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Hurst v. Youngelson

United States District Court, N.D. Georgia, Atlanta Division

January 28, 2019

Brezzy Hurst, Plaintiff,
v.
Steven Youngelson, et al., Defendants.

          OPINION AND ORDER

          MICHAEL L. BROWN, UNITED STATES DISTRICT JUDGE

         Plaintiff Brezzy Hurst (“Plaintiff”) was a dancer and entertainer at The Follies club. She filed suit against Defendants claiming they violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. Specifically, she claims Defendants Surrey White, Steven Youngelson, and WBY, Inc. misclassified her as an independent contractor rather than an employee and failed to pay her minimum wages as required by the FLSA.[1] Defendants and Plaintiff filed opposing motions for summary judgment as to whether Plaintiff was an employee under the FLSA and whether Defendants White and Youngelson were employers under the Act. (Dkts. 86, 87.) Plaintiff also moved for summary judgment as to enterprise coverage, the creative-professional exception to the FLSA, the offset defense, and violation of the FLSA's minimum wage provisions. The Court grants Plaintiff's motion (Dkt. 86) and denies Defendants' motion (Dkt. 87).

         I. Legal Standard

         Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “No genuine issue of material fact exists if a party has failed to ‘make a showing sufficient to establish the existence of an element . . . on which that party will bear the burden of proof at trial.' ” Am. Fed'n of Labor & Cong. Of Indus. Orgs. v. City of Miami, 637 F.3d 1178, 1186-87 (11th Cir. 2011) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). An issue is genuine when the evidence is such that a reasonable jury could return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986).

         The moving party bears the initial responsibility of asserting the basis for her motion. Catrett, 637 F.3d at 323. The movant is not, however, required to negate the non-movant's claim. Id. at 324. Instead, the moving party may meet her burden by “ ‘showing' - that is, pointing to the district court - that there is an absence of evidence to support the non-moving party's case.” Id. After the moving party has carried its burden, the non-moving party must present competent evidence that there is a genuine issue for trial. Id.

         The court must view all evidence and factual inferences in a light most favorable to the non-moving party. Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir. 1988). But “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is there be no genuine issue of material fact.” Anderson, 477 U.S. at 247-48.

         II. Factual Background

         The Follies is a restaurant and bar in Chamblee, Georgia, where women dance in the nude to entertain men. (Dkt. 87-1.) The Follies has between 60 and 100 female entertainers with varying numbers working at any one time. (Dkt. 98 at ¶¶ 23, 60.) Plaintiff worked as an adult entertainer at The Follies from around November 2010 through April 2014.[2] (Dkt. 86 at ¶ 5.) Defendants treated Plaintiff as an independent contractor, allowing her to keep money men paid her to dance for them rather than paying her the minimum wage required by the FLSA. (Dkt. 98 at ¶¶ 8, 36.) Plaintiff claims Defendants misclassified her as an independent contractor under the FLSA and should have treated her as an employee, including by paying her the minimum wage. (Dkt. 29; 86-6.) Plaintiff filed this lawsuit to recover unpaid wages.

         III. Discussion

         A. Employee or Independent Contractor

         The FLSA distinguishes between employees and independent contractors. Employees are entitled to be paid a minimum wage and overtime wages; independent contractors are not. Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th Cir. 2013). The purpose of the act is to “protect those whose livelihood is dependent upon finding employment within the business of others.” Mednick v. Albert Enterprises, Inc., 508 F.2d 297, 300 (5th Cir. 1975).[3] The determination of whether a worker is an employee or an independent contractor is a question of law for the court. Patel v. Wargo, 803 F.2d 632 n.1 (11th Cir. 1986). In making this determination, courts apply the so-called “economic reality test, ” looking beyond labels that the parties may have used and assessing the level of economic independence that the worker actually had from the employer. The ultimate question is whether the worker is so dependent upon the business that she “come[s] within the protection of the FLSA or [is] sufficiently independent to lie outside its ambit.” Usery v. Pilgrim Equip. Co. Inc., 527 F.2d 1308, 1311-12 (5th Cir. 1976). Courts often frame this inquiry as “whether the individual is ‘in business for [her]self.' ” Stevenson v. Great Am. Dream, Inc., No. 1:12-cv-3359, 2013 WL 6880921, at *2 (N.D.Ga. Dec. 31, 2013).

         The Court may consider several factors to evaluate the economic reality, including “(1) the nature and degree of the alleged employer's control as to the manner in which the work is to be performed; (2) the alleged employee's opportunity for profit or loss depending upon his managerial skill; (3) the alleged employee's investment in equipment or materials required for his task, or his employment of workers; (4) whether the service rendered requires a special skill; (5) the degree of permanency and duration of the working relationship; [and] (6) the extent to which the service rendered is an integral part of the alleged employer's business.” Scantland, 721 F.3d at 1312. These factors are not exclusive, and no single factor must control. Rather, these factors guide the Court's analysis of economic dependence - the ultimate question being whether the worker was dependent upon finding employment in the business of another or whether the employee was capable of running an independent business. Usery, 527 F.2d at 1311.

