Benefits & Compensation News

Exotic dancers get $12.9M in misclassification settlement

Just because a person’s main job duty is dancing with no clothes on, it doesn’t mean he or she isn’t a “full-time employee” who is entitled to all of the benefits that go along with that designation.

And a group of exotic dancers recently settled a three-year-old class-action lawsuit where, among other things, employment status was at issue.

Here’s some background on the lawsuit that made headlines in the benefits world, as well as a number of major news outlets: A group of exotic dancers sued the owners of several adult night clubs located in California, Kentucky, Idaho, Texas, Nevada and Florida, claiming they were denied benefits because the clubs misclassified them as independent contractors (ICs).

One of the clubs in the lawsuit was the Spearmint Rhino, an establishment that had been covered by our sister site, HR Morning, previously.

In addition to the misclassification, the dancers also claimed club owners helped themselves to over half of the dancers’ tips, penalized them for not selling enough drinks to customers and made them pay stage fees for dancing.

A costly agreement

A $12.9 million settlement has been approved by a federal judge. Of that amount, $2.3 million will pay for the dancers’ attorney fees, and more than $73,000 in costs — including incentive fees (for the time plaintiffs spent on the cases) and costs associated with the “professional and personal risk” of being named as lead plaintiffs in the class action — were awarded by the court.

Under the settlement terms, all of the clubs will have to treat their exotic dancers as either employees, partners or shareholders in the business. And in California, dancers won’t have to dole out the pay-to-perform fees that clubs had previously required.

The independent contractor temptation

The owners of these strip clubs actually have a lot in common with other “less-adult-oriented” businesses — at least when it comes to classification issues. These days, there is no shortage of employers who claim workers are ICs when they aren’t 100% sure of their employment status. After all, it’s way less expensive than paying all those federal, state and local taxes — not to mention OT and workers’ comp.

Problem is, the feds are being extra vigilant when it comes to classification issues. To make sure your firm has all of its workers classified correctly, the IRS offers official guidance on the subject.



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