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Under Kansas labor law, strippers are employees of the clubs where they work and are entitled to employment-related benefits, the Kansas Supreme Court ruled.
The case stems from a determination by the Kansas Department of Labor after an exotic dancer at Topeka, Kan.-based Club Orleans filed an unemployment claim in 2005. The department decided that under state law the club's dancers were employees. Two lower courts upheld the determination.
At the forefront of the case is whether employers can classify workers as independent contractors rather than employees, industry experts say.
While the Kansas Supreme Court's ruling was limited to unemployment insurance benefits, the decision may be “persuasive” for other workers that are classified as independent contractors who are seeking employee status for employment benefits such as workers compensation, disability benefits and other federal protections, said James C. Spencer, member at Hinkle Law Firm L.L.C., in Wichita, Kan.
In the case, Milano's Inc. v. Kansas Department of Labor Contributors Unit, John Samples, president of Milano's and owner of Club Orleans, appealed the Kansas Department of Labor's determination that the dancers are employees for purposes of unemployment insurance, according to court documents.
Mr. Samples argued that the dancers weren't his employees, rather independent entertainment contractors, because they were not paid a wage but directly paid by the individual patrons of the club in the form of tips, according to court documents.
The state's high court in Topeka last week upheld the decisions of the labor department and two lower courts, ruling that Club Orleans management had control over the dancer's activities that requires them to be classified as employees.
Such activities include minimum tip policies, dancers are required to accept drinks from customers, and Milano's provided some supplies to the dancers, among others, according to court papers.
“Ample substantial competent evidence in the record … demonstrates that Milano's possessed such a right of control over the dancers at Club Orleans,” Supreme Court Justine Carol A. Beier wrote in opinion. “Most telling, the house set various rules, and dancers' violations of those rules were punishable by fines and termination.”
“This case highlights that employers do not have the discretion to decide whether a worker is an independent contractor versus an employee,” Denise Portnoy, an associate at Spencer Fane Britt & Browne L.L.P. in Overland Park, Kan., said in an email.
Such classifications of workers have “consequences beyond eligibility for state unemployment benefits,” she said.
“Based on this decision, Milanos Inc. well may have misclassified its dancers not only for purposes of unemployment insurance, but for purposes of other laws as well,” Ms. Portnoy said.
The ruling also illustrates that federal and state agencies continue to look for cases of worker misclassification, said Hinkle's Mr. Spencer.
“The fact that this court found that they were employees, it would make it pretty likely that if they were trying to show that they were entitled to protections under other statutes, that they'd win,” he said.
The Department of Labor is soliciting comments on a proposed survey to collect information about “employees' experience with worker misclassification,” the department said in a notice published in the Federal Register on Friday.