         In conducting this analysis, a court should not assume that a worker is an independent contractor because he or she has some characteristics of an independent contractor. Mednick, 508 F.2d at 302. To make this assumption would be to allow employers to get around the goals of the FLSA by granting some independence to workers who are, in reality, dependent upon their employer's business. Usery, 527 F.2d at 1311. So when the analysis can go either way, a court must err on behalf of the worker by applying an expansive definition of the term “employee”.

         Recently, other courts have considered the relationship between adult entertainers and the clubs where they perform, nearly universally finding adult entertainers to be employees. See Hanson v. Trop, Inc., 167 F.Supp.3d 1324, 1328 (N.D.Ga. Mar. 3, 2016); Vaughan v. M-Entm't Properties, LLC, No. 1:14-CV-914, 2016 WL 7365201, at *6 (N.D.Ga. Mar. 15, 2016) (collecting cases).[4] This Court agrees with the weight of authority and, after applying the economic-reality test to the undisputed facts of this case, concludes that Plaintiff was an employee under the FLSA.

         1. The Nature and Degree of Control

         The first factor is the nature and degree of the alleged employer's control over how the alleged employee performs her work. Other courts have found that clubs with adult entertainment have control over the work environment of their entertainers. Hanson, 167 F.Supp.3d at 1328 (finding control based in part on the club “setting minimum prices for services, requiring entertainers to tip club employees, and requiring entertainers to report their earnings to the club”); Vaughan, 2016 WL 7365201, at *12 (finding control based in part on the fact that the club “exercises significant control over the atmosphere, clientele and operation of the club”) (internal citations omitted); Stevenson, 2013 WL 6880921 (finding control when plaintiff controlled her own hours on the basis that “in the total context of the relationship . . . the right to set hours [does not indicate] such lack of control by [the defendant] as would show these operators are independent from it.”) (alternations in original) (internal citations omitted). Defendants argue that those cases are irrelevant because Plaintiff had more control over her work than those plaintiffs.

         Regardless of that comparison, the undisputed facts show that The Follies exercised significant control over Plaintiff's work. When Plaintiff arrived at the club, she was required to park her car with the valet attendant and leave her key with him. (Dkt. 79 at 22:22-24.) She was then required to check in with the house mom and pay a “house fee.” (Dkts. 84 at 138:22-25; 98 at ¶ 47.) Defendants used the house fee to control the shifts that dancers worked. The amount of the fee depended on the time an entertainer arrived to work and the time she left. (Id. at ¶ 48.) Leaving earlier meant paying higher house fee. (Id.) For example, dancers who chose to leave before the 3:00 a.m. closing time paid a higher fee than dancers who chose to stay until 3:00 a.m. This structure certainly incentivized dancers to stay later into the night, entertaining patrons and keeping them at The Follies until closing time.

         Defendants also controlled the conditions under which Plaintiff worked. Defendants required Plaintiff to purchase two drink tickets (called “Follies Dollars”) every shift she worked. (Dkts. 84 at 30:9-14; 77-1.) She could use the tickets for her own drinks or could sell them to customers. (Dkt. 100 at 10.) But, she had to buy them.

         Most of Plaintiff's income came from table dances that she performed for club patrons. (Dkt. 84 at 206:23-24.)[5] She was not free to set the prices she charged customers for table and VIP dances. (Dkt. 98 at ¶ 44.) Defendants set minimum prices for those dances, and she could not deviate from them. (Dkt. 79 at 43:13-18.) They also set the cover charge that customers had to pay for entry into the club. (Dkt. 98 at ¶¶ 13-15.) Plaintiff had no ability to waive or alter the charge for her “customers.” Defendants also “had ultimate control over which individuals were allowed to enter The Follies as customers.” (Id.) Indeed, Defendants prohibited women from coming into the club to see Plaintiff perform unless accompanied by a man. (Dkt. 98 at ¶ 17.) Defendants hired bartenders, waitresses, DJs, and security guards. (Dkt. 79 at 71:22-72:8.) They set the hours of operation. (Id. at 68:11-13.) They also determined what behavior was or was not appropriate at the club. (Dkt. 86-3 at ¶ 4.)

         And, once she arrived at work, Plaintiff was not free to leave. As explained above, upon arrival at work, she had to leave her car key with the club's valet attendant. At the end of the night, she was required to take a breathalyzer test in the presence of a house mom or manager. If she passed the test, they gave her a “See Ya” pass. (Dkts. 84 at 336:8- 20; 79-1.) She had to present her See Ya pass to the valet attendant to get her keys back so she could leave. (Dkts. 84 at 87:9-12; 79 at 50:6- 13.) Defendants instructed the valet attendants not to give dancers (including Plaintiff) the keys to their cars unless they presented a See Ya pass. At closing time, The Follies also required Plaintiff and the other dancers to remain inside until all the customers had left the parking lot. (Dkt. 84 at 85:4-86:2.)

