Exotic dancers at a Manhattan strip club are protected by labor law and therefore must be paid at least minimum wage, a federal judge ruled Tuesday. Rick’s Cabaret denied more than 1,900 strippers wages and forced them to pay fees under the pretense that the women were “independent contractors.”
The “independent contractor” excuse is common among strip clubs looking to skirt basic labor protections. Another pending lawsuit against Fantasy Gentlemen’s Club in Colorado charges that dancers are considered tenants who get paid nothing but tips and must pay to work at the club. Last year, a Dallas-area topless club was also accused of withholding pay from dancers and charging them a “house fee” per shift. In 2011, a federal judge ruled that dancers in Washington, DC were not contractors but full employees who were covered by minimum wage requirements.
Though strip clubs are some of the most common offenders, they are hardly the only industry that exploits the “independent contractor” loophole. The U.S. Department of Labor estimates about one-third of all businesses misclassify their employees. According to one federal study, 3.4 million regular employees were illegally labeled independent contractors. This ambiguity lets companies avoid paying Social Security, Medicare, and unemployment insurance taxes and excludes the contractors themselves from minimum wage and overtime pay requirements. A Treasury Department report found that in 2012, employers could save about $3,710 in taxes per worker by labeling an employee an independent contractor.
The Manhattan U.S. District Court’s ruling this week is the latest encouraging sign of a crackdown on the independent contractor misclassification. Courts have consistently ruled for strippers who endured the lengthy litigation process. In New York, a task force uncovered more than 31,000 cases of misclassification that withheld $11 million in unemployment taxes and $14.5 million in unpaid wages. The Labor Department has also stepped up their investigations, recently winning $1 million in back wages for so-called contractors at a cable installer company.
But the independent contractor classification is just one of the many games employers play to avoid treating their workers fairly. In general, wage theft complaints are becoming more and more ubiquitous, increasing 400 percent since 2000.