#although to be fair if it came from anyone other than 999

[milkmynk]

Just thinking about how KDJ receives a ton of flak for sacrificing himself all the time but frankly, he did really well. Like just incredibly well. He took down the Constellations, dismantled the Star Stream, gave everyone a happy ending (besides himself).

Frankly, it's a paltry price. One man for entire worldlines? People have sacrificed themselves for far less. Sure, that one man means the world to a few, but the vast majority of people would say that he's a hero, that it was a sacrifice well-made.

I just... think that KDJ needs to be praised more for what he accomplished. He's always had this negative view of himself that he failed throughout life, that he's undeserving, that he's not good enough... And heck, I don't think Kimcom would praise him after he returns, cause he gave them all the worst trauma of their lives 😂

So... yeah. I think it'd mean a lot to KDJ if 999, the YJH he looked up to the most, could give him a pat on the head and praise him for a job well done. Especially since 999 would be the YJH most likely to understand KDJ's actions.

I mean... KDJ even says as much. That he hopes someone (HSY) could reassure him that he was doing good. But nobody ever did :/

[kpopordie]

The problem with

Fu Ya Ning (푸야닝)

(So far: episode 4)

Many of us were first introduced to Fu Ya Ning as the girl that came in and dissed the beloved Yujin. With a little help from Mnet we had ourselves a good villain right from the start.

She was someone for the antis to root for, the drama seekers to love, and the CLC fans to rally against. But, really, she was someone to suck all of us viewers in. It worked. We all held our breath as we watched.

The Helicopter performance. This is where you really see her personality for the first time. Her strategy and her skill. She is talented and she knows it. She boldly projects confidence whether this is a front or not we do not know. It seems her plan here was find the biggest kid on the playground and punch her out- so to speak.

When it became known that Yaning’s threats were empty and edited with malice she became much less hated among fans. Although she still left a bad taste in many mouths.

Although, this plan did not work. Clearly she did not “Go up” considering Yujin made it into the top nine and Yaning did not. How this will determine her behavior later on is unknown.

When Yaning (let’s be real here) demanded the role of leader in episode 3, she confirmed her need to be in total control. Her reasoning being age.

“I’m 25. I’m the oldest.” Leaving no room for conversation or debate. Age being an important thing in Asian culture that must be respected by the young. This is not something you go against especially on national tv.

I personally feel Yaning showed her first major fault in leadership by abusing this. She TOOK power and made it about age. knowing very well if anyone younger than her spoke up it would be seen as disrespectful soiling their name like it has many other idols before them.

Let’s talk about You Dayeon

Fu Ya Ning handled this situation poorly continuously showing us her poor leadership skills.

Let’s review what was happening:

Dayeon was feeling confused and discouraged over rules set by Yaning that she felt didn’t make sense. Yaning told the girls they could only try out for one part. If you wanted another one that was too bad.

When Dayeon became overwhelmed it came out through tears, many of the teammates hugged her and asked her what was troubling her. This is where I want to praise Dayeon for not shutting down. She regained herself and spoke clearly explaining her confusion and asking Yaning to try out for more parts.

To this Yaning scolded her and twisted her words as if Dayeon was asking for special treatment. Yaning told her it wouldn’t be fair to the others, but it would, be if they could all try out for more parts. This left me wondering if Yaning feared losing her part since Dayeon originally tried out for hers.

Dayeon, again, expressed her wish to have been leader and regret in choosing Fu Ya Ning as a teammate.

Remember Dayeon not speaking up to become leader is not on her. Many idols have had issues being labeled disrespectful for simply speaking informally to a close friend. What were to happen if she decided to challenge Yaning for leadership who was already using age as a weapon?

After their interim evaluation the judges could tell though individually exceeding they failed to work as a team. Plus, some roles weren’t suited correctly- to this Dayeon nervously spoke up. Shyly, she explained what she was so harshly shut down for by her leader. The judges agreed with Dayeon and explained to Yaning why it’s important each member gets the part best suited for them. It’s not about being fair, it’s about finding how you fit together.

Though this was obviously Yaning’s shortcoming as a leader but somehow Dayeon seemed to take the heat for it. Dayeon ended up getting scolded by the judges and her teammates telling her she should have spoken up before the evaluation. - this was confusing considering she did.

Yaning did not take any responsibility for this mistake but instead blamed her team stating “How would I know if they don’t tell me?”

This was disappointing but not surprising. Yaning also seemed to miss the point. This wasn’t about the members wanting different parts it was about the members not fitting into their roles.

As leader Yaning created an unsafe environment. A place where almost all of the members felt the group was taking a turn for the worst but couldn’t say anything out of fear for the same treatment of Dayeon.

The Problem?

So what is the problem with Fu Ya Ning?

I believe Yaning has become focused on winning and cleared her mind of all others. She has lost the ability to connect and wants only to show her skills.

Though she is talented Yaning will be unable to learn/grow if she refuses to listen and work with teammates. She is still a trainee and has a lot to learn. If she could have befriended Yujin, instead, Yaning might have gained friendship and insight to the Kpop world rather than antis.

⚫️Redemption?⚪️

Do I believe Fa Ya Ning can be redeemed? Yes. I fully believe that Yaning can unlearn this all for one and one for me attitude. What Yaning is missing is the ability to work with a team.

If she can take a step back from this tough girl persona and learn how to connect and care for others I believe she will do great in girls planet 999.

If Yaning cannot get over herself then she needs to debut solo.

GP999 winners have a responsibility to bond with one another and work as a team. If she keeps going down this path I don’t believe she could fulfill that.

[edogawatranslations]

999: Alterna (2) - Part 7, Chapter 6

Table of Contents | Previous: Part 7, Chapter 5

Chapter 6

A throaty cackle broke the suffocating silence. It was Ace.

“You’re calling me a murderer? That’s hilarious. To think you'd suspect someone like me."

“I’m not suspecting you. I'm certain it's you.”

“That’s enough of your bullshit,” Ace said, his expression becoming more stern. “What proof do you have?”

“I have three reasons to believe you’re guilty.”

“How laughable. Go ahead, convince me.” Ace issued the challenge with his arms wide open.

I had no choice but to go at him with everything I had.

“Think back to what happened in the large hospital room. A few hours ago, when all seven of us couldn't move forward, you offered to remain behind. Why?”

“Isn’t that obvious? I wished to save everyone else.”

“Nope, that’s wrong. It was because you didn’t want us to discover the corpse in the x-ray room.”

Ace didn’t react. I kept my gaze fixed on him and continued talking. “You knew that if you stayed in the hospital room alone, the other six of us would have no choice but to continue through the [7] and [8] doors.”

“Give me a break,” Ace huffed. “I can understand how you may feel envious of my altruistic actions. However, that is no reason to cast my heroism in a negative light. I simply selflessly desired to save all of your lives.”

“Selflessly? That’s not even close to the truth. You knew that no matter which doors we passed through, we would've looped back to the large hospital room.”

His eyes narrowed. “W-What are you saying? There’s no way I could have known that!”

His body was clearly trembling.

“Well, we’ll leave that at that. I have two other reasons to go through.”

“And those are?”

“The second reason, as I explained a moment ago, is that you're afflicted with prosopagnosia.”

“Are you insinuating that anyone who can’t distinguish people’s faces is inherently evil? That’s quite prejudiced, Junpei.”

“Please. That stupid reason isn’t enough to suspect anyone.”

“Then what are you—”

“Before I explain, there’s something important I should tell you. The body in the x-ray room isn’t Snake’s.”

“What?”

In the blink of an eye, Ace’s face suddenly paled. The others in the room stood shaking as well. I could sense the anxiety in the room.

“Clover, could you tell us something? How did Snake, your brother, end up blind?”

“I was about to fall from a cliff, and he tried to rescue me...” Clover answered, visibly distressed.

“At that time, he didn’t just lose his sight, but also his left arm, correct? That’s why he wasn’t able to play guitar anymore.”

She nodded.

“Left arm? Then his left arm is a prosthetic limb?” Lotus jumped in, her eyes widening in realization. “Wait a minute. If I remember correctly, the corpse in the x-ray room...”

“Exactly. The left wrist that shot off from the charred body, without a doubt, was a human hand. Therefore, the body in the x-ray room isn’t Snake’s.”

“Then... He’s still...” Clover said, her expression brightening.

“Yeah. He’s got to be alive.”

“I’m glad... Brother...” Tears started streaming out of her blinking eyes.

“No... That can’t be... That’s ridiculous...” In contrast to Clover, Ace muttered to himself, the color drained from his face.

“Let’s suppose the culprit didn’t have prosopagnosia. In that case, they would've realized the person they tried to kill wasn’t Snake. Even if the victim was wearing Snake’s clothes, their faces would be completely different. But for some reason, the culprit killed the victim anyways. Why? Why would they need to kill an unknown person who had suddenly appeared out of nowhere?”

“...”

“If the culprit had prosopagnosia, then all of the pieces fit together. They mistook the victim as Snake and killed him.”

“Wait. Wait just a moment,” Ace said with a restless voice. “For argument’s sake, let’s assume I am the murderer. I would have no motive to kill. Why would I have to kill Snake?”

I had already expected that Ace would respond as such. Without hesitation, I said, “You had two motives.”

“What?”

“The first was that Snake was aware of your past.”

Ace suddenly grew flustered.

