$3.65 Million Settlement Goes to Dancers for California Labor Lawsuit

A $3.65 million settlement was approved by the District Court for the Central District of California, effectively ending the California labor lawsuit alleging that The Spearmint Rhino nightclub chain made a practice of misclassifying dancers as independent contractors. The practice of misclassifying workers as independent contractors violates FLSA (the Fair Labor Standards Act) and California Labor Law.

The Spearmint Rhino Misclassification Lawsuit Receiving Extra Attention:

The dancers at Spearmint Rhino nightclub offered nude, semi-nude, or bikini entertainment to the club’s patrons at various locations since October 30, 2017. In the end, they will net approximately $2.6 million. The misclassification lawsuit filed by Spearmint Rhino’s dancers is just one in a long series of suits and related legal actions that are inspiring a noticeable reaction. The attention this case received is party due to the novelty of a sex industry labor lawsuit, but also due to the currently charged political debate about AB 5, California’s new gig worker law based off of the Dynamex decision.

Dancers Actually Pay their Employer to Work for Tips:

Did you know that in many cases, dancers in the sex industry end up paying their employers so they can work for tips? It’s true. The economics of exotic dancing are unlike anything you’ve seen in other industries. Dancers are required to pay an assortment of “fees” such as house fees or dance floor fees before performing at an establishment.

In some cases, the dancers must sign an agreement requiring them to pay a lease fee for the “business space” they will be using. Additionally, many employers in this industry charge exotic dancers a higher stage fee if they are not fully nude by the end of their performance. Exotic dancers do not receive wages; they work for tips. Dancers share their tips with the bartenders, DJs, and dressing room helpers (often referred to as House Moms). If it’s a slow night, an exotic dancer may go home with very little to show for a full shift.

Legal Actions Targeting the Exploitative Sex Industry:

Ortega v. The Spearmint Rhino is just one in a series of similar lawsuits. The change that would come with AB 5 would not be limited to exotic dancers or the sex industry. The legislation was originally drafted to address misclassification issues in the gig economy. AB 5 applies to any California worker who finds themselves pushed or forced into independent contractor status without fully understanding the consequences of the classification.

Opponents of AB 5 Refuse to Comply or Seek Exemption

The purpose of AB 5 is to address misclassification in the workplace. Misclassification is a significant issue because employees have essential wage and hour protections in place that do not apply to independent contractors. In some cases, it can be difficult to distinguish between an employee and an independent contractor. Following Dynamex, the legislature introduced AB 5 to address this problem using a simple test to determine which workers are employees (and entitled the protections of employment law), and which workers are independent contractors.

Many employers actively fought against AB 5 before it was enacted. Some were exempted using modifications to the law. Other California employers (like Uber and Lyft) announced that they would not comply with the terms of AB 5. In the face of such powerful opposition, some wonder what would happen to workers like the Spearmint Rhino dancers if AB 5 is repealed or left without the power of effective enforcement through additional amendments or judicial limitations?

The Fate of California Misclassification Suits: With or Without AB 5

The Ortega suit against Rhino Spearmint night club was filed in before AB 5 was enacted – in February 2017. It was filed before the Dynamex decision that led to the legislative change. While the case did not receive an actual judicial decision, the defendant found the arguments presented strong enough to warrant making a settlement to resolve the matter out of court. This conclusion would be likely with or without AB 5 in place. While it is likely that misclassification lawsuits would be more difficult for California workers to win without AB 5, it is not their only hope.

If you need to discuss misclassification or how to file a misclassification lawsuit, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in any one of various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.