Inside Scarlett’s Cabaret, a slim blonde dressed in only a black thong wrapped her limbs around a pole as images of flames flickered on the walls. Under the terms of a settlement approved this week, the dancer may now be entitled to not just tips from the men huddled around the stage, but also back wages.
The strip club, just west of Interstate 95 in Hallandale, is one of three locations that settled a class action suit with its exotic dancers for $6 million. The agreement received preliminary approval from a federal judge on Tuesday.
Former dancer Adonay Encarnacion sued the company over labor violations last summer. During her time at Scarlett’s she was classified as an independent contractor rather than an employee, and her wages came solely from tips. But unlike waitresses, who also rely largely on tips, Encarnacion never received any hourly pay.
Encarnacion said online business courses she was taking at the time helped open her eyes to the problem.
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“I started to realize that the environment where I was working was violating a lot of my rights,” Encarnacion said.
The Bronx native who has lived in South Florida since 1998 said that she started stripping to make up the difference in her tuition after her Pell grant was cut in 2012. But when she raised her concerns over pay with a manager, he told her that if she didn’t like their system she could leave, she said.
“He basically pulled a Donald Trump on me and said I was fired,” Encarnacion said. Today, she’s working on starting up her own marketing and web services business in Miami.
The case sheds light on the practices of an industry that has become notorious for labor violations. In addition to not receiving hourly pay, she, along with other dancers, had to pay a range of fees as part of working as an independent contractor. They ranged from $55 for leasing the club’s space to $20 for the D.J. as well as between $3 to $5 for each security guard, all depending on the shift. These types of performance fees are common across the industry.
The expenses easily could amount to $150, Encarnacion said. Sometimes, she said, she saw girls hitting the ATM because they had not made enough in tips to cover their costs if business was slow that day.
The $6 million payout could benefit more than 4,700 women who worked at three club locations over the last five years. In addition to the one in Hallandale, there are clubs in Tampa and Toledo, Ohio.
Galvin Kennedy, one of Encarnacion’s lawyers, said that mis-classifying exotic dancers as independent contractors is common in the industry because of the financial incentive for club owners. Employers can not only skip out on wages but also avoid taxes and insurance. But they don’t always get away with it.
In April, Rick’s Cabaret settled a class action suit in New York for $15 million because of similar labor violations. And last December, Jaguar Gold Clubs in Texas settled a dispute with its dancers for $2.3 million.
Kennedy said his Houston-based firm alone has between 10 to 20 similar cases pending across the country.
The settlement does not compel Scarlett’s to change its labor practices, but other recent cases have led to more forceful legal decisions. Last October, the Nevada Supreme Court unanimously ruled that dancers at Sapphire Gentleman’s Club must be classified as employees rather than independent contractors. And earlier in 2014, courts in Georgia and Arkansas also ruled in favor of classifying dancers as employees.
Despite the settlements and a nearly uninterrupted precedent of dancers winning these types of cases, Kennedy said that he was doubtful about a major shift in labor practices without continued efforts to hold employers accountable.
“While I would hope that this would mean things will change, unless more ladies speak up I don’t think the industry is going to change its practices,” he said.
In calls to strip clubs around Miami, some managers said they gave dancers a choice of whether they wanted to work as independent contractors or employees but did not elaborate on the differences of what this meant for their wages or performance fees.
Scarlett’s corporate office declined to answer questions and management also escorted a reporter from the premises of the Hallandale location after the reporter asked questions. Lawyers who represented the club did not return phone calls seeking comment.
A dancer at Scarlett’s in Hallandale said performers were now given the choice of how they wanted to classify themselves but was called away by a manager before answering further questions.
According to the Department of Labor, however, offering that choice may not be sufficient to meet the requirements of the Fair Labor Standards Act, which guarantees certain employment protections including minimum wage and overtime.
Will Garnitz, district director of the Department of Labor’s Miami office, said that whether someone is an employee or an independent contractor depends on the nature of the relationship, not the decision of the employee.
“If it’s an employment relationship, then it’s not a choice” for workers of how they want to be classified, Garnitz said. “An individual cannot waive their protections under the Fair Labor Standards Act.”
If an individual is working full-time and exclusively for one company, these are usually signs that the person is an employee, not an independent contractor, which would signify a relationship between two businesses, he said.
Encarnacion believes that if she had received hourly wages, it might have made a deeper dent in her $30,000 student debt. She incurred the debt while completing her business degree, which she earned in 2013, at Berkeley College, a for-profit college based in New York. While the settlement may not amount to a substantial award after dividing it among thousands of dancers and considering legal fees, Encarnacion said her motivation for the suit was larger than just recovering back pay.
“I wanted to bring awareness to this so that other people would know their rights,” she said.