“If the details of your past came out to everyone else, that would be quite troublesome for you. That’s why you decided to silence Snake by killing him, right?”

“I-I have no idea what you’re—”

“Second,” I continued, ignoring his excuses, “Snake deeply resented you. You weren’t sure if or when he would go after you. He was nothing but a threat. To eliminate the threat as soon as possible, you killed—”

“W-Wait a second!” Lotus interrupted. “What... What happened in Ace’s past?”

“A certain someone told me earlier. The Nonary Game was held once nine years ago, and Snake participated in it. The game’s organizer was none other than the CEO of Cradle Pharmaceuticals, Gentarou Hongou—”

“That’s enough!” Ace shouted. His face was red with anger. “You’re spouting complete and utter bullshit! Who’s this ‘someone’ you mention? You can’t answer that. All of this is some fantasy concocted inside your head! It’s obvious who's more trustworthy here. Who would believe some brat like you over someone with high standing and honor as myself?!” Ace continued fuming and thrust his index finger in my direction. “Who are you working for?! Why are you trying to set me up?!”

“‘Me,’ you say? You said ‘me’ just now, didn't you?”

Ace gulped and turned away.

“So, you admit to being the CEO of Cradle Pharmaceuticals?”

“Y-Yeah. That’s right,” he answered, mindlessly tugging on the sleeves of his suit. “I am indeed the CEO of Cradle Pharmaceuticals, Gentarou Hongou. But what does that have to do with anything? I have no knowledge of a game nine years ago or anything else you’ve been saying. I don’t know who’s been feeding you these lies, but everything you’ve heard is nothing but bullshit. Actually...”

As if attempting to shut down any rebuttals, or wanting to change the subject, Ace started asking questions of his own. “Junpei. You’ve been acting as if I’m the sole culprit at work here, but take a deep breath and think through things logically. How would I have been able to kill Snake all by myself?”

“Not Snake. Someone else wearing Snake’s clothes.”

“That’s not the point!” Ace roared, making no effort to conceal his anger. “The culprit forced the victim into the [3] door, correct?”

“That’s most likely it.”

“Then it would be impossible for me to kill him by myself. After all, the [3] door wouldn’t have opened if it were just me and the victim.”

“He’s right, Jumpy. You need at least three people to open a numbered door, or else—”

“No, Ace could have opened it,” I said confidently, interrupting Akane.

“What did you say?” Ace seemed flustered, his eyes turning blood-shot.

Keeping my gaze locked onto him, I smirked. “Ace. There’s an item you secretly took that you’re currently hiding on you.”

“...What?” Ace’s face stiffened.

“I’m surprised. To think you had this on you...” I said, reaching into my jacket pocket.

“N-No way!” Ace scrambled to check his inner coat pocket.

“I see, so that’s where you’ve been hiding it.”

“Huh...?” He froze in place. “You tricked me!” After realizing my scheme, he shot me a menacing glare with his hand still inside his coat.

“Why don’t I guess what you’ve got hiding there? The [9] bracelet. Am I right?”

“What?” Lotus let out a surprised gasp.

Seven simply stared at me in a daze, his mouth agape. Akane covered her mouth with both of her hands, her eyes wide in shock.

“I see. That four-eyes’s bracelet, huh.” Santa muttered to himself while leaning against the wall.

“Ace, the man dressed as Snake, and the [9] bracelet. With these three pieces in play, opening the [3] door is simple.”

[1] + [2] + [9] = 12 1 + 2 = [3]

“That means it’s possible for Ace to have killed the man dressed as Snake by himself.”

After quietly taking his right hand out of his inner coat pocket, Ace drooped his head. Although I couldn’t see his expression, I could see that the edges of his lips were twitching.

“Go ahead and play dumb,” I continued. “Feel free to claim that you didn’t take any bracelet. All I ask is that you take off your coat. Is that fair?”

“Old man, do as he says,” Seven said, walking closer to Ace. “If you refuse, I’ll force it off of you.”

Right as soon as Seven brought his hands to Ace’s shoulders...

“Fufufu... Ahahahahaha!” Ace burst out into maniacal laughter. As he stretched out his arms and pointed his face towards the ceiling, his loud voice echoed throughout the room.

Before long, he stopped. His expression was completely devoid of any color.

“Well done, Junpei,” Ace said. His face was emotionless. “Just as you say, I have the [9] bracelet hidden in my coat. I retrieved it when everyone was off searching for the missing <RED> circuit boards. I snuck away from my post and went back through the orange door to the first-class cabin where the corpse was resting.”

Ace continued his confession coldly. “My objective, of course, was to gain the [9] bracelet into my possession. In this Nonary Game, the number nine plays an almighty role. After all, adding [9] to any number does not change the digital root.”

I gulped. I hadn’t realized that far, but Ace was right.

[1] + [9] = 10 → 1 + 0 = [1] [2] + [9] = 11 → 1 + 1 = [2] [3] + [9] = 12 → 1 + 2 = [3]

And so on.

Whoever had the [9] bracelet would be able to join any team without being left behind. It would allow them to enter any door, giving them a substantial advantage in this game.

“I didn’t have a particular use for it in mind, but I thought that as long as I had a trump card in my possession, I could find a way to utilize it. That is why I decided to retrieve the [9] bracelet, “ Ace continued after a short pause. “I returned to the large hospital room as if nothing had happened and found Snake standing in front of the [3] door. Although, I suppose that wasn’t Snake.”

Ace called out to the man in Snake’s clothes. The man turned around, but no words came out of his gaping mouth. It was as if he wasn’t completely alert, like a delusional patient.

“I had been wary of Snake since the very beginning. As Junpei explained, he knew about everything from nine years ago. Thus, I saw him as a threat. Of course, I didn’t recognize his face, but gathering from his voice and lack of sight, it was obvious.” Ace's face contorted. "I wondered, if he so despised me, then why didn't he say anything? He didn't approach me at all. Did he simply not realize who I was, because he couldn't see? Or was he one of Zero's accomplices plotting revenge against me? Either way, I felt threatened having someone who knew about my past around. I had to act before he could execute any plan—so I thought it opportune when there was nobody else around but the two of us. ...My eyes wandered over to the <RED> and saw the word <VACANT>. Did he insert the circuit boards? That didn't matter. It was the perfect opportunity. I knew that I had to involve it in my plan. So I immediately took action."

As if recalling what had happened, one of Ace's cheeks lifted into a menacing smirk.

After scanning his own bracelet and the [9] bracelet he had just retrieved, he must have grabbed onto the man's arm, forced him to authenticate on the device, and kicked him through the open [3] door. That wasn't something any normal human would think to do.

As evidence of that, all of the warmth in his eyes had long faded away. His lips and tongue wriggled around like those of a reptile.

"Let me ask you one more thing," I said, withstanding the unpleasant sight of his face. "Did you kill the man in the captain's cabin?"

"Why do you think that?"

"If the culprit is among us, then they had to have commited the murder during the short time after we passed through the numbered door and came into the chart room. But the long table in the middle of the room made it difficult to move to the captain's cabin. If someone other than you had headed towards the captain's cabin, then they would have definitely bumped into someone else. But since you were standing the closest to the captain's cabin—"

"..."

"Since you had a hand in conducting the Nonary Game nine years ago, you would have full knowledge of every room on this ship."

"Are you trying to say that I somehow managed to make my way there in the darkness? Preposterous. It would be too dangerous. What if someone had immediately found the light switch? Wouldn't that give me away?"

"The light switch was next to the [2] door. Nobody could've found it that quickly. If all of us were going through the numbered doors, then we had to go through the [1] and [5] doors."

"Your skills of deduction are sharp," Ace said. After licking his lower lip, his shoulders drooped resignedly. "I knew that the mastermind of this game, Zero, was in the captain's cabin. Nine years ago, I monitored every inch of the ship from within that room, after all. Like Snake, Zero had to have known about my past. That's why I had no choice but to kill him."

His monologue continued. "The moment I went through the door and realized the room was pitch black, I thought it would be my only chance. I slipped into the captain's cabin and turned on the light. A man was sitting with his back turned towards me. I called out to him, but he didn't respond. Just like the man in Snake's clothes, he had a blank expression on his face, like he had been drugged with sleep medication."

Beside the man, a single axe lay on the ground as if beckoning to be used to kill. After Ace took it in his grasp, he swung straight down at the man's chest. He didn't forget to wear the waterproof clothes hanging on the wall, to avoid any blood splatters.

"I thought I had made quite the noise in there, but everyone was off frantically searching for the <DEAD> and didn't seem to have noticed. After killing Zero, I rushed back to the chart room and turned on the light." After a quick rub of his beard, he continued moving his lips. "I suppose I should reveal something else while I'm at it."

With a gruff voice, he continued. "It was actually I who killed the man with the [9] bracelet."

Next: Part 7, Chapters 7-9

[tecezeposts]

TOP 5 Compliance That Every Organization Must Be Aware Off

What Is Corporate Compliance and Why It’s Important?

Regardless of your organization’s business, corporate compliance is an essential part of operations.

What is compliance with the corporate? Simply put, corporate compliance is the process of ensuring that the rules, legislation, guidelines and ethical practises that apply to your organisation are practised by the company and employees.

Good corporate regulation may include domestic policies and rules as well as federal and state legislation.

The regulation of corporate policy compliance should allow the business to prevent and identify breaches of laws. This can save the company from fines and criminal proceedings.

