Channel 19

Todd Dills

What an exotic dancer-led lawsuit means to leased businesses

| November 29, 2012

Leased owner-operators and exotic dancers around the country share at least one thing in common: In large part, though there are examples of increasing independence for owner-operators with some carriers, both are typically considered independent contractors (ICs) by the carriers they’re leased to or the clubs they work in.

In a story from the Atlantic online this month, a legal case hit my radar that struck me as germane to the long-ongoing worry over the long-term stability of owner-operators’ status as ICs (as opposed to employees) in their relationships with leasing carriers. It’s an issue driven by states’ increasing need for tax revenue and organized labor’s occasional victories in misclassification disputes in some segments of the industry where operator ownership is common, such as port hauling.

I’ve written about the issue on the blog and in Overdrive from time to time.

The $13 million settlement with dancers detailed by Melissa Gira Grant in the Atlantic was brought by exotic dancers independently contracted to a chain of clubs. The judge ordered the company to reclassify the dancers as employees and pay back wages as well as “ruled that within 30 days [the club chain] must stop charging dancers what are known as ‘stage fees’ for the right to work,” Grant wrote. U.S. District Court Judge Virginia Phillips called the “practice of classifying dancers as independent contractors while also placing workplace demands on them that far exceed that legal status” illegal. Grant went on:

By managing dancers like employees but putting them on the books as independent contractors, club owners get out of paying dancers the benefits they’re legally entitled to, which could include worker’s compensation, unemployment, and health insurance if they qualify. Owners and management alike tell dancers they’re independent, but they still exercise control over dancers on the job, routinely using … restrictive rules on breaks and conduct….

You can read her full piece here.

Grant also notes a trend toward large chain buyouts of smaller clubs. Those small businesses tended to give dancers more control over their work, and dancer disgruntlement ultimately has led to a long string of cases decided in a similar settlement fashion as the one mentioned above.

I imagine such a long-term buyout/consolidation trend may well sound familiar to you. There’s some good news for owner-operators who value their independent contractor status here, though: It’s a different industry, for one, and for two there’s the very fact of the case’s settlement. Grant notes that by not going to trial, settled cases have limited ability to set precedents in case law and eventuate in “sustained change [to] the business.”

  • National Delivery Association

    The court decision actually supports the use of independent contractors as long as the firm obeys independent contractor laws. If the clubs a good contractor agreement, and had they obeyed the contractor laws, the court would have supported them. The court had to rule in favor of the girls based on laws. Simply have a good contract, and do not over burden the contractor with too many rules. National Delivery Assoc

  • National Delivery Association

    should say … had a good

  • Todd Dills

    Thanks for the elaboration, NDA.

  • txinsurancepro

    From an insurance perspective, a driver that gets 100% of his work from a leased company could be considered an employee. Thus, he (or she) may be entitled to additional benefits. This is a fine line that we talk. When rating policies for workers comp and general liability, my underwriters specifically ask about sub-contractors.

    I pinned an underwriter to the wall and asked them what that meant. On the case we discussed, this individual insurance company defined an employee as a person that gets all of his compensation from one source; regardless of whether 1099 or W2. That means we are walking a fine line regardless of the court precedent. There may be more to come on this case.

  • Nebraska Trucking Lawyer

    Large companies also get out of paying FICA taxes which negatively affect drivers’ retirement benefits under Social Security. Too many drivers who call themselves IC’s get into trouble with the IRS for not paying taxes, then years down the road find themselves liable for huge penalties and interest on unpaid tax liabilities. The IRS, like the DOT is ruthless when it comes to collecting back taxes; ask anyone who has been there. Essentially, big companies get a free ride with cheap labor (usually temporary given the turnover rate) by calling their employees IC’s when these drivers are anything but independent. This is one of the biggest frauds in the nation that is being perpetrated against all honest small businesses and drivers alike. For all of you super truckers who think you are an IC, wake up. Being called an Owner Operator does not make you more handsome or give you larger genitals. It only makes you poorer in the vast majority of cases. strives to maintain an open forum for reader opinions. Click here to read our comment policy.