A case of improper employee classification in U.S. District Court for the Southern District of New York, Sabrina Hart, et.al v. Rick’s Cabaret International, Inc., has resulted in a settlement of almost $15M for exotic dancers. The court has yet to approve the deal.
The suit, brought on behalf of approximately 2,000 dancers who worked at the Midtown Manhattan club as far back as 2005, claimed that the dancers were controlled to such an extent by the club that they were employees, not independent contractors. U.S. District Judge Paul Engelmayer, in 2013, agreed.
The dancers were not salaried; they received tips and fees for dances of around $20 each. They were also paid for time spent with the club’s patrons in semi-private rooms. Judge Engelmayer ruled that, due to the lack of independent decision-making power, the dancers were employees and, therefore, protected under federal minimum wage laws. The award was $10.9M in unpaid wages and withheld gratuities.
The improper employee classification settlement comes just weeks before a trial over further amounts that might be owed the dancers. RCI CEO Eric Langan, in a statement made about the settlement, said, “We believe it is in the best interest of shareholders to resolve this case now, to eliminate uncertainty and the ongoing cost of litigation.” The company believes it may be end up paying around $9.5M to $12.5M depending on how many dancers are ultimately eligible for the settlement.
RCI Hospitality Holdings stock closed up 1.73% at $10.59 on the NASDAQ the day the settlement was announced.
Something tells me that RCI will be able to easily foot the bill for this expensive dance. I also think they may seriously reconsider their current staffing policies regarding improper employee classification in light of the verdict for the plaintiffs in the original trial. The settlement is likely pennies compared to the singles the dancers could’ve received if the other claims went to trial on April 27th.