         Plaintiff claims she also had to tip out the bar tenders, DJ, and house mom, and get them to sign her See Ya pass to confirm she paid them before she could leave. (Dkt. 84 at 335-337.) The See Ya pass - created by Defendants - has spaces for their signatures, thus supporting her claim. (Dkt. 79-7.) In addition, the DJs kept “sign-in sheets” that listed each dancer and included a space for each dancer labeled “tipped out.” (Dkts. 79-11; 79-12; 79-13; 79-14.) It also had a note stating “[t]here will be no arguing or getting angry with [the e]ntertainers. If they do not tip correctly, have the Manager talk with them.” (Id.) This document supports Plaintiff's claim that she was required to tip the DJ and that The Follies manager had some level of control over her if she failed to do so. Indeed, the documents are consistent with Plaintiff's testimony that she once failed to tip the DJ but The Follies' manager allowed her to come back to work without any punishment. (Dkt. 84 at 226:17-228:3.)

         Defendants dispute that they required Plaintiff and other dancers to pay these other workers. (Dkt. 100 at 11.) In support of this, Defendants cite Plaintiff's admission that the house moms sometimes allowed her to leave without paying them. She explained, however, that in these situations the house mom expected Plaintiff to pay the amount owed on her next shift. (Dkt. 84 at 286:16-23.) Defendants also presented an affidavit from a former dancer and current house mom, Abigail Dunahoo, who averred that tipping was voluntary and customary but not mandatory. (Dkt. 87-7 at ¶ 9.) A genuine issue of fact exists as to whether tipping was mandatory or simply customary.[6] Likewise, a genuine issue of fact exists as to whether Plaintiff was required to perform onstage. She claims she was; Defendants claim she was not. (Dkt. 92-2 at ¶ 49.)

         It is undisputed, however, that, before she could get her keys and leave, Plaintiff had to pass a breathalyzer test in the presence of a house mom, pay her house fee, and present a See Ya pass to confirm she had done both. (Dkt. 79-16 at ¶ 55.) If Plaintiff did not pass the breathalyzer test, the club would keep her car keys and send her home in a cab or with a friend. (Dkt. 84 at 333:19-21.) On occasion, when The Follies closed at 4 a.m. and 100 entertainers needed to check out simultaneously, Plaintiff had to wait to leave for an hour and a half. (Id. at 83:22-25.)

         All of these rules - requiring Plaintiff to pay a house fee, requiring her to purchase and resell drink tickets, controlling which customers she could entertain, setting minimum prices she could charge for services, controlling the hours of operation, requiring her to jump through hoops to leave, and charging her higher fees if she left early - allowed Defendants to control the circumstances under which Plaintiff was allowed to work. They are relevant to the control analysis and weigh in favor of a finding that Plaintiff was an employee of Defendants rather than an independent contractor working for herself.

         These same factors also have been cited by other courts in finding exotic dancers to be employees. Reich v. Circle C. Investments, Inc., 998 F.2d 324, 328 (5th Cir. 1993) (finding that instructing dancers to charge minimum prices for dances indicated control); McFeeley v. Jackson St. Entm't, LLC, 47 F.Supp.3d 260, 269 (D. Md. 2014) (finding that setting the hours of operation for the club indicated control); Thompson v. Linda And A., Inc., 779 F.Supp.2d 139, 148 (D.D.C. 2011) (finding that having dancers pay a house fee to dance demonstrated control); Reich v. Priba Corp., 890 F.Supp. 586, 592 (N.D. Tex. 1995) (finding that dictating the atmosphere of the club demonstrated control).

         Defendants argue that the control they exerted over Plaintiff was insufficient to qualify her as an employee. Defendants point to the disputes about whether she was required to tip DJs and bartenders and whether she was required to perform on stage. They also point to the fact that Plaintiff had no set hours and requirements as to the number of shifts she had to work each week. (Dkt. 88 at 16.) Regardless of these details, the inquiry remains “whether a . . . dancer's freedom to work when she wants and for whomever she wants reflects economic independence, or whether these freedoms merely mask the economic reality of dependence.” Harrell v. Diamond A Entm't, Inc., 992 F.Supp. 1343, 1349 (M.D. Fla. 1997). The fact that Defendants did not require Plaintiff to work certain hours does not mean they did not control the circumstances under which she worked. An employee's “right to set hours [does not indicate] such lack of control [by defendant] as would show these operators are independent from it.” Usery, 527 F.2d at 1312.

