The ongoing legal battle over the question of independent contractor versus employee status produced a June 13th decision by the National Labor Relations Board (“NLRB”) that imposes more stringent criteria to classify workers, including club entertainers, as independent contractors (ICs).
In the case entitled Atlanta Opera, the NLRB classified make-up artists, wig artists, and hairstylists who worked at the Atlanta Opera as employees rather than ICs, as the opera company had classified them.
In handing down its decision, the NLRB overturned its so-called 2019 Super Shuttle precedent in favor of what is known as FedEx II, a decision involving that company that had been the governing guideline at NLRB before Super Shuttle. The Super Shuttle decision made classifying workers as ICs, rather than employees easier. The Atlanta Opera decision opined that “Entrepreneurial Opportunity” shall be considered above all other common law factors when evaluating a putative contractor’s independence to pursue economic gain.
“If clubs (outside of states like California which follow the ABC test) wish to continue to classify dancers as ICs, they should carefully evaluate their current policies and procedures to ensure that the entertainers are free to control their environment and have an independent entrepreneurial opportunity.” – Attorney Devon M. Lyon
The NLRB decision comes as some states are introducing legislation patterned after the ABC Test from California’s AB5, which, effective January 1, 2020, dramatically changed California’s labor landscape and required adult nightclubs to transition dancers from ICs to employees. Specifically, California’s second prong of the ABC test (the person performs work that is outside the hiring entity’s business) makes it seemingly impossible to classify adult nightclub entertainers as ICs.
California labor attorney Devon M. Lyon of Lyon Legal, P.C, represents the Pony Clubs, Spearmint Rhino, and numerous other clubs on labor issues and is a legal panelist at the 30th Anniversary ED Expo, August 20-23, 2023 at the Paris Hotel in Las Vegas. She explains, “The Atlanta Opera ruling is initially viewed as problematic for club owner employers, but the NLRB confirmed that the test for determining who is an employee under the NLRA is still a common law agency test which must weigh the ten factors listed in Section 220(2) of the Restatement (Second) Agency.”
Lyon cautions, “If clubs (outside of states like California which follow the ABC test) wish to continue to classify dancers as ICs, they should carefully evaluate their current policies and procedures to ensure that the entertainers are free to control their environment and have an independent entrepreneurial opportunity.”
See the September issue of ED Magazine for an in-depth analysis of the Atlanta Opera NLRB decision and its potential impact on the adult nightclub industry and attend the EXPO Legal Panel for more discussion on this and other important legal issues for your club.
Larry Kaplan has been the Legal Correspondent for ED Publications for 22 years. Mr. Kaplan is a broker in the sale and purchase of adult nightclubs and adult retail stores and the Executive Director of the ACE of Michigan adult nightclub state trade association. Contact Larry Kaplan at 313-815-3311 or email larry@kaplanclubsales.com.
