Charge Against Earnings of Independent Contractor for Missed Shifts

[bjobjs]

I live in California. My daughters roommate is an exotic dancer (nice way to say stripper) at a nightclub/diner. The arrangement to my understanding is that she is an independent contractor and working there is scheduled by a manager. She is paid every night at the end of her shift. Pay is calculated by taking the entire proceeds she has acquired during her shift and giving 10% to the club and another 10% to the D.J., the remainder is hers. Here's where I start to have questions. If she misses a scheduled shift she has to pay the club $40 for each day missed from her nightly earnings. Just recently she missed 4 or 5 days in a row and when she returned to work the first day back she was told that all the money she would be making that evening was going to be taken by the club as a punishment for her absenteeism. So at the end of her 8 hour shift she left the club with nothing because they kept her money, although she had made more than the $40 X 5 nights she had missed. Is this legal?

[SChinFChin]

She's is a subcontractor, and depending on how many dancers they have per night, is a very IMPORTANT and STRATEGIC part of a strip club operation, and clubs are perfectly allowed to make business deals to make sure "the show goes on". A strip club is NOT a strip club without strippers.

It would be extremely NEGLIGENT of the club if they run things where if a dancer does not shows up, they say "no problem", and if 2 or 3 of them decided to goof off for the night, well then, just shrug and say we'll just close the place for a few nights.

Unfortunately, a strip club is a business, and needs discipline.

I'm in charges of finances at a senior center, and we have about 10 subcontractor entertainers under contract, dancers, yoga instructor, singers and so on. We don't have such penalties, but I notice when an entertainer does not show up, our attendance is down by a third, say from 350 people to 200 in one afternoon. Even with meager donations that we collect, we've out $300.00 for one afternoon already.

For a busy strip club, a popular stripper not showing up would affect the club by more than $300 just for one night.

I don't know if you mean by take, that it includes tips or not. A friend who owns a restaurant said "valet services" vie for the business, the restaurant does NOT pay fees at all to the service, the service collects enough from fees and tips that it's self sustaining. Even here, deals are made where if the valet staff doesn't show up, there's some penalties.

A restaurant that features valet service cannot depend on a valet service where valets may show up one day, and not on another when there's a ballgame. The valet service cannot then say, "oh no, the penalty stinks because we didn't make money 2 to 3 nights in a row due penalties on nights we didn't show up.

Well, too bad!! The entertainers we use often have substitutes ready and willing to show up, so we won't be left in a lurch. Valet services should have backups. Your daughter's friend should think more in terms of her job as a business, and work something out where if she get a subsitute, maybe the penalty can be waived.

If this is such a bad deal for her, as a subcontractor, she is free to work at clubs where they couldn't care less if she showed up, if at all.

[Bubba Jimmy]

If this is the deal, she can either abide by it or decide not to work under these circumstances. If I'm late in delivering a house I'm supposed to build my contract can require financial penalties. Her contract may not be in writing, but the terms are pretty clear. She can accept those terms or not. That's the "independent" part of independent contractor.

[ArmyRetCW3]

She's is a subcontractor,

Not exactly…Although, the employer treats the employee as an Independent Contractor, such designation, is not always 100% correct, unless, the appropriate determination is made by the appropriate state or federal government agency. It just so happens that back in Mar 1995, the US DOL-Wage Hour Div made such a determination. Contrary to any unfavorable ruling by a competent court or government rule that makes these employees an IC, then they are employees of this employer. Not only the employer owes for those hrs worked, at least at minimum wage, it also owes the minimum wage for the entire employment period.

The circumstances above may or may not be similar as the poster, however this Opinion Letter provides a reasonable explanation why the IC designation is not applicable to such employees.

FLSA-1313


March 2, l995



This is in reply to your letter concerning the application of the Fair Labor Standards Act (FLSA) to individuals working as striptease dancers at your client's business establishment that sells liquor to the public and provides live entertainment. You seek an opinion as to whether these dancers are employees or independent contractors under the FLSA.

