A Las Vegas strip club may be on the hook for millions of dollars in back wages after the Nevada Supreme Court ruled that an estimated 6,500 strippers the club had claimed were independent contractors were actually employees entitled to minimum wage.
In a unanimous decision, the Nevada Supreme Court ruled in favor of the dancers at Sapphire Gentlemen's Club, which bills itself as the "World's Largest Strip Club." The suit was first filed by six dancers in 2009 and was certified as a class action lawsuit, meaning that the ruling could affect as many of 6,500 current and former dancers at the club, reports the Associated Press
What led to the court's decision and what should business owners be aware of when determining whether a worker is a contractor or an employee?
Women 'Necessary' to Club's Operation: Ruling
Although Sapphire argued that the women who dance at the club had no "contract of hire" and were not "in the service" of the club, the court found that the women were misclassified as independent contractors. "Given that Sapphire bills itself as the 'World's Largest Strip Club,' and not, say, a sports bar or nightclub," the court said in its ruling "we are confident that the women strip-dancing there are useful and indeed necessary to its operation."
As employees, the women would be entitled to employee classification under the Fair Labor Standards Act, the federal law that controls working condition, wage standards, and other employee rights. Under the FLSA, employees must be paid either the federal or state minimum wage, whichever is higher (although tipped employees may be paid less in some circumstances).
Following the Nevada Supreme Court's ruling, the case now goes back to district court to determine the amount of damages plaintiffs are owed.
The Differences Between Independent Contractors and Employees
With a potential $40 million in back wages and fees owed to the dancers, this case is just the latest in a string of cases in which employers have been hit with large damage awards for misclassifying employees as contractors. So what typically sets contractors apart from employees? Contractors may generally:
Knowing the difference between contractors and employees can save you from legal fees and large damage awards in the future.
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