtime and minimum wage violations. Certainly, the adult entertainment industry is in a state of shock after the Eastern District of Pennsylvania's decision held that exotic dancers are "employees" of an adult nightclub protected under the FLSA.1
The Plaintiffs were exotic dancers who filed a collective action against The Penthouse Club in Philadelphia alleging they were employees benefitted under the FLSA. As discussed in previous blogs, the court assesses the "totality of the circumstances" under the economic realities test to determine whether a worker is an independent contractor or employee under the statute. Since the dancers were not compensated by the nightclub, were responsible for marketing themselves through word-of-mouth, and set their own schedules, surely The Penthouse Club thought they were safe from any employment liability. Shockingly, the court found the dancers were employees after assessing the "control" the nightclub has with the premises. Specifically, the Court noted with importance that the nightclub provided rules and guidelines regarding the facility's maintenance and the dancers' appearances.
While the federal court's decision directly affects the nightclub industry, all employers should take note of this decision due to its effect on future FLSA cases. Even after taking appropriate steps to prevent exposure from liability, businesses may be vulnerable due to speculative results arising from the court's balancing test. For example, as noted by the Eastern District of Pennsylvania in its assessment: "[m]any other courts have previously found that little specialized skill is required to be a nude dancer."2
*This post was written by our Summer Associate Julius Suarez.
1 The case referred to in the blog above is Verma v. 3001 Castor, Inc., No. 13-3034, 2014 WL 2957453 (E.D. Pa. June 30, 2014).
2 Verma, 2014 WL 2957453, at *9.
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