The what, why & how of converting dancers into employees
The EXPO Legal Panel will feature a club owner who converted the dancers at four clubs to the “employee” model, as well as two labor attorneys who specialize in these conversions.
At the very first Gentlemen’s Club EXPO in 1993, the most popular legal topic of debate was the dancer classification — employee versus independent contractor.
At the EXPO in 1998, and at several subsequent conventions, there were entire legal panels devoted to this issue. One labor attorney, Lynn Hensley, faced nothing but opposition for his staunch view that dancers were, in fact, employees.
Now flash forward to the EXPOs in 2000, 2005, 2010, 2015 … and what was one of the hottest topics of conversation in the legal realm? Did you guess dancer classification? Ding ding ding, you’re today’s big winner!
Over the past 25 years, ED readers and EXPO attendees have read and heard so much in regard to dancer classification; most recently, they’ve heard countless stories about the dancer class-action lawsuits that have become the scourge of the adult nightclub industry. If your club hasn’t been hit by one of these suits, you know someone who has—and you may be living in fear of when your time will come.
But there’s one side of this issue that has not been discussed at length at EXPO or in the pages of this magazine. That is, what EXACTLY does it mean to classify entertainers as employees? What would a club owner need to do to make that conversion, what are the potential benefits and risks, and how will entertainers react to being “hired” as employees rather than remaining “independent”?
These are the questions that will be answered at the 2017 EXPO’s Legal Panel, “The future of entertainer classification: Employees.” The goal of this panel is not to convince club owners and operators to convert their dancers to employees, but rather, to answer any and all questions related to a conversion. Participants in this panel include Joey Bien, owner of The Treasure Clubs, who has converted four of his clubs to the employee model for entertainers, as well as two labor attorneys—Rey Velazquez and Jeffrey Kimmel—who are experts in this area and can explain all of the legalities associated with such a conversion.
“The biggest challenge (in converting entertainers to employees) is getting managers and staff involved in it and understanding it,” opines Bien, who is also a member of the ACE National Board. “You’re asking them to think outside the box. The immediate positive of this conversion is, we now have better control of the product we put out on the floor. And believe it or not the girls are happier being employees. It’s not a perfect system and there are pitfalls you come across, but if I had to do it again I’d do it in a heartbeat. Our revenues have gone up, no question.”
Bien began this conversion process about four years ago, when he became disappointed with what he was seeing from the entertainers at his clubs. “We weren’t being sued and there was no threat of a lawsuit at the time, but I had just gone into one of my clubs and looked around and didn’t think we were putting our best foot forward,” Bien says of his Treasure Clubs in Asheville & Greensboro, NC, Myrtle Beach, SC and Roanoke, VA. “I saw entertainers on cell phones, saw them not caring like they had years ago. I didn’t like the product and I wanted to get control of the entertainers; but to do that, to get that control, they had to become employees.”
The first call Bien made was to Florida-based labor attorney Rey Velazquez, who answered Bien’s many questions about exactly what a entertainer-to-employee conversion meant for his clubs. Bien was surprised by some of what he heard from Velazquez.
“I told him, ‘I’m not really worried about lawsuits [pertaining the way Bien was classifying the entertainers].’ I said, ‘Rey, our entertainers in Asheville (North Carolina) have to have a license, they pay a lot of money for that, so that means they’re independent contractors.’ He said ‘No, it doesn’t.’ He told me the license requirement did not make them independent contractors. So we put a business plan together, discussed it at length with an accounting firm and an outside payroll company, etc. It took about a year to figure it out; since there was no model to copy, we created it on the fly.”
“Once Joey made the decision to convert, he followed the process very closely, but allowed me to do what was necessary to make the transition as smooth as possible,” adds Velazquez, an attorney with the FordHarrison LLP (labor and employment law) firm. “That being said, the greatest challenge in converting any club from the independent contractor to employee business model is the communication piece. It is very important for club owners to understand that such a drastic business model change cannot be done in a vacuum.”
“A lot of owners fear that the girls aren’t going to like it, but I can’t even begin to tell you how much they do like it. It’s unbelievable. They become real people, real employees. There’s no harm in people treating (dancing) as a real job.” - Joey Bien
Labor attorney Jeffrey Kimmel has structured the entertainer relationships for several adult nightclubs using the employee model. At the EXPO’s legal panel, Kimmel will be discussing the best method to classify entertainers as employees to reduce the legal exposure from litigants and governmental agencies, and will also discuss the “commissioned salesperson” structure for entertainers and how that structure can reduce exposure for clubs without requiring them to drastically change the way they currently conduct business.
“As every club owner knows, as a result of the classification of entertainers as independent contractors or other types of ‘non-employees,’ clubs are targets for private lawsuits and governmental agency investigations,” says Kimmel. “Converting entertainers to employees may be a way for clubs to avoid the needless substantial expense of responding to these investigations and lawsuits.”
Kimmel acknowledges that converting entertainers to employees will require a change in the way club owners approach their business, and there are multiple financial implications.
“There will be some increase in payroll taxes, unemployment insurance and social security contributions, but these are what substantially reduce exposure and liability,” Kimmel notes. “Also, these expenditures can potentially recouped elsewhere in the structure. There are also record-keeping requirements for club owners, including clocking hours worked by all employees and amounts earned by them.”
Still, despite all the time, work and effort it took to convert four clubs to the employee model, Joey Bien couldn’t be happier with the results.
“Once the lawsuits started and the entertainers got wind of it, you started to hear them say, ‘You can’t tell me what to do, I’m independent,’” Bien adds, noting that his conversion only added to the number and quality of the entertainers at his clubs. “And I thought, you know, you’re right — so I’m going to do something about that. We’ve gotten so many first-time entertainers because of this. We get to train them and they learn the right way to do things. They become spectacular entertainers.”
When asked what he’d tell a fellow club owner about what it will—and won’t—mean for their club if they convert, Bien immediately attempts to dissolve the typical fears associated with this conversion.
“A lot of owners fear that the girls aren’t going to like it, but I can’t even begin to tell you how much they do like it,” says Bien of the dancers’ reaction to becoming “employees.” “It’s unbelievable. They become real people, real employees. They can buy a house, buy a car or rent an apartment, because they now have verification of employment. It’s how you present it to them. There’s no harm in people treating (dancing) as a real job.
“I’ve heard people say, once you convert entertainers to employees you then open yourself up to all of these lawsuits; sexual harassment, etc.,” Bien adds. “I encourage you to speak to an attorney on this, because even if you classify your entertainers as independent contractors you could still face a sexual harassment lawsuit. There are some [lawsuits] you aren’t open to if they’re employees. Sure, it’s a process, but for us it’s well worth it and we all sleep better at night.”