Corporate compliance also sets out employee conduct standards, helps your employees stay focused on the overall objectives of your company, and helps smooth operations.

This process is expected to continue. Many companies are setting up a corporate compliance system to assist policy and enforcement management.

The Top Regulatory Compliance Frameworks

GDPR. PCI-DSS. HIPAA. ISO 27001. These are just some of the acronyms names that organizations need to know today about large regulatory compliance systems. And with so many obscure acronyms to deal with, it can be difficult to keep track of what regulatory frameworks are applicable to what.

GDPR

The General Data Protection Regulation (GDPR) is the new and biggest regulatory compliance mechanism to be unveiled.

The GDPR which came into force in May 2018 is a law of the European Union. Nevertheless, since its provisions typically cover any company that does business in the European Union in some way or communicates with citizens of the European Union, the GDPR is applicable to many businesses outside the European Union.

The GDPR criteria are too lengthy to explain here, but you can check out some of our other GDPR reporting for more information— including What Is General Data Protection Regulation? The Basics Of GDPR

PCI DSS

Credit card information is a category of data that is quite important, for obvious reasons. The Payment Card Industry Data Security Standard, or PCI DSS, is a regulatory standard developed by credit card companies to help protect cardholder data. It was released in 2004.

PCI DSS refers to you if you process, store or transmit credit card data.

To know more about this compliance, you can check out What Is PCI-DSS, The Complete Guide To Online Payments Security.

HIPAA

One of the best-known regulatory compliance structures for customers in the United States is the Health Insurance Portability and Accountability Act, or HIPAA. Established in 1996, it sets, among other things, different standards and requirements with regard to health data. HIPAA is relatively high-level and was introduced at a time when platforms of technology looked very different than they do today (although they have been updated a little since then). As such, HIPAA does not include much in the way of specific technical criteria for how health data are protected, and the regulations of HIPAA are subject to a fair amount of interpretation as to how they should be applied from a technological point of view. Nonetheless, if you manage health data in one way or another on any of the IT infrastructures, it is a good idea to work with HIPAA security experts to ensure that you adhere to best practises for storing and processing data in ways that the authorities will find HIPAA-compliant. To know more about HIPAA compliance you can check out Requirements  for HIPAA

Cyber Essential Plus

Cyber Essentials Plus is the highest level of certification available under the Cyber Essentials scheme, an official UK-wide, government-backed certification that helps companies cope with the most common cyber threats and reduce their risk by at least 80%. Cyber Essentials Plus ensures that you have the five necessary technical checks in place, but independently verify your cyber security.

Our success towards achieving Cyber Essentials Plus

1. Quote

Our team can build a quote starting at £ 999. The estimate will be based on the scope of your IT and business solutions.

2. Preparation

You will need to make sure you meet the certification requirements. The method is quick and easy with the CyberSmart app, even for those with no professional IT support.

3. Audit

An audit by one of our evaluators will highlight any final issues and we will guide you in achieving the certification standard required.

4. Certify

Once the questionnaire and the technical audit have been completed, our assessor will help you submit your application and your certificate will be issued on the same day. To know more about this check out Cyber essentials and its benefits

ISO 27001

Compliance with ISO 27001 is the most standard and most applicable to the implementation of information security management (ISMS) standards. Originally published in 2005, in the midst of growing data breaches and safety lapses, the ISO family of standards for managing information security has recently received more attention. These are still not as common as HITRUST or SOC 2 audits.

ISO 27001 is a PCI or HIPAA compliance regulation. Within the ISO family there are about a dozen standards, but 27001 is the most common and most relevant to the provision of information security management system (ISMS) requirements. First introduced in 2005, the ISO standards were revised in 2013.

What is an ISMS?

An ISMS is essentially how you choose to approach the protection of your sensitive data. These data may include financial records, medical information, internal employee data or any other information that a third party has entrusted to you. The ISMS is not only the information itself, but the staff, procedures and software that surrounds it, which requires a system of risk management. The ISMS ‘ goal is to help organisations maintain secure information.

Who is involved in achieving ISO 27001 compliance?

Since ISO is a standard of management, this means that everyone is involved in the management team, not just the IT department. This includes your team’s CEO, CFO, and anyone else. Because each organisation is actively involved in achieving enforcement, making the entire management team part of the process makes it much easier to enforce security controls and a compliance culture across the board.

To know more about HIPAA compliance you can check out ISO 27001 consultancy service

How can compliance be implemented in the company?

To introduce and enforce compliance within the organisation, a compliance management system (CMS) is required. This system ensures compliance with all regulations and enables quick identification of breaches of laws. The aim of this CMS is to enforce and sustain a compliance culture that is straightforward, unambiguous and easily understandable. Nonetheless, the design of a CMS is not a simple undertaking due to the variety of topics and areas of interest that can influence the definition of enforcement. For a project like this, even medium-sized enterprises often lack the necessary know-how. There will be specific criteria for implementation depending on the sector, company size and form as well as the organisational structure, so there is no generally applicable protocol. The following, however, is a rough explanation of the most important steps.

Step 1: Assemble a team to comply

Every CMS starts with a company management commitment to enforcement and a concept that is unique to the client individually. This is the only way to make sure all those responsible get together and avoid misunderstandings about the project’s nature and scope. From how much personal capacity and expenditure they are willing to spare can already be seen how serious the management team is about this pledge. The active compliance group should be comprised of professionals from all organization divisions (e.g. staff management, financial management, legal department). It is only in this manner that all possible areas of interest and risk in the business can be defined and protected. It is possible to obtain additional professional experience from lawyers, tax advisors, and management consultants. Involving the works council in all decision-making processes is also legally necessary and advisable. It is necessary, for example, to decide whether to change existing employment contracts or operating agreements. A reasonable timeline and a clearly defined task distribution (including a knowledgeable team leader) will help manage costs and produce a timely outcome.

Step 2: Compliance analysis

The main task of the team is to analyse the current situation. It could be that the company already has (at least rudimentary) compliance structures that apply among employees in the form of “unwritten rules.” The target state is then defined on the basis of this pre-evaluation: which measures and mechanisms need to be supplemented, modified or completely recreated in order to do justice to the concept of compliance of the company? Identifying the interfaces of civil society that the company has to deal with in its daily business is worthwhile. Hiring a company with enforcement services that could manage processes and operations in line with existing regulatory regulations and requirements could even be worthwhile. Many companies work with workers to teach them how to integrate regulation into the environment of the internal workplace and offer many benefits as well: • Ensure compliance with all federal and state laws • Keeping a firm ethical footing • Transparent procedures for reporting • Processes that are well defined to increase efficiency • Reduced litigation scope and other legal issues • More efficient processes of auditing

Step 3: Formulate and communicate guidelines for compliance

There are various compliance policy trends on the internet, but content and structure do not have a general requirement. Alternatively, it is recommended that all guidelines be adjusted explicitly to the company’s individual needs and circumstances. The following could be one possible structure: • Specific laws of conduct • Complex problems (e.g. business partners ‘ gifts, competitor behaviour, workplace equal treatment) • Contact individuals and violation notification formalities • Mechanisms for recording infringements • Sanctions (e.g. reminder/caution, relocation, (extra)ordinary dismissal, reduction of wages, payment, police reports) When completed, it is necessary to communicate the enforcement guidelines freely throughout the organization. This is achieved by newsletters, intranet articles, and information events. Regular training sessions are required to raise awareness of the new compliance culture among all those involved in the company (including contractual partners and suppliers). It is also essential that all employees are bound by their contracts of employment through appropriate additional clauses. Many companies also decide in the form of a “Code of Conduct” or “Mission Statement” to place a reduced version of their compliance policy on their website. Being so open will strengthen customer and business partners ‘ confidence and draw candidates in the branding of employers. Nonetheless, the most important thing is that managers constantly set a good example and both internally and externally exemplify the culture of compliance.

Step 4: Implementation and adjustment in regular operation

Although the company management has the main responsibility and full liability for compliance, this responsibility can be given to a single chief compliance officer, a complete compliance team, or a company with compliance solutions (as mentioned above) can take over the work. These are then responsible, among other items, for the following tasks: • Implementing the CMS • Organizing training courses • Continuous control of quality • Conduct surveys of employees • Monitoring for improvements in law • If required, adapt, invest and further improve the CMS • Documentation of violations • Daily leadership statements Such a complex task requires professional and assertive workers, which is why hiring requires special care. In order to be able to work effectively, the compliance officer does not necessarily have to be at the highest level of management but should have a direct, reliable and shortest possible relation. This is the only way to ensure that compliance efforts are ultimately successful.

Is compliance a “business obstacle”?

In the light of existing laws and corporate social responsibility, the benefits and objectives of compliance measures are evident. This does nothing, however, to change the fact that in some management circles the theory has a very questionable image-challenging established procedures and hampering business activity.

Some find the main challenge in the enforcement concept’s inherent complexity and changeability. Companies, especially global players, face a real flood of domestic, regional, and industry-specific rules and bans. Themes are also constantly changing. As a result, robust compliance management systems are often seen only in large corporations, whereas in small and medium-sized enterprises the subject is often of secondary importance.

It makes it all the more relevant (and urgent) to ensure compliance with the regulations for all those responsible in the business and to appoint a trained and experienced compliance officer to address the job description challenges.

