Look for the Union Labia

Our guest columnist this morning is Christel E. Marquardt, judge on the Kansas Court of Appeals.

In July 2002, Milano’s acquired a controlling interest in Club Orleans, a gentlemen’s club. In 2004, Milano’s designated their entertainers as independent contractors.

In response to an unemployment claim submitted by a Milano’s entertainer, the Unemployment Tax Contributions Unit of the KDOL [Kansas Department of Labor] began an investigation to determine whether Milano’s entertainers are employees or independent contractors. After the investigation, the KDOL auditor determined that the entertainers are employees for unemployment tax purposes…

The hearing officer cited Club Orleans’ house rules and concluded “there are sufficient indicia of control, or at least the right to control, that the facts of this matter point to an employer-employee relationship.” The hearing officer determined that although the owner of Milano’s testified that customers frequented Club Orleans for the “good atmosphere, good lighting and good food,” the facts indicate that the “atmosphere largely derives from and is based upon the presence of its semi-nude dancers.”…

The district court agreed with the hearing officer’s order that the entertainers’ tips constituted wages under the KESL [Kansas Employment Security Law]. Additionally, the district court noted that the entertainers were required to complete an application with Milano’s before they did any entertaining and to agree to abide by Milano’s house rules. Based on this application process, the district court reasoned that a valid contract existed between Milano’s and the entertainers. Thus, the burden shifted to Milano’s to prove the entertainers were free from its control or direction and the entertainers’ performances were outside Milano’s usual course of business.

The district court reviewed the statutory exceptions… and noted several areas in which Milano’s maintained the right to control — place to perform, customers, cover charge, tips, schedules, required to accept drinks from customers, shifts, supplies, and fees charged for certain services. Thus, the district court concluded that Milano’s retained greater control over when and how the entertainers worked for Club Orleans than did the entertainers. The entertainers were a significant part of the atmosphere at Club Orleans, and their presence during their shift, along with their performances, fell within Milano’s usual course of business…

The hearing officer cited Milano’s nonnegotiable house rules, which regulated conduct among the entertainers and between the entertainers and Club Orleans’ customers. Milano’s required each entertainer to complete an application and sign a performance agreement accepting the house rules.

The house rules stated that entertainers could not refuse drinks from Club Orleans’ customers and prohibited entertainers from “work[ing] the crowd” around the stage area as another entertainer performed her routine on stage. If an entertainer violated a house rule, Club Orleans’ management had the authority to impose fines or terminate the business relationship. Further, Milano’s claimed in its house rules that Club Orleans’ customers were its own and not the entertainers’ customers.

Additionally, the house rules required an entertainer to impose an industry standard minimum tip for various dances so that an entertainer could not discount the rates she charged Club Orleans’ customers. If a customer tipped an entertainer less than the minimum amount, or failed to provide a promised tip, Club Orleans’ management would direct a Milano’s employee, i.e., a doorman, to discuss the issue with the customer and inform the customer that the behavior was unacceptable.

The hearing officer’s order also noted that the entertainers incurred considerable business expense, including costumes, shoes, hair, nails, and plastic surgery. However, in exchange Milano’s provided the entertainers with a stage, dressing room, showers, towels, soap, razors, feminine hygiene products, sound equipment, lighting, security, and a tanning bed.

Club Orleans allows the entertainer to choose what day and what shift to work, but Club Orleans’ management determines in what sequence the entertainers perform on stage. Entertainers must be on the floor or on stage if a customer is in Club Orleans’ building. Many of Milano’s advertisements, including ads on the outside of the Club Orleans’ building, billboards, and local newspapers, highlight the entertainers.

Moreover, Milano’s house rules included several restrictions concerning the manner and method in which the entertainer performs. Milano’s prohibited an entertainer from leaving the stage at any time during her three-song set. Entertainers are required to gather their personal effects and exit the stage as another entertainer enters. Under the house rules, entertainers must notify Club Orleans’ management of “rude, abusive, grabby or threatening” customers.

The record on appeal supports the finding that Milano’s had the right to control the entertainers.

Milano’s v. Kansas Dept. of Labor [PDF]

Court rules strippers are employees, not contractors [Wichita Eagle]