Exotic dancers considered employees, not independent contractors

In Montana, a court may assess penalties against an employer where the employer forced performers to enter contracts to avoid paying them wages and circumvent state wage laws.

Case name: In the Matter of the Wage Claims of Renne L. Smith, et al. v. TYAD, Inc., No. 07-0305 (Mont. 05/20/09).

Ruling: The Montana Supreme Court found that several exotic dancers were employees rather than independent contractors. It imposed penalties on the employer for improper income withholding, unlawful kickbacks, and impermissible contracts under the state wage claim laws, and remanded the case for an order awarding the dancers unpaid wages and reimbursement.

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What it means: In Montana, a court may assess penalties against an employer where the employer forced performers to enter contracts to avoid paying them wages and circumvent state wage laws.

Summary: Four dancers filed complaints with the Department of Labor and Industry against a lounge for unpaid wages and reimbursement of "stage fees." Even though they were previously paid hourly wages, the dancers were required to sign "rental agreements," stating they were not employees and would not be paid hourly wages. Instead, they were considered independent contractors and would pay the lounge to "rent" the stage and dressing room when they worked. They were entitled to their tips and dance fees. The dancers claimed they were employees and entitled to minimum wages and reimbursement for the stage fees. The lounge contested the DLI's initial authority to hear the claims and its determination that the dancers were employees. It argued the stage fees were a contractual condition of employment and were neither wages nor deductions from wages. The Montana Supreme Court affirmed the determination that the dancers were employees. The court acknowledged that "the issue of stage fees is factually unique and anomalistic" but concluded the fees were impermissible kickbacks and impermissible deductions from income the dancers earned.

The Supreme Court noted that employers generally may not withhold wages for room, board or incidentals. Some dancers testified they did not earn enough in tips and dance fees on some nights to pay the stage fee. The court found not only did the lounge fail to pay the dancers earned wages, it demanded payment for providing the essential elements of their employment -- a stage and dressing rooms. The court found the lounge was subject to a 15 percent penalty to each dancer based on the amount of unpaid wages and stage fees she paid.

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August 17, 2009

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