[onespoongirl]

Let Sleeping Wolves Lie | Chapter 4

Pairing: Stiles/oc/Lydia (polyamory)

Fandom: Teen Wolf

Read on ff.net or AO3

Summary: Beth has just moved across the Atlantic to be closer to her father, who lives in Beacon Hills, but she arrives just in time for a dead body in the woods and something monstrous prowling the school hallways. American teen sitcoms really didn't prepare her for this.

Word count: 6583

Chapter Index

Chapter 4: Strange Bethfellows

Waking up was nothing short of a harrowing experience. Looking up at an unfamiliar ceiling, Beth opened her mouth and let out a confused groan. It wasn't until she turned her head and saw the slumbering Lydia next to her that she recognised where she was.

There was a weird kind of silence over the house, a kind of quiet after the storm so to speak. The only sound was an occasional sigh from the sleeping Lydia.

Beth felt uncharacteristically well, even though she'd woken up way earlier than necessary on a weekend. There was a bitter, disgusting taste in her mouth and her right foot felt sore as if she had twisted it sometime the night before but other than that, there was a suspicious lack of head-splitting pain.

With a smile, she moved to get out of bed and her optimism faltered; the second she moved from her prone position, nausea shot down from her head to her stomach, like lightning from a discount Zeus. She put a hand up to her mouth as if to physically hold back on the sick that were churning in her stomach.

"Do not throw up on my bed," said a voice, and Beth looked around until the room spun. Lydia was propped up on her bed, head tousled from sleep and a crease on her cheek where she had laid on a fold. It was rare to see Lydia not carefully made up from top to bottom. Seeing her friend like this helped Beth remember that under the snarky exterior and designer clothes, Lydia was a human who got creases on her face just like everyone else.

"Wasn't I supposed to take the guest bedroom?" Beth said after she was sure she wouldn't be sick on Lydia's floor. She warily leaned back against the headboard and folded her hands across her uneasy stomach.

"You were," came the clipped response. "You staggered in here after the last guest had gone home. I'm not actually sure if you fell asleep or passed out. Jackson wanted to drag you outside and leave you in a bush." Lydia stretched her arms above her head and shook her head so her red locks danced around her. She looked entirely too lively this early in the morning and after a party no less. "I tried to wake you but you were already totally gone."

Beth closed her eyes and groaned. The fact that Jackson had been there to witness Drunk Beth climb into bed with his girlfriend was beyond embarrassing. "Well, I'm glad you were there to save my arse from getting hypothermia," she mumbled.

Lydia patted her on the hand. "What makes you think I had anything to do with it? You have Danny to thank for that." She swung her legs over the bed and showed the first sign that she wasn't as unaffected as she looked. Her legs were a bit wobbly as she walked to the vanity and sat down.

Beth groaned louder and hid under a blanket. "Danny was here too? Well, isn't that profoundly mortifying. Wait," she said, and ripped the blanket away so she could fix Lydia with a horrified look, "where's Jackson? God, I didn't spoon him, did I? Lydia, tell me I didn't spoon him."

Lydia looked at Beth in the mirror, while she brushed her hair. She smiled haughtily. "As much as I like watching you writhe in embarrassment, you did not. He went home with Danny after you rudely took his spot. He looked pissed, too, so you better come up with a damn good apology."

"I was unseemly drunk, I'm not sure I can be entirely accountable for my actions."

Lydia put the brush down and turned around in the chair so she could look at Beth properly. "Spoken like a true alcoholic," she said with a sugary voice.

"Alright, I'll buy him a card or something. D'you think they sell ‘sorry I climbed into your girlfriend's bed' at the grocer's?"

"After you moved to Beacon Hills I can imagine they'll see an increase in apology cards sales." Beth stuck out her tongue at Lydia, who grimaced in return. "Have anyone ever told you that you literally sleep like the dead? For a moment I thought you'd stopped breathing."

"You are not the first to tell me that. My mum called 999 once when I was 5 because she thought I'd stopped breathing." Beth balanced on the edge of the bed while she fumbled around after her phone, which she found in the pocket of her discarded jeans. The sight of the cracked screen reminded her of the incident on the road, and she looked up at Lydia. She hadn't told anyone about what happened and she could already hear Lydia's voice admonishing her for being scared of what was probably a deer. Maybe it was better to wait until she really was accosted by some kind of cryptid before telling her friend.

Her phone was again courting death by flat battery, but Beth saw the text from Allison before it went out. "Allison says she got home safely last night. Nice of her to check in."

"Yeah, what happened to her and Scott last night? I saw them out by the pool but then …"

"She left me a voicemail that was pretty cryptic, but apparently something happened with Scott and she got a ride home from Stiles."

"Who?"

"And who leaves voicemails in 2011, honestly? Just send a text like a normal person." Beth began the job of shimmying on her trousers from the day before. "I'm famished. Do you want breakfast?"

"Yeah, sure. And since you've enjoyed so much of my hospitality," Lydia said and looked pointedly at the bed, "I think it's only fair that you get to make it."

"Lydia! First, I have to play photographer all night for you, and now you order me to cook breakfast. What am I, a glorified butler?"

Lydia paused in the doorway and smiled innocently. "Glorified?" she said

Beth went downstairs to the kitchen, limping a bit with every second step she took. She stopped dead in her tracks when she rounded the corner to the big open kitchen. It was an absolute disaster zone. The kitchen drain had been clogged with some unknown substance and the kitchen counter was littered with empty bottles and red plastic cups. The smell of alcohol that lingered all over the house was concentrated in the kitchen, where the floor was sticky from spilt drinks.

Very slowly, like someone who knew they had to help clean up, but really didn't want to, Beth started collecting empty bottles and putting them by the white, futuristic looking bin. She pointedly ignored whatever was going on with the sink.

It didn't take long before Lydia descended the stairs, wrapped in a silk dressing gown and with hair still wet from the shower. She scrunched her nose as she overlooked the chaos in the kitchen.

"I really regret staying the night. I know the last one helps clean but goddamn, this is going to take a week, it is!" Beth said from where she was crouched by the fridge. Somehow, a drunk partygoer had managed to wedge an empty bottle of Malibu in the little gap between the fridge and the counter, and Beth was trying to wriggle it out without breaking it. The contents of it were spilt all around the fridge, making everything smell like sickly sweet coconut.

"Yes, well. I'll go buy some breakfast. I don't think this kitchen is suitable to prepare anything right now." Lydia shot the sink a dismayed look, which Beth didn't think was quite appropriate for the level of grossness currently clogging up the sink. Injury

"Yeah, I think you just might be right. Just being in here is a health hazard. I've gotten hepatitis A to Z just from just standing here," Beth said and got up from a crouched position. She carefully navigated through the kitchen, trying to avoid stepping in the goo as much as possible.

While Lydia got ready to leave, Beth took a tour of the house to assess the damage. The kitchen was definitely the worst part, although someone had puked in the bushes next to the pool and she found some discarded male underwear behind a couch, which she promptly shoved as far down the bin as it could get.

Lydia still hadn't returned so Beth went to take a shower in the guest bathroom. After a bit hunting around, she found some fluffy white towels in one of the cupboards. The fresh feeling after the shower didn't last long though, as she had to put on her old clothes from the night before that smelled slightly of sweat and rum.

Lydia returned not long after with bagels and coffee. When they had eaten breakfast out on the terrace - the only place that didn't stink of alcohol - operation clean up commenced, with much whining from Beth. It didn't take a week but it did take them four hours of combined work to make the house presentable again. It wasn't exactly clear if Mrs Martin knew the exact extent of the party or not.

"What do you think happened to the girl in the woods?" Beth asked as she lounged on the couch. She was waiting for her father to come pick her up. "It's quite the way to start the new school year."

Lydia, who sat in an armchair and looked as exhausted as Beth felt – another sign that she wasn't as robotic as some might think – looked up from her phone. "You sound like I had anything to do with it."

"No, no, not like that. But has anything like this ever happened before?" Beth wriggled a bit so she could see Lydia from her prone position. She frowned when she saw Lydia turning her attention back to her phone.

"It probably has, given that this isn't exactly a new town," Lydia said. Her thumbs flew over the screen as she texted like her life depended on it.

Beth waited a moment before sighing and sitting up. "Someone told me that they found animal hairs on the body. What do you think it was?" Silence. Her features scrunched up into an annoyed grimace. "Me personally, I think it was Sasquatch who'd done it." Narrowing her eyes, she waited for Lydia to react. "Maybe he had help from his boyfriend the Mothman. What do you reckon their children would be called? Sasman? Mothsquatch?"

"You think I'm not listening to you, but I am."

"It doesn't sound like it."

Lydia lowered the phone a fraction of an inch. "Maybe that's because I simply. Don't. Care." She shot Beth an annoyed look before she returned to her phone.

Beth huffed indignantly and crossed her arms in front of her. Maybe Lydia didn't care about this, but she did, and the least Lydia could do was humour her a bit. "Oh, sorry. Maybe you'd care more if she'd been wearing the wrong colours or if she was killed by a-a wayward Louis Vuitton."

With an icy look, Lydia put down her phone. "Louis Vuitton. Really, Beth? You can do better than that."

"I think it got my point across well enough. You don't care about anything if it doesn't involve flaunting you status that, by the way, no one's going to care about in five years."

