A Boom of Strip Club Lawsuits in Texas
For eight years, Cristal M. Vera danced on a raised stage bathed in violet light inside a windowless club along busy West Expressway 83 in Harlingen. She and other entertainers served as the main attractions for the strip club called Jaguars. And though they worked long hours, performing on stage and in private rooms for customers, they were never paid any wages, according to a federal lawsuit filed in July 2021 on behalf of all dancers who have worked at Jaguars in the last three years.
Entertainers at Jaguars danced nude or semi-nude for shifts, but were required to wear heels at all times, whether they were on the floor or on stage, the pending lawsuit in the Southern District of Texas says. They were fined if they failed to comply with management’s rules,”including late fees added on for every hour, and more fees for changing before getting permission at the end of a shift or for leaving early,” court records say.
Jaguars performers were required to pay $30 or more for each shift, whether or not there were customers present, the lawsuit says. Jaguars also required dancers to contribute to an “illegal tip pool,” that included employees such as the DJ, security, and management,” the court record says. Those arrangements meant that dancers could take home good tip money on busy nights.
On slow nights, they might take home nothing at all.
State and federal law generally requires all employers to pay employees wages, even workers who rely on tips workers, such as waitstaff. Many dancers’ attorneys argue that exotic dancers perfectly fit the definition of tipped employees: They audition for their jobs, work scheduled shifts and must follow dress (or undress) codes and club rules.
Vera, like dancers at about 50 other clubs nationwide, worked without wages for a business that is part of a fast-growing Houston corporation called RCI Hospitality Holdings, Inc.,where the CEO makes more than $1 million each year, according to the company’s annual report.
Court records show thousands of other exotic dancers who work at other so-called gentlemen’s clubs nationwide share similar experiences. The fast growing and profitable industry includes nearly 4,000 topless and nude venues nationwide.
As the industry grows, so does the number of lawsuits piling up against it. Across the United States, dancers have been filing lawsuits contesting how they are paid for more than a decade. A 2019 Bloomberg Law review of federal district court data found that 406 wage-and-hour lawsuits challenging illegal club practices and seeking back wages had been filed by exotic dancers from 2005 to September 30, 2019. Since then, dozens of additional lawsuits have poured into Texas federal courts. Tracking the exact number is difficult since many clubs are owned by corporations and not all cases are correctly classified by federal court clerks as wage and hour disputes.
Each individual federal court case might represent a handful or hundreds of dancers, since past and present performers at a club often sign on to join a legal action The case filed against Jaguars in Harlingen is a “collective action case” including all performers who danced at the club for three years prior to its filing date.The case against Jaguars remains pending.
Often dancers win and are awarded back pay. Yet clubs’ treatment of dancers as unpaid contractors continues in Texas and elsewhere even after years of litigation, lawyers who have handled dozens of cases say. That’s because many corporate-owned strip clubs are turning big profits; and the cost of settling lawsuits is often covered by insurance or treated as a cost of doing business. In many states, federal and state regulators are not actively enforcing labor laws inside so-called sexually oriented businesses.
A review of cases filed in federal court shows that many strip clubs have been successfully sued by performers alleging violations of their rights to fair pay or overtime. Some high dollar settlements have attracted press coverage. But cases are often referred to arbitrators, who determine behind closed doors how much dancers are owed based on the dancers’ own bank records and work-related texts, since clubs don’t tend to track their hours. Many settlements are small and not public.
The recent wave of exotic dancer lawsuits are also part of a larger U.S. employment trend; many employers forgo paying wages—and benefits—to workers by classifying them as contractors, though they often share the same shifts and duties as regular employees. The employers recently sued for wage and hour violations in Texas include oil and gas companies, chain convenience stores and corporate exercise gyms, federal court records show.
Houston attorney Jarrett Ellzey, who specializes in employment law cases,has represented dozens of dancers in federal court. Ellzey first began working on the cases soon after graduating from law school in May 2003 partly because he was convinced that dancers’ arguments were so strong it would be easy to win in court. Since then he has represented dancers in multiple states and has handled at least four cases against RCI Hospitality Holdings, including the one involving Jaguars in Harlingen. (Vera and other dancers Ellzey represented did not respond to a request for interviews made through his office).
