United States District Court, N.D. Georgia, Atlanta Division
SAMETHA GLEN, SIDNEY DAVIS, and CRYSTAL MORRIS, individually and on behalf of all persons similarly situated, Plaintiffs,
GALARDI SOUTH ENTERPRISES, INC., GALARDI SOUTH ENTERPRISES CONSULTING, INC., PONY TAIL, INC. d/b/a ONYX, TROP INC. d/b/a PINK PONY, TERRI GALARDI, MICHAEL KAPP, and DENNIS WILLIAMS, Defendants.
OPINION AND ORDER
WILLIAM S. DUFFEY, Jr., District Judge.
This matter is before the Court on Plaintiffs Sametha Glen's ("Glen"), Sidney Davis's ("Davis") and Crystal Morris's ("Morris") ("Plaintiffs") Emergency Motion for a Temporary Restraining Order ("TRO"), Preliminary Injunction and Hearing Pursuant to Local Rule 7.2(B) , and following the hearing on the TRO that was conducted on June 2, 2015.
1. Factual Allegations of the Complaint
On November 6, 2013, Plaintiffs filed their Complaint, alleging that Defendants violated 29 U.S.C. §§ 206 and 207 of the Fair Labor Standards Act ("FLSA") for failing to pay the minimum wage or overtime wages to Plaintiffs and others similarly situated. On December 11, 2014, Plaintiffs filed their First Amended Complaint against Defendants. On March 23, 2015, the Court allowed Plaintiffs to file a Second Amended Complaint to add Crystal Morris as a Plaintiff, and Trop Inc. ("Trop") and Dennis Williams ("Williams") as Defendants.
In the Second Amended Complaint, Plaintiffs allege that Glen and Davis are currently employees of Onyx, and Morris is a former employee of Pink Pony, adult entertainment clubs located in Atlanta, Georgia. Plaintiffs allege that Defendant Terri Galardi ("Galardi") is the controlling shareholder and exerts day-to-day operational and management control over Galardi South Enterprises, Inc. ("GSE"), Galardi South Enterprises Consulting, Inc. ("GSEC"), Pony Tail, Inc. ("Pony Tail") and Trop. Pony Tail is the entity through which GSE and GSEC own and manage Onyx, and Trop is the entity through which GSE and GSEC own and manage the Pink Pony. Plaintiffs allege that Michael Kapp is the Chief Operating Officer of GSEC and directs the day-to-day operations of Pony Tail and Onyx. Plaintiffs allege that Williams is the Chief Financial Officer ("CFO") and Secretary of Trop and Pony Tail, the CFO of GSEC, the Secretary of GSE, and the general manager of Pink Pony.
Plaintiffs allege that Defendants employ adult entertainers at their nightclubs, and that Defendants classify these entertainers as independent contractors to avoid paying wages and overtime. Plaintiffs allege that they are employees covered by the FLSA because Defendants do not require the adult entertainers to have any specialized background. Plaintiffs also claim that they are employees because Defendants (1) establish their specific work schedules; (2) require them to dance at specified times and in a specific manner on stage and for customers; (3) control their attire and interactions with customers; (4) set the price the entertainers are allowed to charge for dances; (5) require them to attend meetings at Defendants' business; and (6) enforce uniform written guidelines and policies governing their conduct at Defendants' clubs.
Plaintiffs allege further that Defendants require them to pay Defendants a portion of their tips, referred to as a "tip out" or "bar fee" for each shift worked. If entertainers are late for a shift, fail to appear for a shift, or otherwise violate Defendants' policies, they are charged additional fees or fines. Plaintiffs allege that these bar and other fees, and the fines, are unlawful kickbacks under the FLSA. Plaintiffs claim they and other entertainers were not paid wages for their work, did not receive overtime wages when they worked more than forty (40) hours per week, and are not considered exempt employees under the FLSA. Plaintiffs seek to assert a collective action against the Defendants, on behalf of all current and former entertainers who worked at Onyx and Pink Pony.
2. Facts Related to the Current Dispute
In April 2014, Netasha Spencer, an adult entertainer at Onyx, and Angie Baker and Christine Rybka, adult entertainers at Pink Pony (collectively the "Opt-in Plaintiffs") opted into this action as Plaintiffs. In May 2015, Defendants told the Opt-in Plaintiffs that they are required to sign an employment agreement entitled "ENTERTAINER ELECTION FOR COMPENSATION" (the "Employment Agreement") if they want to continue working as adult entertainers at Onyx and Pink Pony. See Spencer Decl., Ex. A at 1. The Employment Agreement classifies the Opt-in Plaintiffs as W-2 employees, entitles them to compensation in the form of direct wages at a rate of $2.13 per hour, allows them to retain tips earned during on-stage performances, and to receive forty percent (40%) of the tips earned during off-stage performances, including lap dances on the house floor, and in private rooms. Id. at 2. The Employment Agreement also (i) requires the Opt-in Plaintiffs to follow a work schedule determined by Defendants, (ii) recognizes them as "skilled in the discipline of dance, " and (iii) contains a non-compete clause prohibiting them from working at "competitive clubs." Id. at 1-2. The Employment Agreement does not require the Opt-in Plaintiffs to pay a house fee to the clubs or to tip the DJ, bar staff, house moms, floor staff and security.
The Opt-in Plaintiffs allege that the Employment Agreement adversely affects the conditions of their employment, including because only they, and not other entertainers at the club, are required to sign the Employment Agreement to continue working at the clubs. In short, Plaintiffs allege that those entertainers who did not opt-in to this action are given the choice of retaining their status as independent contractors or signing the Employment Agreement.
On May 22, 2015, the Opt-in Plaintiffs filed an Emergency Motion for a TRO, Preliminary Injunction and Hearing Pursuant to the Court's Local Rule 7.2(b). The Opt-in Plaintiffs contend that Defendants retaliated against them for opting-in to this action by reducing their compensation, materially altering the terms and conditions of their employment, and depriving them of employment opportunities at other clubs.
On June 1, 2015, Defendants filed their Response to the Emergency Motion. Defendants contend that they reclassified the Opt-in Plaintiffs as employees and changed their compensation method in a "good faith" effort to respond to their demand that they be treated as employees for purposes of the FLSA. Defendants argue further that offering the Employment Agreement provides the Opt-in Plaintiffs "with working terms and conditions consistent with the relief they seek in their Second Amended Complaint." See Defs.' Resp. at 4-5. Defendants characterize their actions as "remedial measure[s], intended to accommodate Plaintiffs' [demands], by allowing them to be treated as tipped employees, and offering them the same working conditions that Defendants offer to other individuals whom Defendants acknowledge to be bona fide tipped employees such as its bartenders and wait staff." Id. at 5. Defendants argue that injunctive relief should be denied because, among other things, the Opt-in Plaintiffs have failed to show a materially adverse change in the terms and conditions of their relationship with the entertainment clubs. Defendants specifically claim ...