For a split second, there was an unidentifiable emotion in Lydia's eyes before they hardened to stone. "At least people will remember me for something. Why exactly is it you insist on that camera? Is there an actual reason or is it just because you know that is literally the only way people will find you interesting? Let's face it; I think we both know the answer." Her smile was all hard edges.

That hit a nerve. Beth's eyes prickled with unshed tears and her throat constricted painfully. Without another word, she got up and snatched her things from where they had been dropped on the coffee table. Lydia said nothing, having returned to typing on her phone. Stalking out of the room, Beth tried her hardest to keep from crying until she was out of the house. The moment the front door had slammed with more force than necessary, hot tears streamed down her face.

A few minutes later, she was perched on the curb in front of Lydia's house. Rubbed her eyes forcefully, she tried willing the tears to go away before Jaime showed up. She didn't feel like explaining what had happened to anyone.

Just as that thought had ended Jaime's car rounded the corner. With a groan, Beth got up and blinked furiously to get rid of the remaining tears.

"What happened?" Jaime asked her, as she closed the door behind her. He didn't start the car but sat and watched her expectantly. "Have you been crying?"

"Allergies," Beth said miserably and started crying again.

Jaime looked alarmed and grabbed her shoulder. "Beth, did something happen at the party?"

The quivering in his voice made Beth look up. She was used to him being, not indifferent, but passive, or solid or thoughtful. Now he just looked scared.

"Wha- oh god, no. Nothing happened at the party. I just had a row with Lydia is all. Honestly." She placed a hand on top of his and gave it a reassuring squeeze.

"You know you can talk to me about anything," Jaime said. There was still a hint of panic in his eyes.

"I know that," Beth said and shot him a kindly smile. "But really, I‘m fine."

Jaime shot her a concerned look, but he still started the car and began the drive home. Beth chatted along, trying to convince Jaime that there was nothing wrong. There was, of course, but nothing she really felt like discussing with her father.

When Beth got home, she haphazardly threw her stuff in her room, before she found Chloe and told her everything about the fight. It felt good getting it out there, and Chloe was a good listener, knowing exactly when to curse angrily at Lydia.

After dinner, she sat down in front of her computer, idly munching on some salted almonds, and waited for the computer to finish downloading the photos she'd taken of the party.

After a couple of minutes, the computer dinged, and Beth began the arduous task of sifting through all the photos she had taken and find out which one of them were suitable for eternalisation on the internet.

"Beth, what are you even doing?" she mumbled, as she looked at a particularly bad one. The camera had been crooked when she took it, so the drunk guy in the picture looked like he was standing nearly horizontal. The camera hadn't had time to focus properly so his outline was blurred enough that identification was impossible. "Away to the shame box with you," she sang, and with a couple of clicks, she saved it to a password-protected folder called "sin bin.”

A couple after that one made Beth squeal with laughter. She filled her lungs to shout after Chloe, but let it out in a huff when she saw the closed door. There was no way Chloe would hear her.

With a sigh, Beth got up and almost fell over her own feet in the hurry to get to the door. "CHLOE!" she yelled as soon as it was open. The responding crash as something fell to the floor from Chloe's room made Beth wince.

"God, what is it?" Chloe emerged from her room, looking frazzled at Beth, "is something wrong?"

"Oh, uh- I found your new profile picture for Facebook," Beth said with a sheepish grin.

"Are you kidding me? I thought a bear had crawled through your window and attacked you or something." She massaged her heart and scowled at Beth.

"Are there even bears in California?"

"How the hell should I know? And that's not the point. So you almost gave me a heart attack over a profile picture? I'm glad to hear my life means so much to you." Chloe flipped her hair over her shoulder and turned around to head back to her room.

"Not just any picture. Seriously, if you use this I-I swear, people will be all over you. You'd need to beat them off with a stick."

"Ew! Is that really how it goes? But alright, show me, then. Is this from the party?"

"It is indeed," Beth said and returned to her computer.

"Is there any of Felix Gamble? He's the creep that I told you about, the one who called me a whore when I said I didn't want to date him. I want some good blackmail on him when he inevitably tri-oh, my god." Chloe stopped dead when she saw the screen. "Beth, delete it."

"Aw, what? It's hilarious! I'm not going to delete it!"

"Beth! I will frickin' kill you," Chloe screeched, and dove for the computer. In the foreground of the photo was a lacrosse player striking a Captain Morgan pose, but it was the background that was really interesting. Chloe stood behind him with her arms stretched over her head, eyes and mouth wide open like a discount The Scream. It looked like she had been acting out a pretty dramatic looking story, but the camera had only caught that one, unfortunate snapshot.

Beth tried to wrestle Chloe away from the computer, but the older girl had height and strength on her side. She pinned Beth to the office chair and sat on her.

"That's not fair!" Beth squealed and tried to bat Chloe's hands away from the computer. The weight of Chloe was not unsubstantial, but it wasn't enough to make Beth panic. Her overworked muscles stung when she pushed against Chloe's back.

"What is going on in here? Jesus, are you fighting?" came Louie's voice from the doorway. Both Beth and Chloe stopped and looked at him for about 2 seconds before they resumed their fight.

"No worries Dad-I just … got it!" Chloe yelled triumphantly as the computer swooshed, indicating that the photo had been deleted.

"Uh, Okay," Louie said, and shook his head. "Um, Chloe, I think you're suffocating Beth."

"Gerroff!" Beth grunted as she tried to shove Chloe off her lap.

With a long-suffering sigh, Chloe got up and put her hands on her hips. "Next time I won't let you off so easy."

Beth dramatically gulped in air, as if someone had tried to drown her. "You nearly killed me, you did. I think I have a broken rib. Louie, she broke my rib!"

Louie snorted. "Please keep me out of this. I just wanted to make sure you didn't break the furniture."

"Your concern warms my heart."

"I am a saint, I know," Louie said with a smile and retreated from the door.

Chloe snorted and went to drag a spare chair over to the desk. "I think I'd better stay here and keep you in your place, in case you got any more unfortunate pictures."

"Maybe we'll find an embarrassing one of Felix Gamble," Beth said and scooted her chair closer to the computer.

They spent the next five minutes alternating between laughing and cringing at the often mortifying moments caught on film. Beth stopped when they got to a photo of two people she recognised. She furrowed her brow in confusion. "That's weird." On the photo Allison and Scott were facing forward, both wearing a dopey smile. Or Allison was, anyway, but Scott's face was obscured by two big lens flares.

Chloe leaned forward to get a better look. "Uh, that's unfortunate. Looks like the dude's got laser beams coming out of his face. You think he's about to kill Sarah Connor?"

"I don't think the Terminator had laser eyes," Beth said and zoomed in on Scott's face. Even with a lens hood, there was the possibility of flares, especially at night, but it seemed a little extreme, and none of the others was affected.

"Do you know who it is?"

"It's Scott McCall."

"Oh, so that must be Allison. She just started a week ago, right? Damn girl, she moves fast. She already snatched the best lacrosse player."

"Did you know that if you say ‘Scott McCall is the best lacrosse player' three times in the bathroom mirror, Jackson will come up from the shower drain and beat you to death with a lacrosse stick?"

Chloe laughed and shook her head. "No, but I want to see that horror movie."

Beth moved to the next picture and paused with her hand hovering over the keyboard. She had totally forgotten Derek Hale, but that wasn't what made her pause: his face, like Scott's, was hidden behind two big lens flares.

"Uh, is it your camera, maybe?" Chloe pushed Beth's hand away and zoomed in on his face. "I don't recognise him. Do you know who it is?"

Beth paused and looked at Chloe. She was a rotten liar but still, she didn't want to worry Chloe unduly. "No, he was just standing in the corner sort of … staring."

"Creepy. He probably wasn't invited because he's the kind of person to stand in the corner and stare." With a flourish, Chloe clicked on the next photo. "Ah, that's better. No flares of any kind."

Beth breathed a sigh of relief. "Thank god. I was actually scared my camera was broken."

It was just past ten when they finished going through the rest of the photos. Beth yawned and stretched her arms over her head. "I think I'm heading to bed."

Chloe sent her an incredulous look. "It's Saturday. What are you, 90?"

"I'm tired is what I am. I spent most of the day helping Lydia clean up after all you hooligans."

"I would've walked home if it meant I could get out of cleaning an entire house. Why didn't you try to sneak out the window or something?"

"Because I'm not a horrible friend. But I mean it, get out." Beth weakly pushed Chloe towards the door.

"Alright, I'm going. Goodnight, Grandma'," Chloe said and waved before she disappeared out of the door.

When Beth finally slid under the covers, she was off to a lovely, dreamless slumber in less than a minute.

When Beth arrived at school the next Monday she found Allison by her locker. The girl had a forlorn look in her eye as she gathered her books.

"Good morning," Beth said cheerfully, as she went to her locker and punched in the combination.

"Hey," came the unenthusiastic answer.

Beth frowned and leaned towards Allison's locker. "Are you all right? You sound a bit glum. Bad case of the Mondays, eh?" She jumped when Allison slammed her locker closed.

"I don't get boys," Allison said hotly, "I mean, Scott and I were having fun. We were dancing and suddenly he just runs off." She huffed a lock of hair out of her face and crossed her arms.

"Oh, right! That. Um, he didn't say what was wrong?" Beth moved closer, fiddling a bit with her a wayward curl.