You state that the individuals in question are professional striptease dancers who enter into lease agreements with your client. Under the lease agreement your client has no authority to control any aspect of the striptease business each dancer conducts on the leased premises or at such other nightclubs unrelated to your client at which a dancer may choose to perform. The dancers determine their own work schedule, prices, customers, dance routines, musical accompaniment, assistants, and advertising.

The lease agreement specifically provides for the following:

1. our client does not determine the dancer's work schedule;
2. your client does not determine the amounts the dancer's customers pay to the dancer;
3. your client does not determine the prices to be charged by the dancer;
4. your client does not approve the clothing worn by the dancer;
5. your client does not approve the dance routine of the dancer;
6. your client does not require (or allow) the dancer to wait on tables;
7. your client does not require the dancer to pay fees to employees who work for your client;
8. your client does not have the right to terminate the agreement because of a dancer's unlawful acts for which the client is not subject to criminal and/or civil penalties;
9. your client does not have policies for which the dancer could be fined for breakage;
10. your client does not have the right to terminate the agreement without cause; and
11. your client does not limit the times the dancer may perform at other clubs or work at other jobs.

You state that your client is essentially renting a stage and related facilities for a fixed rental fee of $15 per dancer per dance night.

In the application of the FLSA an employee, as distinguished from a person who is engaged in a business of his or her own, is one who as a matter of economic reality follows the usual path of an employee and is dependent on the business which he or she serves. The employer-employee relationship under the FLSA is tested by "economic reality" rather than "technical concepts." It is not determined by the common law standards relating to master and servant. Rutherford Food Corp. v. McComb, 331 U.S. 722; Goldberg v. Whitaker House Cooperatives, Inc., 336 U.S. 28; Walling v. Portland Terminal Co., 330 U.S. 148; Walling v. American Needlecrafts, Inc., 139 F. 2d 60.

The Supreme Court has on a number of occasions indicated that there is no single rule or test for determining whether an individual is an independent contractor or employee for purposes of the FLSA. The Court has held that it is the total activity or situation which controls.

Among the factors which the Supreme Court considered significant were:
(1) the extent to which the services rendered are an integral part of the principal's business;
(2) the permanency of the relationship;
(3) the amount of individual investment in facilities and equipment;
(4) the opportunities for profit and loss;
(5) the degree of independent business organization and operation;
(6) the nature and degree of control by the principal; and
(7) the degree of independent initiative, judgment or foresight exercised by the one who performs the services. See Rutherford Food Corp. v. McComb, 331 U.S. 722; and see also United States v. Silk, 331 U.S. 704; Bartels v. Birmingham, 332 U.S. 126; NLRB v. Hearst Publications, 322 U.S. 111.

For the following reasons, it is our opinion that the individuals in question are employees of your client and not independent contractors. It is clear that the services rendered are an integral part of your client's business; there does not appear to be any significant investment on the part of the individuals in facilities and equipment; and it is our opinion that the individuals in question are not engaged in the operation of independent business organizations. We feel that these factors, rather than the degree of control by your client, are the significant ones in determining whether or not an employment relationship exists between your client and the individuals you describe.

We trust that this satisfactorily responds to your inquiry.

Sincerely,

Daniel F. Sweeney
Deputy Assistant Administrator

[SChinFChin]

Some years back, a partner and I looked into buying into some strip clubs. One question in the back of our minds which we asked the owners is if "we will be forced to take on strippers on "employees", because it was our understanding that customers like variety, so how practical is it to hire someone, then having to fire them two months later, and hire another bunch, carry unemployment insurance on them, and then fire this bunch a few months after that. Our concern was our UI would go sky high hiring and firing strippers.

We were told that few clubs employ strippers as employees, and if it gets to be a problem, then we can contract with firms that has the girls under contract, and they arrange to rotate the dancers for us, and also arrange van service to take them home.

