Court rules strippers are employees, not contractors

05/18/2010 12:00 AM

05/18/2010 12:02 AM

Strippers at a "gentlemen's club" may not get to decide how much to charge for a dance or refuse a customer's offer to buy them a drink, but they do have the right to unemployment benefits.

So says a new ruling from the Kansas Court of Appeals.

A three-judge panel ruled Friday that Milano's Inc., operator of Topeka-based Club Orleans, could not define its dancers as "independent contractors" instead of employees under state law, because it controls their work rules and schedules when they go on stage.

"The house rules stated that entertainers could not refuse drinks from Club Orleans' customers and prohibited entertainers from "work(ing) the crowd" around the stage area as another entertainer performed," noted the court opinion written by Judge Christel E. Marquardt.

"Additionally, the house rules required an entertainer to impose an industry standard minimum tip for various dances, so an entertainer could not discount the rates she charged Club Orleans' customers," the judge wrote.

"If a customer tipped an entertainer less than the minimum amount, or failed to provide a promised tip, Club Orleans' management would direct a Milano's employee, i.e. a doorman, to discuss the issue with the customer and inform the customer that the behavior was unacceptable," the ruling said.

The decision upheld a Department of Labor hearing officer's decision and a District Court finding that the women are employees, not contractors.

Club owner John Samples said he hasn't decided whether to appeal further. He said he thinks there are inaccuracies in the state's description of his business practices and that he considers it a matter of principle.

Department spokeswoman Kathy Toelkes said the case arose when a dancer who had been laid off filed for unemployment benefits.

The Labor Department litigated the case, and Toelkes said she could not identify the former employee because of privacy protection in unemployment cases.

Marquardt wrote that the hearing officer had found that the dancers "incurred considerable business expense, including costumes, shoes, hair, nails and plastic surgery.

In exchange, Marquardt wrote, the club provided the entertainers with a stage, dressing room, showers, towels, soap, lighting, security and a tanning bed.

The Topeka club is well-known for its provocative billboard advertising on the Kansas Turnpike, and the appeals court sided with the hearing officer in rejecting the operators' testimony that customers frequented Club Orleans for "good atmosphere, good lighting and good food."

The officer noted and the court agreed, "the facts indicate that the atmosphere largely derives from and is based upon the presence of its semi-nude dancers."

A ruling that workers are employees rather than contractors generally affects how much the employer has to pay into the state's unemployment insurance trust fund, Toelkes said.

"We're obviously pleased the court sided with us on this," Toelkes said.

Samples said his current unemployment charge is zero because he has a balance in the trust account.

He also said most of his entertainers don't want to be considered employees, because they're single mothers and want the flexibility to work around child-care schedules.

Contrary to the state's findings, he said the dancers "come in at whatever time they want" and work out who dances when among themselves.

In addition, he said, the federal Internal Revenue Service has ruled the dancers are neither employees nor contractors but tenants because they pay rent for the use of the club's facilities.

He also disputed the state's finding that the club's supplying of security, towels and other items was evidence of an employer-employee relationship. He likened it to renting a room in a hotel, in which the hotel supplies towels, soap and other incidentals.

He also said the court overstated the club bouncers' role in collecting tips.

"We cannot extort any money out of any customers and we don't," he said. If a customer doesn't pay, "we don't tip them upside-down and shake money out of their pockets."

The most that would happen, he said, is that a bouncer would ask a customer to leave and not come back.

"The only control I have over them (the dancers) is that they obey Kansas law," he said.

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