"No!" Allison huffed and thrust out her jaw. "He told me that he'd be right back, but then he just took off in his car. I'm sorry for just leaving without saying goodbye, by the way. I tried to find you but- "

Beth waved her apology away. "Yeah, no, that's fine. I don't think I'd want to stay there either. So, he just abandoned you? What a dick move. Lucky that Stiles was there to drive you home."

One of confusion replaced Allison’s frustrated look. "Stiles? I-What do you mean? He didn't drive me home. He came by later, though, which was really weird."

"Huh? You said that one of Scott's friend drove you home didn't you?" Beth tried to remember if she had seen Scott with anyone else, but by the looks of it, he only really hung out with Stiles.

"Yeah, his name is Derek."

Beth's mouth fell open and her spine straightened as if she had just gotten a face full of ice water. Derek Hale had driven Allison home. Derek Hale the sour looking, serial killer-esque creep who was frightening enough to almost send her running through the dark forest, had driven Allison home. Had been alone with her in a car.

"Beth, are you-"

"Why would you ever go with him? Allison, that is really dangerous!" Beth's raised voice made some students shoot them weird looks. Beth ignored them.

Allison crossed and uncrossed her arms. "He's a friend of Scott's, so I didn't think it would be that big of a problem. Honestly, he was a lot more normal than you are right now," she said, with a bit of bite in her tone.

Beth, who had been gearing up for a proper tirade, paused and deflated a bit. Allison hadn't had the same weird experiences with Derek, so of course, she wasn't as wary of him. "You said that he was Scott's friend?" That was just as strange as Derek showing up at a high school party at all; a week ago, Scott hadn't even known Derek, though he could have become friends with him since then. Beth doubted it, though, as it didn't seem like Derek was someone who made friends easily. His death stare and brooding appearance must be a pretty big spanner in the works when it came to that.

"Yes," Allison said exasperatedly, "and I'm totally fine. Really." She uncrossed her arms and gestured to herself. "Not gotten eaten by a bear."

It's not the bear I'm scared of, Beth though, but decided against arguing further. She took a deep breath and rolled her shoulders to relieve some tension. "Alright, then. Just be careful, yeah?"

Allison smiled but it looked slightly strained. "I promise, mom." She said with a fair bit of annoyance in her voice.

Beth remembered that her parents were both overprotective and scary as hell, and Allison probably didn't need her friends start too, so she changed the subject. "Have you talked to Scott at all?"

Allison sighed and shook her head. "No. I kind of ignored his texts. This is more of a face to face deal; don't you think?"

Beth's eyes widened when she saw the object of their conversation walk through the doors and head for his locker. He locked eyes with Beth and stopped dead in his tracks.

"Uh, yeah, Scott's face is right there if you want to give it a go," Beth said and returned to her locker.

Allison froze but she didn't turn around. "Is he coming over here?" she asked in a panicked voice.

"Uh," Beth said and stole a look at the boy. He was facing his locker but hadn't made a move to open it. His head was bowed and he rested his forehead against the steel door. There was no doubt he knew he was in the doghouse. "He's not … he's doing, uh- something with the locker."

Allison, who looked flustered, schooled her face into a stony look. "Let's go," she said and grabbed Beth by the arm, who barely had time to close her locker before Allison dragged her down the hall. Her high heels clicked against the floor and she had a determined look. Beth felt positively bumbling beside her.

It only lasted until they rounded the corner. As soon as Scott was out of sight, Allison deflated and leaned against the wall.

Beth gave her shoulder a little squeeze.

Allison buried her face in her hands. "Do you think I should give him a second chance?" Her voice came out muffled.

Beth leaned against the wall next to her. "I am a terrible judge of character, so you really shouldn't ask me. What I can say is that you two seemed pretty happy when I saw you at the party."

Allison removed her hands and looked at Beth. "I just don't know …"

"Hey, who says you have to decide now? Let him suffer a bit. He deserves it." Beth lightly bumped Allison's shoulder with her own.

Allison smiled sincerely for the first time. "That's true."

The first bell rang, making them both jump. They hurried to class talking idly about anything not related to Scott or Derek or the party.

When Allison came through the door she stopped dead, and Beth crashed into her. She turned around with a harried look. "Switch places with me, please."

Beth looked over Allison's shoulder. Scott was sitting upright in his chair, his big, brown eyes trained on them.

"Um, okay. But then you'll just be in front of him. I reckon it's easier to ignore him …"

"Oh, thank you so much." Allison turned around again and squared her shoulders. She waltzed to Beth's seat and sat down primly, where she studiously ignored Scott, who was trying to talk to her.

When Beth passed him, she narrowed her eyes at him. The look of pure dejection she got in return made her waver, just a bit.

She had barely sat down in the seat before Stiles was leaning out of his chair towards her. The last bell hadn't rung yet, so he didn't really need to whisper like he did. "Are you angry at Scott too?" he asked, and threw his out his arm to keep himself from falling to the floor. Beth, who had leaned out from her chair, too, almost caught it in the face.

"Solidarity," she said, after dodging his flailing limb, "and I'm not happy with you either. You just left too."

Stiles had the grace to look embarrassed. He rubbed the back of his head and looked around the room. "Uh, yeah. Something came up, uh-"

"Does that something have something to do with Scott?" Beth asked and raised a brow. She had leaned out further, to avoid Scott hearing them talking about him. "What the hell happened?"

"N-no, why should it? I don't know what happened," he said, shaking his head vigorously.

Beth sent him a deadpanned look. "How stupid do you think I am? I have questions for you and-" she gestured wildly at Scott, who seemed to have resigned himself to mope at the back of Allison's head.

"There are no questions! We-uh, we just …" Stiles trailed off and shot a desperate look at Scott's back.

"Wow, who wouldn't believe you with a reply like that," Beth said dryly.

Stiles stared at her with wide eyes and opened his mouth though no sound came out. In that moment the last bell rang and with a sigh of relief he sat back in his chair and got suspiciously engrossed in his notes.

Beth made a sound of frustration but leaned back as well. Leaning her head on her hands, she tried to pay attention as the teacher droned on about Kafka.

At lunch, Beth had done her utmost to forget about Stiles and Scott. When she walked through the door, she remembered her row with Lydia the other day, when she saw the girl in question sitting by the centre table, already with a tray of cheap cafeteria food in front of her. When Beth sat down with her equally as stodgy lunch, Lydia regarded her with a cold stare, before she demonstratively turned around and started a conversation with some lacrosse player. Beth felt a stab of hurt before it was replaced by anger and she turned around to somewhat aggressively talk to Danny.

"So, who are you playing on Saturday?" Beth asked, as she forcefully stabbed a tough piece of chicken with her fork.

"Westerberg High. They're from the next county over. Um, Beth, are you okay? I think it's already dead." Danny looked pointedly at the now shredded chicken.

Beth, too, looked down at her lunch tray. "Double tap," she offered and started eating what was left of her lunch.

"Did something happen between you and Lydia? She didn't seem that mad when you fell asleep in her bed. Which is, by the way, one of the funniest things I've ever seen, so thank you for that."

Beth groaned and hid her face in her hands. "What's funny for you is utterly mortifying for me, so thanks for bringing it up, mate. And that's not it, anyway. It doesn't matter."

Danny leaned forward and shook his head. "Aw, c'mon. You're never anything else than cheerful. Sometimes it borders on the psychotic."

"Did you somehow work psychotic into a compliment?"

"I didn't fully intend it as a compliment, but-"

"-And you've only known me for two weeks, like. And-and, do you really want to know? I mean really? Are you sure you want to be privy to all my girly teenage angst?”

Danny threw up his hands in defeat. "You know what, I stand corrected. Just forget it."

She spent the rest of the lunch chatting with Danny and shooting the occasional angry glare at Lydia.

Allison approached the subject as they were walking to History. "So, I know why I'm angry at Scott. Why are you angry at Lydia?"

Beth sniffed in what she hoped was a haughty way. "It's so stupid, really. I mean, Lydia is stupid, and I'm totally in the right."

"Naturally," Allison said with a small smile.

"We just fought over … just some stuff. But she kept ignoring me today and it just pisses me off." Beth said and threw down her book on the desk with a loud thud.

Allison sat down at her own desk with a little more composure than Beth. She turned around in her seat so she was facing Beth, and rested her chin on her hand. "So how are you going to fix this? It's too early in the school year for this kind of drama."

Beth, who had hidden her face in her arms, peeked at Allison through her curls. "I'm just going to ignore it like any sane, non-confrontational person would do. I reckon she'll forget it in a couple of days."

Allison made a face. "Wow, that sounds really healthy … although I can't say I wouldn't do the same."

Beth straightened up and looked at Allison properly. "It works, it does. I've yet to lose a single friend from something as stupid as a row."

Allison looked sceptical. "Are you saying you've never fallen out with a friend? I don't believe that."

"Believe it, mate. I'm a friend for life. Why, have you left a slew of abandoned friendships?" Beth froze when she remembered Allison's travel history. There was probably a lot of lost friendships on that path. "Ah, right."

"There's the Beth we know and love," Allison said with a laugh.

Beth merely gave her two thumbs up and a meek smile. Fortunately, the bell rung and Mr Westover saved her from further embarrassing herself.

"Did you know that leeks are the national symbol of Wales?" Beth asked as she looked around the produce section for the aforementioned vegetable. It was after school and Beth and Louie were shopping for tonight's supper.

