NEW YORK — A federal judge ruled today that Rick's Cabaret subsidiary Peregine Enterprises is liable for minimum-wage claims made by 41 exotic dancers who say they were cheated because Rick's Cabaret New York classified them as independent contractors.
The ruling, which Rick's Cabaret plans to appeal, is stinging for the strip club conglomerate because more than 1,900 plaintiffs who worked at Rick's NY are covered under the lawsuit's claims.
The plaintiffs, who worked as exotic dancers and gave lap dances at Rick's NY at 50 W. 33rd St., alleged violations of the Fair Labor Standards Act and the New York Labor Law, as well as unlawful retention of gratuities and unlawful deduction of wages by imposing fines.
In their contention that they were employees as defined by law, the strippers said that club management regulated almost every aspect of their behavior within the club. According to the suit, Rick's NY exerted an “immense degree” of control by, among other things, imposing written guidelines that detailed the intricacies of their employment relationship, they said.
Rick's NY's management, however, said the dancers were more like independent contractors than they were like employees and that they exercised "minimal control" over them.
But U.S. District Judge Paul Engelmayer didn't buy Rick's NY's argument, writing in his ruling that "on their face, the club’s guidelines reflect the exercise of tight control, indeed, control fairly described as micromanagement, by Rick’s over the dancers."
The judge said that Rick's NY's claim that its guidelines were designed safety concerns or compliance with law were bogus.
"Rules such as those setting the length of a dancer’s dress, the height of her shoe, the meetings she was required to attend, the entrances she was allowed to enter, the amount of money she was required to tip-out at the end of each night, or her use of chewing gum or stiletto heels, and many more, were neither mandated by state or federal law, nor justified on grounds of workplace safety," he wrote.
"Notably, defendants argue that the guidelines with regard to dress code existed to perpetuate Rick’s NY’s 'upscale club' feel. That representation is of no help to defendants’ claim of limited control here: Although maintaining an atmosphere perceived as 'upscale' may have helped the club in its marketing or assisted it to appeal to a higher-end customer base, those goals had nothing to do with providing a safe and law-abiding venue. Rather, they helped Rick’s NY achieve its business ends.
"The court finds that the guidelines, as a whole, compellingly indicate that Rick’s NY had significant control over the dancers."
Engelmayer also said that even though Rick’s NY's written threat to impose fines on non-compliant dancers is strong evidence of its control over them, as well as managing certain small aspects of its dancers’ lives.
The judge noted testimony from Rick’s NY's general manager who testified that at times he took steps to let a dancer know that she needed to lose weight if she wanted to continue performing at the club.
In his 65-page decision, Engelmayer granted summary judgment to the dancers, who he said were employees as a matter of law, and ordered back pay and be subject to any finding of liability on any worker claims.
Engelmayer also found that the dancers’ wages were unlawfully deducted for fines and tip-outs, but he said the parties haven't fully briefed the issue whether the deductions by Rick’s NY, which were made from performance fees paid by customers, were from wages, as the New York Labor Law statute requires.
Engelmayer directed the parties to confer later this month to confer on the future course of litigation and discuss prospects for a settlement on the deduction issue.
In reaction to the decision at U.S. District Court in New York, Eric Langan, president and CEO of Rick’s Cabaret International Inc., said the ruling has no impact on the operations of Rick’s NY "since we changed our independent contractor practices some time ago."
But Langan, whose Houston-based company operates through subsidiaries 40 gentlemen’s clubs and restaurant venues nationwide, plans to appeal the case, which has been litigated for 4-1/2 years.
"It is hard to imagine how these entertainers should be paid at the minimum wage, which would amount to a fraction of the $1,000 or more that some of them acknowledged they earned in a single night," he said.
Jeffrey A. Kimmel of Meister Seelig & Fein, which represents Rick's Cabaret in the case, said that in addition to the appeal he plans to move the court to decertify the class of more than 1,900 potential plaintiffs who have worked as exotic dancers at Rick's NY. The club opened in 2005.
"We are optimistic that the class will be decertified,” he said.
Michelle Drake, an attorney for the dancers, said in a statement that she was "thrilled" with the decision.
"This ruling is particularly important for women who work in the world of adult entertainment, where workers are often vulnerable and willing to work in illegal circumstances out of desperation," Drake said.