I'm in charge of finance at a non-profit senior center, we provide daily entertainment at our center, some of them dancers, all through subcontractors entertainers. We have them come in, if our clientele likes the entertainmant, we invite them back. If not, we look for someone else, and there is no reason to keep a entertainers on as employees if our clientere wants variety.

In fact, we are city-funded, our policies and procedures are reviewed and approved by our own city's legal department, and at no time are we told that we are required to put entertainers on as employees. If we are in violation, then hundreds of city centers would also be in violation.

Strippers are entertainers, they come and go, and as a club owner, there is no reason to constantly hire and fire employee entertainers. As to the stripper mentioned by the OP, if she insists that she's an employee, with it's entitlements, I think her time at my club is over.

[ArmyRetCW3]

You have to look at the Supreme Court 7 factors guidance, especially factor #1. The business of dancing is an integral part of the main employer night club business. If there is no dancing then the employer has no business. Your comparison of your business (senior center) is not in the business of entertainment. Therefore facto #1, the entertainment part of your senior center is not an integral part of the senior center. On the other hand the dancing of this employee is an integral part of the nightclub. The other six factors must also be explore, however, it appears that the US DOL has made a decision as to the enforcement of this particular subject.

[Bubba Jimmy]

Nightclubs contract for entertainment from independent contractors all the time. Contracting for a four week engagement for a singer, for example, is quite normal and an integral part of a nightclub's operation. Same for bands, comics, and other entertainers. Not all entertainers are employees, and strippers are indeed entertainers.

Anyone in doubt can file form SS-8 with the IRS to request a formal determination for tax purposes. Every business operates differently and the full set of circumstances works together to determine under the law a worker's status.

[jk]

=Bubba Jimmy;325693]Nightclubs contract for entertainment from independent contractors all the time. Contracting for a four week engagement for a singer, for example, is quite normal and an integral part of a nightclub's operation. Same for bands, comics, and other entertainers. Not all entertainers are employees, and strippers are indeed entertainers.

but it is apparent, to me at least, this is not the situation here.

Anyone in doubt can file form SS-8 with the IRS to request a formal determination for tax purposes. Every business operates differently and the full set of circumstances works together to determine under the law a worker's status.

yep and it would behoove the OP's friend to do this.

[SChinFChin]

I guess people have a choice.

For employees, the senior center pays low level professionals $12.00 to $20.00/hour. Singers come by to do a 2 hour gig, and they'll get paid $40.00, tops as employees within the city payscale. We'll budget in some travel expenses, but travel time is not included.

If they want drive one hour to our place, which many do, do a two hours gig, make $24.00 to $40.00, some gas money, drive another another hour home, be my guest. I can't see how thay can make a living. They can thank the Supreme Court.

For subcontractors, they're paid $125/hour. If they work as subcontractors, they'll make $250.00 for the same afternoon's worth of work.

I'll let you in on a secret. I was in the IT field for 10 years, consultants collects $150,000/year, want to stay that way, whereas programmers on the company payroll makes $85,000. tops. Why?? Department Managers at big corporations start at $85,000, and they just cannot have some people on the payroll blowing up the salary scales.

I got a friend working for a big name company that the company begged him to go on payroll and he refused. He's making $150,000/year. For signers and dancers that perform at our facility, subcontracting works out for them, and works for us. We're not going to have employees that we have to fit into a city "payscale" at $125/hour to sing. In fact, there is no job description for "singers", and "dancers" on the city payroll job description.

I guess the Supreme Court haven't thought of that.

[Bubba Jimmy]

I guess people have a choice.

Actually, they don't legally. The facts and circumstances under which work is performed taken together determine whether a worker is an employee or an independent contractor. As a practical matter, if everyone agrees even if the wrong determination has been made by the parties involved, nothing usually happens. That is not always the case, however, and the IRS does sometimes go after companies who treat workers abusively by miscategorizing them.