Louie stood nearby, digging around in a crate of mangos for the best one. "No, I did not. That's a weird national symbol, isn't it?" He thoughtfully studied a mango before he deemed it unsatisfactory and put it back in the crate. "Choose something normal like eagles or freedom like the rest of us."

"Okay, so it's because- ah, here they are –according to legend, Saint David- that's the patron saint of Wales, you know."

"Oh right, him. I love that guy. He's my favourite saint out of all of them." Louie found the perfect mango and moved on to scoop some potatoes into a plastic bag.

"So Saint David ordered his men to wear leeks on their helmet, to distinguish themselves from British invaders. Have you seen the swedes?" Beth glanced at the assorted vegetables like it was their fault she couldn't find her quarry.

"They're in Sweden where they belong."

"Hardy har har. You know, I'm inclined to agree with Chloe: you're not funny and you should probably stop before someone gets hurt." Beth said and smiled cheekily at him.

Louie grabbed a couple of swedes from where they were wedged between the wall and a crate of artichokes. "My humour is amazing, it's just that you need a more developed brain to fully comprehend it. Science. You'll understand when you get older," he said and tried to ruffle Beth's hair, which she quickly dodged.

"Since you're not technically my parent can I swear at you?" She asked innocently.

"No, because if you do then I will tell someone who is definitely your parent, and you'll get grounded." They moved on to the butcher section, where Louie ordered some lamb.

"Maybe I'm just acting up. Isn't that what teenagers are supposed to do?" Beth checked her shopping list for any ingredient they might have missed. "I'm being mean to my dad's new husband. And- and also, I just had to change schools and my mum is marrying some new bloke. I think I'm entitled to a little rebelliousness." She leaned against the trolley in a nonchalant way. It looked less nonchalant when it started to roll away from under her and nearly flattened a kid who walked past with a carton of milk.

After she was done profusely apologising to the kid and his mother, who glared daggers at her the entire time, Beth turned around to look at a snickering Louie. "Thanks for the help, mate. Now I might rebel for real."

Louie got his snickering under control as they moved towards the registers. "Speaking of, what do you think of this new bloke?" He said it in a weird nasal way, which Beth suspected was his British accent.

"Anthony? Uh, he's fine. Not really much to say about him," Beth said and shrugged. The movement looked weird with the way she was slung over the trolley's handlebar. Her stomach clenched uncomfortably at the thought of that whole mess.

"Your mom seems really happy. Wait, hold up." Louie disappeared down an aisle and came back a minute later with some laundry detergent.

"You talked with my mum?"

"I talk with Jaime who talks with your mom. Even more now after you moved here." Louie sighed when he saw the massive line in front of the two open registers.

"Yeah, they just got this new swanky flat. He's a banker, and I don't mean like just a normal bloke working at the tills, I mean a real and true capitalist one percenter. But a Welsh one percenter, which is not as impressive as an American one."

Louie mock gasped and covered his mouth with his hand. "You're lucky you made it out before Mr Fat Cat got his fat cat claws in you."

Beth snorted. "You make him sound like a moustache twirling villain in a kid's film. He's pretty normal. Just boring." He was normal and he made Anna happy, and that was what was most important, Beth kept telling herself.

"Urgh, boring? That's even worse!" Louie said and gave Beth's shoulder a friendly squeeze. "But, and I think I can speak for Chloe too, we're really happy that you're here. But only if you make us delicious dinner, so no pressure."

Previous chapter - Next chapter

[scotthunterne]

4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

Click McFeeley v. Jackson Street Entertainment, LLC to read the entire..

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[melanieclarkne]

4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

Click McFeeley v. Jackson Street Entertainment, LLC to read the entire..

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[anakeimmkna]

4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

Click McFeeley v. Jackson Street Entertainment, LLC to read the entire..

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[jimmiebrundagene]

4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

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[samuelsnownmna]

4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

Click McFeeley v. Jackson Street Entertainment, LLC to read the entire..

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[dianaelliottne]

4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

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4th Cir.: Strippers Are Employees NOT Independent Contractors; Trial Court Properly Applied the Economic Reality Test

McFeeley v. Jackson Street Entertainment, LLC

In this case, multiple exotic dancers sued their dance clubs for failure to comply with the Fair Labor Standards Act and corresponding Maryland wage and hour laws. The district court held that plaintiffs were employees of the defendant companies and not independent contractors as the clubs contended. Following a damages-only trial and judgment on behalf of the dancers, the Defendant-clubs appealed the court’s finding that the dancers were employees and not independent contractors.  The Fourth Circuit held that the court properly captured the economic reality of the relationship here, and thus affirmed the judgment.

The Fourth Circuit summarized the salient facts regarding the dancers’ relationship with the defendant-clubs as follows:

Anyone wishing to dance at either club was required to fill out a form and perform an audition. Defendants asked all hired dancers to sign agreements titled “Space/Lease Rental Agreement of Business Space” that explicitly categorized dancers as independent contractors. The clubs began using these agreements after being sued in 2011 by dancers who claimed, as plaintiffs do here, to have been employees rather than independent contractors. Defendant Offiah thereafter consulted an attorney, who drafted the agreement containing the “independent contractor” language.

Plaintiffs’ duties at Fuego and Extasy primarily involved dancing on stage and in certain other areas of the two clubs. At no point did the clubs pay the dancers an hourly wage or any other form of compensation. Rather, plaintiffs’ compensation was limited to performance fees and tips received directly from patrons. The clubs also collected a “tip-in” fee from everyone who entered either dance club, patrons and dancers alike. The dancers and clubs dispute other aspects of their working relationship, including work schedules and policies.

After discussing the traditional elements of the economic reality test, the Fourth Circuit discussed each element and concluded that, overall, they supported the district court’s holding that the dancers were employees and not independent contractors.

Here, as in so many FLSA disputes, plaintiffs and defendants offer competing narratives of their working relationship. The exotic dancers claim that all aspects of their work at Fuego and Extasy were closely regulated by defendants, from their hours to their earnings to their workplace conduct. The clubs, not surprisingly, portray the dancers as free agents that came and went as they pleased and used the clubs as nothing but a rented space in which to perform. The dueling depictions serve to remind us that the employee/independentcontractor distinction is not a bright line but a spectrum, and that courts must struggle with matters of degree rather than issue categorical pronouncements.

Based on the totality of the circumstances presented here, the relationship between plaintiffs and defendants falls on the employee side of the spectrum. Even given that we must view the facts in the light most favorable to defendants, see Ctr. for Individual Freedom, Inc. v. Tennant, 706 F.3d 270, 279 (4th Cir. 2013), we cannot accept defendants’ contrary characterization, which cherry-picks a few facts that supposedly tilt in their favor and downplays the weightier and more numerous factors indicative of an employment relationship. Most critical on the facts of this case is the first factor of the “economic realities” test: the degree of control that the putative employer has over the manner in which the work is performed.

The clubs insist they had very little control over the dancers. Plaintiffs were allegedly free in the clubs’ view to determine their own work schedules, how and when they performed, and whether they danced at clubs other than Fuego and Extasy. But the relaxed working relationship represented by defendants—the kind that perhaps every worker dreams about—finds little support in the record.

To the contrary, plaintiffs described and the district court found the following plain manifestations of defendants’ control over the dancers:

Dancers were required to sign in upon arriving at the club and to pay the “tip-in” or entrance fee required of both dancers and patrons.

The clubs dictated each dancer’s work schedule. As plaintiff Danielle Everett testified, “I ended up having a set schedule once I started at Fuego’s. Tuesdays and Thursdays there, and Mondays, Wednesdays, Fridays, and Saturdays at Extasy.” J.A. 578 (Everett’s deposition). This was typical of the deposition testimony submitted in the summary judgment record.

The clubs imposed written guidelines that all dancers had to obey during working hours. J.A. 769-77 (clubs’ rulebook). These rules went into considerable detail, banning drinking while working, smoking in the clubs’ bathroom, and loitering in the parking lot after business hours. They prohibited dancers from leaving the club and returning later in the night. Dancers were required to wear dance shoes at all times and could not bring family or friends to the clubs during working hours. Violations of the clubs’ guidelines carried penalties such as suspension or dismissal. Although the defendants claimed not to enforce the rules, as the district court put it, “[a]n employer’s ‘potential power’ to enforce its rules and manage dancers’ conduct is a form of control.” J.A. 997 (quoting Hart v. Rick’s Cabaret Int’l, Inc., 967 F.Supp.2d 901, 918 (S.D.N.Y. 2013)).

The clubs set the fees that dancers were supposed to charge patrons for private dances and dictated how tips and fees were handled. The guidelines explicitly state: “[D]o not [overcharge] our customers. If you do, you will be kicked out of the club.” J.A. 771.

Defendants personally instructed dancers on their behavior and conduct at work. For example, one manager stated that he “ ‘coached’ dancers whom he believed did not have the right attitude or were not behaving properly.” J.A. 997.

Defendants managed the clubs’ atmosphere and clientele by making all decisions regarding advertising, hours of operation, and the types of food and beverages sold, as well as handling lighting and music for the dancers. Id.

Reviewing the above factual circumstances into account the Fourth Circuit held that the district court was correct to conclude that the dancers were employees of the clubs under the FLSA and not independent contractors.  The Court reasoned:

Taking the above circumstances into account, the district court found that the clubs’ “significant control” over how plaintiffs performed their work bore little resemblance to the latitude normally afforded to independent contractors. J.A. 997. We agree. The many ways in which defendants directed the dancers rose to the level of control that an employer would typically exercise over an employee. To conclude otherwise would unduly downgrade the factor of employer control and exclude workers that the FLSA was designed to embrace.

