Not Stripped of Their Rights

A judge’s ruling that strippers can’t be treated as independent contractors is good news for workers everywhere.

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**EDS NOTE, GRAPHIC CONTENT**Dancers perform at Mons Venus down the street from Raymond James Stadium, site of Sunday's NFL Super Bowl XLIII football game, Wednesday, Jan. 28, 2009 in Tampa, Fla.

According to a district judge, strippers need to receive the same wages and labor protection as any other full-time employee. And that's good news for workers everywhere.

What do strip clubs have to do with labor law? Well, Judge Paul A. Engelmayer of the Southern District ruled this week in a class action suit that women working at a Rick's Cabaret in Manhattan had been unfairly denied wage and labor protections due to the club misclassifying them as independent contractors and not regular employees.

In his ruling, Engelmayer wrote that, because the club gave strict guidelines to its dancers – including controlling their attire, and lack thereof – and made them the business's main attraction, "the Court comfortably concludes as a matter of economic reality that the dancers at Rick's NY were employees, not independent contractors." The ruling means that the dancers will need to be paid the minimum wage, as opposed to just in tips, and that they will receive protection against wage theft and other employer abuses.

[See a collection of political cartoons on the economy.]

But while misclassifying workers as contractors is reportedly prevalent in the strip club industry, it is certainly not confined to it. According to federal estimates, more than 3 million workers are improperly classified as contractors. The Labor Department estimates that up to 30 percent of companies engage in the practice. These workers are called contractors even though, as the New York Times' Steven Greenhouse has reported, "they often are given desks, phone lines and assignments just like regular employees."

What's the benefit of misclassifying an employee as a contractor? By doing so, companies are able to get away with avoiding a host of wage and labor laws, while dodging employment taxes (which pay for Medicare and Social Security) and not paying their workers benefits. Some estimates say that up to 30 percent of labor costs can be avoided by misclassifying a worker. The Treasury Department puts the savings at thousands of dollars per year, per employee.

And while workers are the ones getting the short end of the stick, taxpayers, writ large, are also hurt by the misclassification of employees, as both general revenue and money for state unemployment insurance funds is lost. Furthermore, law-abiding companies have to compete against companies that can save significantly on their labor costs via misclassification. As E. Michelle Drake, the plaintiffs' lawyer in the New York case, said, the ruling "makes clear that employers cannot pass their statutory duties to pay wages on to their customers and gain an unfair advantage in the marketplace while their employees go without guaranteed or long-term benefits such as Social Security."

[Read the U.S. News Debate: Should McDonalds and Burger King Workers Strike for Higher Wages?]

FedEx is one of the companies most associated with the practice of misclassifying workers. Though FedEx drivers use trucks decked out in FedEx colors, wear FedEx gear and have to live by FedEx's rules regarding hours, they are officially "independent contractors," and as such often don't receive benefits or sick leave. (This summer, much like the strippers' case in New York, a Massachusetts court ruled that FedEx drivers can't legally be classified as contractors.) The cable and Internet provider RCN does much the same thing.

Missclassification of workers is one of those labor practices that flies under the radar but that can do significant harm to workers and their communities. And, overall, illegal practices cost U.S. workers $19 billion annually in lost wages and benefits. Good for the workers of Ray's Cabaret for, in at least one case, making sure that their employer can't get away with it.

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