In response to lawsuits, lawyers for club owners in places like Jaguars and its parent company RCI Hospitality Holdings almost always argue that dancers aren’t entitled to pay because they are actually independent contractors, much like a beautician who rents chair space inside a salon. But salon chair operators generally have their own clientele – and wear whatever they want to work, Ellzey says. He has successfully argued in court that dancers should be classified as employees and paid hourly wages. Part of the proof, he says, often comes from depositions where owners admit that they screen dancers based on their looks, require auditions, assign shifts and impose a dress code. In an interview, Ellzey compared some club owners’ practices to “almost a kidnapper-victim scenario,” based on the amount of control club owners exert over their talent.
Nationwide, federal court records show that more than two dozen recent lawsuits have targeted the corporate owners of Jaguars: RCI Hospitality Holdings, a for-profit corporation based in Houston that comprises dozens of strip clubs and topless clubs marketed under various brand names.
Founded in 1983, the company began as “Rick’s Cabaret” and, according to its website, it “pioneered the creation of elegant gentlemen’s clubs featuring beautiful topless dancers and high quality restaurant service.”After going public in 1995, Rick’s grew into a holding corporation with subsidiaries that now own and operate more than 50 different clubs under different brand names, including Jaguars, and Rick Cabaret, among others in Texas. The corporate name changed in 2014 to RCI Hospitality Holdings, Inc. In addition to Jaguars the corporation owns stock in more than 40 clubs with names like Rick’s,” “Rick’s Cabaret,” “Tootsie’s Cabaret,” “Club Onyx,” “XTC Cabaret,” “Temptations,” “Downtown Cabaret,” “Cabaret East,”and other “sexually oriented businesses.”
In 2015, the corporation paid $15 million to settle a massive lawsuit involving an estimated 2,000 dancers employed at one of its New York clubs over similar allegations of failure to pay wages, drawing headlines. A search of federal court documents showed similar cases have been filed in Texas and other states.
Even though the dancers’ lawsuits have grown in number, RCI Hospitality Holdings Inc.itself has claimed its own recent losses as relatively small, according to its most recent annual report. Dancers’ labor-related lawsuits are not specifically mentioned in that document. But in each of the last three years, the company reports that settlements of all lawsuits related to labor disputes and other laws ranged from $174,000 to about $1.7 million, often covered by insurance.
In contrast, RCI Hospitality Holdings in FY 2021 reported $135.8 million in sales.
Casey Wallace is a Houston attorney who has defended Jaguars and other clubs in similar cases. Wallace argues that Ellzey and other attorneys like him have formed a “cottage industry” who basically copy and paste labor law claims, advertise excessively on social media to attract dancers’ business and profit by filing lawsuits on behalf of dancers who are already relatively well-compensated through customers’ tips. In an interview, he said dancers would lose money if they took only hourly wages instead of tips. But Wallace did not explain why paying both tips and wages would be impossible for his corporate clients.
Corporate records show that the CEO of Houston-based RCI Hospitality Holdings makes more than $1 million a year in salary and that he and other executives have been raking in larger compensation packages fueled in part by nightclubs filled with exotic dancers who are not paid wages. According to a 2020 SEC filings, RCI Hospitality Holdings, the publicly traded parent company of Jaguars, was accused by the government of failing to properly disclose top executive’s benefits. From fiscal year (“FY”) 2014 through FY 2019, RCI failed to disclose $615,000 of executive compensation in the form of perquisites, the SEC alleged. In 2020, the company agreed to pay a $400,000 civil penalty, without admitting or denying the allegations.
In an interview, Wallace acknowledged that the dancers and their lawyers tend to win wage and hour cases. But he says the amounts due to most dancers are so small that club owners typically prefer to pay rather than go to trial. Often, the actual hours dancers worked—and the back pay owed to them—can be in dispute since clubs rarely retain any schedules or formally track dancers’ hours. That means dancers have to mine their own personal records for proof they need to prevail in court.
Vera has claimed in the pending lawsuit to have danced regularly at Jaguars from February 2011 to October 2019 and is seeking back pay for all that time.
But Wallace told the Observer he has records that show that Vera “worked a total of eight days at the club. Approximately 50 hours and it’s claiming she’s owed 7.25 an hour. We claim she’s not entitled to those wages. She is an independent contractor.” By his calculations, even if Jaguars loses, Vera only gets about $362.50.
Source: The Texas Observer