None of this is to suggest that a worker automatically becomes an employee covered by the FLSA the moment a company exercises any control over him. After all, a company that engages an independent contractor seeks to exert some control, whether expressed orally or in writing, over the performance of the contractor’s duties and over his conduct on the company’s premises. It is rather hard to imagine a party contracting for needed services with an insouciant “Do whatever you want, wherever you want, and however you please.” A company that leases space or otherwise invites independent contractors onto its property might at a minimum wish to prohibit smoking and littering or to set the hours of use in order to keep the premises in good shape. Such conditions, along with the terms of performance and compensation, are part and parcel of bargaining between parties whose independent contractual status is not in dispute.

If any sign of control or any restriction on use of space could convert an independent contractor into an employee, there would soon be nothing left of the former category. Workers and managers alike might sorely miss the flexibility and freedom that independent-contractor status confers. But the degree of control the clubs exercised here over all aspects of the individual dancers’ work and of the clubs’ operation argues in favor of an employment relationship. Each of the other five factors of the “economic realities” test is either neutral or leads us in the same direction.

Two of those factors relate logically to one other: “the worker’s opportunities for profit or loss dependent on his managerial skill” and “the worker’s investment in equipment or material, or his employment of other workers.” Schultz, 466 F.3d at 305. The relevance of these two factors is intuitive. The more the worker’s earnings depend on his own managerial capacity rather than the company’s, and the more he is personally invested in the capital and labor of the enterprise, the less the worker is “economically dependent on the business” and the more he is “in business for himself” and hence an independent contractor. Id. at 304 (quoting Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994)).

The clubs attempt to capitalize on these two factors by highlighting that dancers relied on their own skill and ability to attract clients. They further contend that dancers sold tickets for entrance to the two clubs, distributed promotional flyers, and put their own photos on the flyers. As the district court noted, however, “[t]his argument—that dancers can ‘hustle’ to increase their profits—has been almost universally rejected.” J.A. 999 (collecting cases). It is natural for an employee to do his part in drumming up business for his employer, especially if the employee’s earnings depend on it. An obvious example might be a salesperson in a retail store who works hard at drawing foot traffic into the store. The skill that the employee exercises in that context is not managerial but simply good salesmanship.

Here, the lion’s share of the managerial skill and investment normally expected of employers came from the defendants. The district court found that the clubs’ managers “controlled the stream of clientele that appeared at the clubs by setting the clubs’ hours, coordinating and paying for all advertising, and managing the atmosphere within the clubs.” J.A. 1001. They “ultimately controlled a key determinant—pricing—affecting [p]laintiffs’ ability to make a profit.” Id. In terms of investment, defendants paid “rent for both clubs; the clubs’ bills such as water and electric; business liability insurance; and for radio and print advertising,” as well as wages for all non-performing staff. Id. at 1002. The dancers’ investment was limited to their own apparel and, on occasion, food and decorations they brought to the clubs. Id. at 1002-03.

On balance then, plaintiffs’ opportunities for profit or loss depended far more on defendants’ management and decision-making than on their own, and defendants’ investment in the clubs’ operation far exceeded the plaintiffs’. These two factors thus fail to tip the scales in favor of classifying the dancers as independent contractors.

As with the control factor, however, neither of these two elements should be overstated. Those who engage independent contractorsare often themselves companies or small businesses with employees of their own. Therefore, they have most likely invested in the labor and capital necessary to operate the business, taken on overhead costs, and exercised their managerial skill in ways that affect the opportunities for profit of their workers. Those fundamental components of running a company, however, hardly render anyone with whom the company transacts business an “employee” under the FLSA. The focus, as suggested by the wording of these two factors, should remain on the worker’s contribution to managerial decision-making and investment relative to the company’s. In this case, the ratio of managerial skill and operational support tilts too heavily towards the clubs to support an independent-contractor classification for the dancers.

The final three factors are more peripheral to the dispute here and will be discussed only briefly: the degree of skill required for the work; the permanence of the working relationship; and the degree to which the services rendered are an integral part of the putative employer’s business. As to the degree of skill required, the clubs conceded that they did not require dancers to have prior dancing experience. The district court properly found that “the minimal degree of skill required for exotic dancing at these clubs” supported anemployee classification. J.A. 1003-04. Moreover, even the skill displayed by the most accomplished dancers in a ballet company would hardly by itself be sufficient to denote an independent contractor designation.

As to the permanence of the working relationship, courts have generally accorded this factor little weight in challenges brought by exotic dancers given the inherently “itinerant” nature of their work. J.A. 1004-05; see also Harrell v. Diamond A Entm’t, Inc., 992 F.Supp. 1343, 1352 (M.D. Fla. 1997). In this case, defendants and plaintiffs had “an at-will arrangement that could be terminated by either party at any time.” J.A. 1005. Because this type of agreement could characterize either an employee or an independent contractor depending on the other circumstances of the working relationship, we agree with the district court that this temporal element does not affect the outcome here.

Finally, as to the importance of the services rendered to the company’s business, even the clubs had to concede the point that an “exotic dance club could [not] function, much less be profitable, without exotic dancers.” Secretary of Labor’s Amicus Br. in Supp. of Appellees 24. Indeed, “the exotic dancers were the only source of entertainment for customers …. especially considering that neither club served alcohol or food.” J.A. 1006. Considering all six factors together, particularly the defendants’ high degree of control over the dancers, the totality of circumstances speak clearly to an employer-employee relationship between plaintiffs and defendants. The trial court was right to term it such.

Significantly, the Fourth Circuit also affirmed the trial court’s holding that the performance fees collected by the dancers directly from the clubs’ patrons were not wages, and that the clubs were not entitled to claim same as an offset in an effort to meet their minimum wage wage obligations.  Discussing this issue, the Court explained:

Appellants’ second attack on their liability for damages targets the district court’s alleged error in excluding from trial evidence regarding plaintiffs’ income tax returns, performance fees, and tips. The clubs contend that fees and tips kept by the dancers would have reduced any compensation that defendants owed plaintiffs under the FLSA and MWHL. According to defendants, the fees and tips dancers received directly from patrons exceeded the minimum wage mandated by federal and state law. Had the evidence been admitted, the argument goes, the jury may have awarded plaintiffs less in unpaid wages.

We disagree. The district court found that evidence related to plaintiffs’ earnings was irrelevant or, if relevant, posed a danger of confusing the issues and misleading the jury. See Fed. R. Evid. 403. Proof of tips and fees received was irrelevant here because theFLSA precludes defendants from using tips or fees to offset the minimum wage they were required to pay plaintiffs. To be eligible for the “tip credit” under the FLSA and corresponding Maryland law, defendants were required to pay dancers the minimum wage set for those receiving tip income and to notify employees of the “tip credit” provision. 29 U.S.C. 203(m); Md. Code Ann., Lab. & Empl. § 3-419 (West 2014). The clubs paid the dancers no compensation of any kind and afforded them no notice. They cannot therefore claim the “tip credit.”

The clubs are likewise ineligible to use performance fees paid by patrons to the dancers to reduce their liability. Appellants appear to distinguish performance fees from tips in their argument, without providing much analysis in their briefs on a question that has occupied other courts. See, e.g., Hart, 967 F.Supp.2d at 926-34 (discussing how performance fees received by exotic dancers relate to minimum wage obligations). If performance fees do constitute tips, defendants would certainly be entitled to no offset because, as noted above, they cannot claim any “tip credit.” For the sake of argument, however, we treat performance fees as a possible separate offset within the FLSA’s “service charge” category. Even with this benefit of the doubt, defendants come up short.

For purposes of the FLSA, a “service charge” is a “compulsory charge for service … imposed on a customer by an employer’s establishment.” 29 C.F.R. § 531.55(a). There are at least two prerequisites to counting “service charges” as an offset to an employer’s minimum-wage liability. The service charge “must have been included in the establishment’s gross receipts,” Hart, 967 F.Supp.2d at 929, and it must have been “distributed by the employer to its employees,” 29 C.F.R. § 531.55(b). These requirements are necessary to ensure that employees actually received the service charges as part of their compensation as opposed to relying on the employer’s assertion or say-so. See Hart, 967 F.Supp.2d at 930. We do not minimize the recordkeeping burdens of the FLSA, especially on small businesses, but some such obligations have been regarded as necessary to ensure compliance with the statute.

Neither condition for applying the service-charge offset is met here. As conceded by defendant Offiah, the dance clubs never recorded or included as part of the dance clubs’ gross receipts any payments that patrons paid directly to dancers. J.A. 491-97 (Offiah’s deposition). When asked about performance fees during his deposition, defendant Offiah repeatedly stressed that fees belong solely to the dancers. Id. Since none of those payments ever went to the clubs’ proprietors, defendants also could not have distributed any part of those service charges to the dancers. As a result, the “service charge” offset is unavailable to defendants. Accordingly, the trial court correctly excluded evidence showing plaintiffs’ earnings in the form of tips and performance fees.

This case is significant because, while many district courts have reached the same conclusions, this is the first Circuit Court decision to affirm same.

Click McFeeley v. Jackson Street Entertainment, LLC to read the entire..

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