In ED Publications’ May issue of ED Magazine, we (specifically, ED’s legal correspondent Larry Kaplan) interviewed Joe Carouba of BSC Consulting for the article, “The Nightmare of Dynamex.” In it Kaplan wrote, “Carouba says due to Dynamex, BSC Management’s 10 San Francisco clubs have been forced to operate with a completely different business model than before.”
That statement is not accurate.
Having spent more than 20 years covering legal issues for the adult nightclub industry, a disproportionate number of which have occurred in California, Kaplan and ED Publications are well aware that since 2014 the San Francisco clubs BSC Management advises have been named in countless class-action lawsuits. They have been accused of misclassifying entertainers as independent contractors, resulting in defense fees and settlement payments that have cost the clubs millions of dollars and pushed them to the brink.
During the interview, Carouba explained to Kaplan and ED Magazine that just when the constant stream of litigation seemed to have finally subsided, the Dynamex ruling came down. Dynamex adopted a standard that presumes all workers are employees, not contractors, and that it’s up to the hiring company to prove otherwise, under their newly adopted three-prong “ABC Test.” This ruling almost immediately resulted in another class action against the clubs, which were so tired of endless litigation that they agreed, as part of a proposed settlement, to convert the entertainers to employee status.
There has been no Dynamex court ruling thus far that “forced” conversion to employee status, as this article may have implied. Carouba says the clubs would not have converted had that not been a part of a settlement that the clubs hoped would bring them litigation peace once and for all. Dynamex, and the prospect of a further wave of class action litigation citing Dynamex, was simply the economic straw that broke the camel’s back.
ED Magazine its legal correspondent, Larry Kaplan, regret characterizing Dynamex as forcing BSC’s decision to convert its clubs’ entertainers to employees. In fact, it was the economic reality of the clubs hemorrhaging money to fund constant litigation, and the prospect of even more costly litigation, that motivated the business decision to convert.