A New York federal judge has ruled that strippers at Rick's Cabaret, a live adult-entertainment business in New York City, are entitled to at least minimum wage after the company misclassified more than 1,900 current and former exotic dancers as independent contractors.
The ruling Tuesday was in response to a class-action lawsuit filed by two dancers in 2009. The plaintiffs claimed that Rick's violated the Fair Labor Standards Act and New York Labor Law by not paying them the minimum wage, which is $7.25 an hour in New York.
Rick's Cabaret in New York City is one of more than 40 so-called gentlemen's clubs across the country owned by Rick's Cabaret International Inc., a publicly traded company. The company is based in Houston and was founded in 1983.
Judge Paul Engelmayer ruled that the certified class were employees and the money they received from customers were tips and not service charges that could offset the club's wage obligations.
"We are thrilled about the win," said attorney Michelle Drake, who represented the dancers. "We see it as a real victory for both employees generally but, in particular, for women who work in the adult entertainment industry, where people are often all too willing to work under illegal conditions, because they are desperate or because they don't know what their rights are."
The lawsuit seeks back pay and damages but the actual award has yet to be determined. Also at issue now is whether the two sides will settle or go to court.
Plaintiffs Sabrina Hart of Florida and Reka Furedi of New York, who worked at Rick's Cabaret in New York in 2006 and 2007, declined to comment through Drake.
The case represents Rick's Cabaret dancers only in New York, but it could have implications for other locations, which are run in a similar fashion, Drake said.
Drake declined to say whether further legal action is being considered in other states.
The lawsuit was filed against parent company Rick's Cabaret International Inc., and subsidiaries RCI Entertainment (New York) Inc. and Peregrine Enterprises Inc., which operate the New York location. The ruling did not hold the parent company liable.
Eric Langan, president and CEO of Rick's Cabaret International, said in a statement the "ruling has no impact on the operations of Rick's Cabaret New York City since we changed our independent contractor practices some time ago and the court denied the plaintiffs' attempts to hold the parent company liable."
A spokesman for Rick's Cabaret declined to comment further.
"Nonetheless, we are disappointed with the ruling and intend to appeal," Langan said. "It is hard to imagine how these entertainers should be paid at the minimum wage, which would amount to a fraction of the $1,000 or more that some of them acknowledged they earned in a single night. Additionally, the court did not rule on the issue of whether the substantial amounts entertainers earned are wages under New York State Labor Law."
The class claimed in the lawsuit that Rick's paid their employers a "facilities use fee" at the beginning of each shift. Rick's said it allowed dancers to keep "performance fees," starting at $20 for services such as lap dances and table dances.
Customers who purchased via credit card bought vouchers or "dance dollars." The voucher is worth $20, but costs $24 for customers. Once the dance dollar is redeemed, Rick's gives the dancer $18 and keeps $6, the lawsuit states.
During proceedings, plaintiffs claimed that more than 87 percent of Rick's dancers earn less than federal minimum wage during at least one week of their employment.
The judge ruled that the dancers were not independent and instead were managed with "tight control, indeed, control fairly described as micromanagement."
The guidelines cited in the lawsuit include a 24-hour notice of cancellation, otherwise being subject to a fine, and a three-day minimum commitment, one of which had to be Friday through Monday.
Rick's also had rules against chewing gum, which bathrooms were used, or "having any type of hand bags or purse on the floor," the lawsuit states.
Fatima Goss Graves, vice president for education and employment of the National Women's Law Center, said the ruling gives Rick's and other adult entertainment facilities the opportunity to re-evaluate or to consider their practices for how they label their employees.
She said the misclassification of workers present in Rick's lawsuit is a frequent occurrence, especially in workplaces with large concentrations of female and immigrant workers.
"It's critically important that our wage laws are enforced and employers are not able to skirt around them by labeling their employees as contractors," she said.
Graves said lawsuits against employers are "incredibly difficult" to bring to a courtroom unless employees band together to challenge practices.
"When the challenge is labeling categories of employees incorrectly, that's not just one individual employee's issue, that's a systemic issue," she said.
The most recent jobs data show the jobs coming back for women are increasingly in low-wage industries, "where workers are particularly vulnerable to this type of treatment," Graves said.
"I suspect that the issue of misclassification of workers as non-employees is just the tip of the iceberg," she said.