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NEW YORK (Reuters) - Dancers at the midtown Manhattan strip club Rick's Cabaret should be paid minimum wage, a federal judge ruled on Tuesday, saying the club unfairly classified them as independent contractors when they are in fact club employees.
The ruling paves the way for 1,900 current and former Rick's Cabaret dancers to seek back wages from the club, extending a U.S. trend toward judges ruling that exotic dancers deserve to get minimum wage, overtime and other job protections.
A group of dancers sued Rick's Cabaret in 2009, seeking class-action status, saying they were not paid salaries but received "performance fees" - usually $20 - from customers for the lap dances they performed.
The dancers, who were required to pay the club a fee for the nights they worked, argued that they were denied basic minimum wage protections because Rick's Cabaret classified them as independent contractors.
Shares in Rick's Cabaret International Inc closed down 0.73 percent at $12.19 on the Nasdaq in a day of broadly bullish trading on Wall Street. The company owns more than 40 gentlemen's clubs and restaurants nationwide.
U.S. District Judge Paul Engelmayer of New York generally sided with the plaintiffs, saying in a 65-page ruling that the club exercised so much control over the dancers that the women were actually employees subject to the club's rules, and could not make independent decisions about their work.
Rick's Cabaret ordered that dancers not chew gum, dictated what outfits they wore, when they came to work and which bathrooms they used on the premises, Engelmayer said.
"After four years of litigation we are thrilled to finally have had our day in court," said Michelle Drake, an attorney for the dancers. "We think the ruling makes clear that employers can not avoid their obligation to pay wages by hoping that somehow their customers can do it for them."
The judge's ruling follows similar decisions involving strip club dancers from judges in Kansas, Georgia, Washington D.C. and Minnesota, who have said that the workers are entitled to receive minimum wage, overtime and other wage protections.
In April a group of 1,245 dancers at the New York-based Penthouse Executive Club reached an $8 million preliminary settlement with the club over unpaid wages; the settlement is awaiting a judge's approval.
Rick's Cabaret had argued that the fees that the dancers got for lap dances counted as their wages, an argument Engelmayer did not accept.
"Permitting an employer's minimum wage obligations to be satisfied by payments directly by customers to its employees would create intolerable problems of proof," he wrote.
The ruling has "no effect" on Rick's Cabaret's current practice because it has changed its classification of workers, said Eric Langan, CEO of Rick's Cabaret International, in a statement, adding that the company intends to appeal.
"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," Langan said.
Representing the company, Jeffrey Kimmel of law firm Meister Seelig & Fein LLP, said in a statement: "We disagree with the decision and intend to appeal."
He said the company plans to move the class be decertified.
"Additionally there are significant remaining issues that were not addressed on these motions, including whether the substantial amounts earned by the plaintiffs can be deemed wages under New York state law and therefore be applied against any claimed minimum wage obligations," he said.
The case is Sabrina Hart et al v. Rick's Cabaret International Inc., No. 09cv3043, U.S. District Court for the Southern District of New York.
For plaintiffs Sabrina Hart et al: E. Michelle Drake, Paul Lukas, Anna Prakash, Donald Nichols, Steven Smith and Rebekah Bailey of Nichols Kaster.
For defendants Rick Cabaret International et al: Jeffrey Kimmel and Howard Davis of Meister Seelig & Fein.
Reporting by Carlyn Kolker; Editing by Kevin Drawbaugh and Bob Burgdorfer