Nev.: Exotic Dancers Are Employees, Not Contractors

By Diane Cadrain Jan 15, 2015

The Nevada Supreme Court applied the economic realities test in determining that some 6600 semi-nude dancers working for Sapphire Gentlemen’s Club were employees, not independent contractors, and therefore entitled to the minimum wage.

When the dancers, who worked mainly for tips, made their minimum wage claim in state court, a lower court noted that their employment status hinged on whether Sapphire met the definition of an employer under state law. Using a five factor test for employment status under the state’s workers’ compensation law, the lower court ruled that they were independent contractors, not employees.

The dancers appealed.

The Nevada Supreme Court noted several reasons for following federal law and using the economic realities test. One was that none of the available state law definitions was sufficiently specific to be useful. Another was that Nevada lawmakers had long looked to the federal Fair Labor Standards Act (FLSA) in crafting state law, and that the two were considered parallel. Such parallels are part of a national pattern, the court said, pointing to other states that have adopted the economic realities test.

Having explained its decision to apply that test, the court stated that the test examines the totality of the circumstances and determines whether, as a matter of economic reality, workers depend upon the business to which they render service for the opportunity to work.

The test looks at a number of factors, the court said, but one key consideration is the degree of the employer’s control over the manner in which the work is to be performed. On this issue, the court noted evidence that might speak to a lack of control on Sapphire’s part. The club did not produce a set schedule for performers, theoretically allowing them to work any day they chose for as long as they liked, as long as they met a six-hour shift minimum or received permission to depart early. They were required to pay an off-stage fee unless they performed at least two stage dances per shift. They were discouraged from refusing lap dances and were required to take some of their tips as “dance dollars,” from which the club took a cut, rather than cash.

But the court thought that Sapphire's supposed lack of control actually reflected a framework of false autonomy that gave performers a coercive “choice” between accruing debt to the club or redrawing personal boundaries of consent and bodily integrity.

Sapphire emphasized that performers could choose not to dance on stage, the court said, as long as they also chose to pay an “off-stage fee,” and could choose not to dance for someone who would only pay with dance dollars, but thereby risk a loss.

By forcing them to make such “choices,” the court said, Sapphire is actually able to heavily monitor the dancers, including dictating their appearance, interactions with customers, work schedules and minute to minute movements when working, while ostensibly ceding control to them.

“This reality undermines Sapphire's characterization of the ‘choices’ it offers performers and the freedom it suggests that these choices allow them;” the court said, “the performers are, for all practical purposes, not on a pedestal, but in a cage.”

The court examined other circumstances bearing on the existence of an employment relationship, including the relative investment of the parties. On this point, the court noted that Sapphire provided all the risk capital, funds advertising, and facility expenses. The performers' financial contributions were limited to their costume and appearance-related expenses and house fees.

“Thus, the performers are far more closely akin to wage earners toiling for a living, than to independent entrepreneurs seeking a return on their risky capital investments,” the court said.

Therefore, based on a review of the totality of the circumstances of the working relationship's economic realities, Sapphire qualified as an employer under state law, the court decided.

Terry v. Sapphire Gentlemen’s Club, Nev.,No. 59214 (Oct. 30, 2014).

Diane Cadrain is an attorney who has been writing about employment law issues for more than 20 years.

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