(Note: This story appears in the January 2021 issue of ED Magazine)
Pole Position, an application that allows marketing and communication between dancers and adult nightclubs, hosted a recent live webinar for adult nightclub operators. The webinar featured prominent labor attorneys Jeffrey Kimmel, Brad Shafer and Casey Wallace who provided a guide to FLSA (Fair Labor Standards Act) entertainer cases and explained how the Pole Position app helps maintain and defend the independent contractor model. Here are some of the highlights of the webinar. (Note: The Pole Position app can do nothing for the AB5 employee test for California and the discussion focused on other states.)
Kimmel explained the control factor of the multi-factor Economic Realities Test is applied by federal courts in labor cases to determine whether an entertainer is accurately classified as an independent contractor vs. an employee. Kimmel noted that control is usually the first factor addressed in the test. The number-one mistake clubs make is exerting excessive control by requiring entertainers to follow a laundry list of rules.
“The more control you exert over entertainers at your club, the more likely they’ll be considered employees, not independent contractors” explained Kimmel.
Shafer explained that there is no one single Economic Realities Test. Tests vary by federal circuit, how you litigate a case, and the Economic Realities Test isn’t even applied in all circumstances. While it applies in federal minimum wage cases, it doesn’t necessarily apply under state wage laws, workers comp laws, unemployment comp laws, federal or state tax laws, and more. Some of these cases apply a different legal standard called the Common Law Test.
While the Economic Realities Test is not one single test and varies by The US Supreme Court and two circuits, the eighth and DC circuits have acknowledged that they have never adopted a specific Economic Realities Test.
“So the question is,” explained Shafer, “what is the standard you use when you try to differentiate employees from independent contractors? The lawyers are there to make the test as friendly to the club as possible.”
Shafer cautioned that if you’re in litigation and dealing with this Economic Realities Test, you’re automatically behind the eight-ball, as you may not have correct contracts, procedures, or competent counsel. He explained that these cases are made more difficult to defend because clubs have previously used attorneys with no familiarity with adult nightclubs’ precise operations and the nuances of law related to them.
Shafer explained that for the opportunity for profit or loss section of the Economic Realities Test, clubs want to employ appropriate procedures where the entertainers are deciding who to dance for, not the club. Shafer noted that when entertainers testified in court that they left clubs, not only without any earnings that night, but in fact owing fees, they express feeling exploited. In reality, if they suffer occasional losses, sometimes due to things within their control, that works to the club’s advantage because an employee doesn’t have the ability to suffer a loss. For the opportunity for profit or loss, it’s probably beneficial to the club to have some absolute type of rent fee due, if possible, upon arrival. Shafer explained, the more you can ensure the amount of money entertainers earn is based on the amount of initiative they have exercised, the better off the club will be if it lands in court.
Wallace noted that in nearly every case he’s tried, courts and arbitrators have concluded that there are no special skills required by entertainers. On the other hand, Shafer has provided evidence in cases and had some courts determine that there is, in fact, skill involved. Wallace explained that, while he is not a part of Pole Position, the app does have a section with training videos and teaching sections that helped him to show special skills in a case arbitration.
Wallace explained the importance of having proper agreements containing provisions for arbitration and separate class-actions and spelling out the economic realities in place with entertainers.
Wallace noted the degree of permanence in the relationship between entertainer and club is essential. When an entertainer can work anywhere they please, that element is usually won. Pole Position provides factual support on the app for entertainers moving between clubs.
Are entertainers integral to the business? Wallace hasn’t seen a court say they aren’t. This factor is challenging for clubs to win. Shafer has prevailed on the argument that this element is not relevant to the issue of employment status.
Wallace explained the importance of having proper agreements containing provisions for arbitration and separate class-actions and spelling out the economic realities in place with entertainers. Wallace noted the degree of permanence in the relationship between entertainer and club is essential. When an entertainer can work anywhere they please, that element is usually won. — Larry Kaplan
Some information on the Pole Position app: The app can help clubs establish and defend entertainers as independent contractors. The app documents profit and loss, showing that the entertainers are truly in business for themselves, with their ability to work at multiple clubs all across the country. The app has safeguards to ensure one club cannot poach another club’s entertainers. The app has robust tutorials and advice section, including a point system that tracks how much the entertainer uses the app. This effort on her part can reinforce her independent contractor status. If the club was sued, Pole Position could provide data documenting the number of videos an entertainer had watched and the number of clubs at which she’d danced. The app also contains third- party sections where entertainers can book travel, apparel, insurance, and more, reinforcing their independent contractor status.
To win the permanence prong, it’s preferable if an entertainer works at various clubs. After so many days of dancing, the app provides the option to message an entertainer to encourage her to check out other clubs.
This article briefly summarizes extremely complex legal issues and is provided for general information purposes only and is not intended to provide either an exhaustive analysis of these matters or any specific legal advice or recommendation. Laws vary by state and municipality. The positions and opinions expressed by the attorneys represented here and Pole Position are theirs alone, and do not necessarily reflect those of ED Publications. Club operators and others are strongly encouraged to consult their attorneys and accountants for specific advice on how these issues will affect their businesses and what measures to take. Larry Kaplan and ED Publications do not guarantee the accuracy of this information.
Contact Pole Position at info@poleposition.app, www.poleposition.app or call 970-445-4811.
Contact attorney Jeffrey Kimmel at 212-259-6435 or jeffrey.kimmel@akerman.com.
Contact attorney Brad Shafer at 517-886-6560 or brad@bradshaferlaw.com.
Contact attorney Casey Wallace at 713-227-1744 or cwllace@wallaceallen.com.
Larry Kaplan has, for 20 years, been the Legal Correspondent for ED Publications. Mr. Kaplan is a business 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.
