11.19.2014

Baby. Got. Back... Pay

Alternative title: When The Court Ordered Strip Club to Pay Dancers $10M in Back Wages

Musical accompaniment to this story:

From New York (CNN) -
More than 2,000 current and former exotic dancers in New York City were awarded $10 million in a class-action lawsuit they brought against their employer, Rick's Cabaret. 
The federal judge's order came on Friday, four years after the dancers filed their lawsuit alleging the company cheated them out of wages. The award covers unpaid wages from 2005-2012. 
For the dancers, the ruling follows a court victory last year when the judge ruled that they were considered hourly employees who deserve to be paid minimum wage. Rick's Cabaret argued that the dancers worked as independent contractors. 
Friday's ruling was a partial summary judgment, which means a trial over the dispute will take place as planned, and the amount of the award could change. The club says it will appeal. 
While it is true that a patron pays a dancer $20 for a personal dance, these are considered "performance fees" and are not considered regular wages. The club owes the dancers back pay for their hourly wages, the court ruled. According to court documents, Rick's Cabaret failed to pay the dancers minimum wage and kept some payments that should have gone into the dancers' pockets. 
U.S. District Judge Paul Engelmayer also found that Rick's Cabaret shortchanged dancers through something called "Dancer's Dollars." 
Patrons were able to purchase $24 vouchers called Dancer's Dollars, which could be redeemed for personal dances at the club. Rick's Cabaret "systemically retained, without disclosure to customers" $2 of each voucher, in addition to charging a $4 service fee. Dancers only received $18 of each voucher. When paid in cash, the dancers retained the full $20 fee for each dance. 
The withheld $2 from each voucher should have gone to the dancers as a gratuity, according to the court documents. 
Rick's Cabaret had claimed that the dancers made more than minimum wage when the dancers' performance fees were included. But under labor law, "such fees do not offset defendants' minimum wage obligations," according to the court documents. 
"We are very pleased with the court's well-reasoned and thorough decision, and are confident that we will prevail at trial and secure an even greater monetary judgment," the dancers' attorney, Anna P. Prakash, said in a statement. "The court's decision reflects that exotic dancers are entitled to the same legal protections as other employees, and is a resounding victory for a group whose voices are all too often ignored." 
RCI Hospitality Holdings, which owns Rick's Cabaret, said the case is ongoing and "there is no current or near-term obligation to pay any sums as a result of this decision." 
The company is "disappointed" with the initial judgment, and plans on appealing it once the final judgment is reached, RCI Hospitality Holdings said. 
Engelmayer said that it was unclear to patrons that the dancers would not receive the full payment. None of these payments were recorded in the club's gross receipts.

The lessons for NY business owners and entrepreneurs:
  • If you want your workers to be considered "independent contractors," then treat them like one.
  • If your workers are employees, then follow the NY Labor Laws and the Fair Labor Standards Act to a tee.
  • Don't be cheap and try to cheat your employees out of their minimum wages... even if they make good tips.

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