         Defendants also argue that the house fee did not operate as a “carrot or a stick” that pressured dancers to remain at the club. Instead, they claim that it was “essentially a charge for renting floor space.” (Dkt. 98 at ¶ 139.) They claim that the fees “increase at certain times because the demand per square foot increases with the number of entertainers willing to compete for that space and [they] charge more during times that entertainers are willing to pay more.” (Id.) The notion that Plaintiff rented floor space is absurd - Defendants' silly attempt to redefine reality to avoid the consequences of their conduct. Neither Plaintiff nor any dancer controlled any section, portion, or square footage of the club. They walked throughout it, performing wherever customers wanted them to dance. Defendants introduced no document or evidence to suggest there was any assessment of supply and demand, square footage, or space used in setting the house fees.

         The house fees depended on two things - when dancers got to the club and when entertainers left the club. (Dkt. 79 at 74:11-14, 81:15-20, 82:23-83:1.)[7] They incentivized the entertainers to be there during particular hours. Dancers who chose to leave the club before 3:00 a.m. paid more money than those that chose to leave after 3:00 a.m. (Dkt. 98 at ¶ 48.) A supply and demand system would not penalize entertainers for wanting less time to perform. Defendants also argue that this payment arrangement benefited entertainers as they could take a nap at the club or make more money by continuing to perform. (Dkt. 97 at 11.) Regardless of the potential advantages to entertainers for staying at work longer, requiring dancers to pay more for leaving early exerts control.

         Defendants next argue that the breathalyzer requirement did not establish control because the only consequence of failing the test was having to take a cab home. (Dkt. 97 at 13.) The Court rejects this argument. The breathalyzer requirement placed a constraint on Plaintiff's ability to leave upon her own initiative. It might also have increased public safety (making it a good policy) but it exerted control over Plaintiff's working conditions.

         Defendants claim the club's managers did not routinely enforce minimum price requirements for dances. As a result, they claim the minimum prices requirement did not actually exert any control over Plaintiff. (Dkt. 97 at 12.) Defendants set this rule, and absent evidence that Plaintiff knew Defendants did not enforce it (and no such evidence has been presented), the rule controlled her behavior. The requirement of minimum prices, enforced or not, controlled Plaintiff's work at the club. See Vaughan, 2016 WL 7365201 at *7 (“However, simply because a manager may be kind, and may decide not to strictly enforce every rule on every occasion, does not change the fact that the manager is exercising control over the subordinate.”).

         Defendants next contend that that their control of the hours, employees, and clientele had no impact on Plaintiff's earning potential and thus did not constitute a form of control. (Dkt. 97 at 9.) The Court rejects this argument. “Defendants created and control the atmosphere and surroundings at [the club], the existence of which dictates the flow of customers into the club. An entertainer can be considered an independent contractor only if she exerts such a control over a meaningful part of the business that she stands as a separate economic entity.” Reich, 890 F.Supp. at 592 (internal citations and quotations omitted). And here, “the entertainer's economic status is inextricably linked to those conditions over which defendants have complete control.” (Id.) Plaintiff had no control over when customers could enter the building, which customers could enter, what cover charge they paid, or the minimum fee for a dance. Defendants exercised complete control over this important aspect of the business - the customers.

         It is true that Defendants did not control some elements of Plaintiff's work. (Dkt. 97 at 6.) Plaintiff, for example, was not required to dance for customers while at the club, but rather could spend her time drinking, playing games, talking to customers, or even taking a nap. (Id.) She also decided how to dress, whether to wear a wig, and how to interact with customers. (Id.) “The mere fact that [the club] has delegated a measure of discretion to its dancers about how best to entertain its customers does not necessarily mean that its dancers are elevated to the status of independent contractors. Indeed, one could say that the nature of [an entertainer's] job requires some measure of discretion and flexibility.” Harrell, 992 F.Supp. at 1349. Certainly, every dancer has discretion in how she interacts with a customer. This discretion, however, does not reflect economic independence. Instead, it “merely mask[s] the economic reality of dependence.” Id. Plaintiff was dependent on Defendants' customers and Defendants controlled most of the terms of her interaction with them, including key terms like who she could entertain (only customers The Follies admitted) and the prices she could charge (no less than minimum charge The Follies set).

         Defendants repeatedly argue that they exerted less control over Plaintiff than other strip clubs exert over their dancers. They argue, for example, that they did not fine Plaintiff if she was late or wore something they did not like, impose shift requirements, require Plaintiff to perform stage dances, or impose a plethora of written rules. (Dkt. 87-1 at ¶¶ 42, 46, 130.) That may be true. But, no single type of control is required to make someone an employee. Try as they might, they did not, in fact, build the better mousetrap. The undisputed facts of this case show that Defendants exerted significant control over how Plaintiff sold her services at the club.

         2. Opportunity to Make a ...


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