Laura McFeeley v. Jackson Street Entertainment

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 8:12-cv-01019-DKC. [999846852]. [15-1583]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-1583

LAURA MCFEELEY, On Behalf of Herself and All Others
Similarly situated, a/k/a Dynasty; DANIELLE EVERETT, a/k/a
Jasmine; CRYSTAL NELSON; DANNIELLE ARLEAN MCKAY; JENNY
GARCIA; PATRICE HOWELL,
Plaintiffs − Appellees,
and
EBONY WASHINGTON; FERRIS PACE; SHANIEKA DANIELS; SCHARLENE
ALUGBUO; NICOLE PRECIOUS GRAY; TARSHEA JACKSON; CLEMENTINA
IBE, as personal representative of the Estate of Scharlene
Alugbuo,
Plaintiffs,
v.
JACKSON STREET ENTERTAINMENT, LLC, d/b/a Fuego Exotic Dance
Club, d/b/a Club Extasy Exotic Dance Club; RISQUE, LLC,
d/b/a Fuego Exotic Dance Club; QUANTUM ENTERTAINMENT GROUP,
LLC, d/b/a Fuego Exotic Dance Club; NICO ENTEPRISES, INC.,
d/b/a Fuego Exotic Dance Club; XTC ENTERTAINMENT GROUP, LLC,
d/b/a Fuego Exotic Dance Club; UWA OFFIAH,
Defendants − Appellants.
--------------------------------------SECRETARY OF LABOR,
Amicus Supporting Appellees.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt.
Deborah K. Chasanow, Senior District
Judge. (8:12-cv-01019-DKC)

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Argued:

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May 11, 2016

Decided:

June 8, 2016

Before WILKINSON, GREGORY, and DIAZ, Circuit Judges.

Affirmed by published opinion.
Judge Wilkinson wrote
opinion, in which Judge Gregory and Judge Diaz joined.

the

ARGUED: Michael Lloyd Smith, SMITH GRAHAM & CRUMP, LLC, Largo,
Maryland, for Appellants.
Gregg Cohen Greenberg, ZIPIN, AMSTER
& GREENBERG, LLC, Silver Spring, Maryland, for Appellees.
Katelyn Jean Poe, UNITED STATES DEPARTMENT OF LABOR, Washington,
D.C., for Amicus Curiae.
ON BRIEF: Michael K. Amster, ZIPIN,
AMSTER & GREENBERG, LLC, Silver Spring, Maryland, for Appellees.
M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand,
Associate Solicitor, Paul L. Frieden, Counsel for Appellate
Litigation, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C.,
for Amicus Curiae.

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WILKINSON, Circuit Judge:
In this case, exotic dancers have 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. The court properly captured the
economic reality of the relationship here, and we now affirm its
judgment.
I.
Plaintiffs,

as

noted,

are

exotic

dancers

who

worked

at

Fuego Exotic Dance Club (Fuego) and Extasy Exotic Dance Club
(Extasy) in Prince George’s County, Maryland for various periods
between April 2009 and April 2012. Defendant Uwa Offiah owns and
manages both Fuego and Extasy. No other party has a financial
interest in them.
Plaintiffs
similarly

situated

misclassified
club

alleged

them

employees

and

on

that
as

behalf

of

defendant

independent

accordingly

themselves
clubs

and

contractors

had

failed

to

and

others

Offiah

rather
pay

than
them

had
as
the

minimum wage required by the Fair Labor Standards Act (FLSA), 29
U.S.C. § 201, et seq., the Maryland Wage and Hour Law (MHWL),
Md. Code Ann., Lab. & Empl. § 3-401, et seq. (West 2014), and
the Maryland Wage Payment and Wage Collection Law (MWPWC), Md.
Code Ann., Lab. & Empl. § 3-501, et seq. (West 2014). They sued
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defendants both for unpaid wages and liquidated damages. The
clubs

denied

their

working

which

were

that

plaintiffs

relationship

were

employees

and
for

unsuccessful,

raised
breach

at

any

point

of

all

of

counterclaims,
of

contract,

unjust

enrichment, conversion, and fraud.
We shall summarize at the outset the working relationship
between the dancers and the clubs. 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

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dancers

and

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clubs

dispute

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other

aspects

of

their

working

relationship, including work schedules and policies.
On January 3, 2014, plaintiffs filed a motion for partial
summary judgment, and defendants countered with a cross-motion
for

summary

judgment.

The

district

court

granted

plaintiffs’

motion in part, finding that plaintiffs were employees and not
independent contractors under both federal and state law. In
drawing that conclusion, the district court applied the sixfactor “economic realities” test for classifying employees and
independent contractors. The court placed special emphasis on
“the degree of control that the putative employer has over the
manner in which the work is performed,” Schultz v. Capital Int’l
Sec., Inc., 466 F.3d 298, 304-05 (4th Cir. 2006), observing that
defendants “exercised significant control over the atmosphere,
clientele, and operations of the clubs.” J.A. 996-97.
The court reserved various disputes over monetary recovery
for

the

limine
about

jury.
seeking

their

Prior
to

to

trial,

prohibit

income

tax

plaintiffs

defendants

records,

filed

from

a

asking

performance

fees,

motion

in

plaintiffs
and

tips.

After conducting a hearing, the court granted the motion.
The case was tried before a jury from February 3 to 5,
2015. The trial court rejected the clubs’ objections to the jury
instructions and the verdict sheet. The jury found in favor of
plaintiffs

and

awarded

them
5

damages

for

unpaid

wages.

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Separately, the district court heard testimony on the issue of
liquidated damages and defendants’ proffered good-faith defense.
The court found that defendants had consulted an attorney in
September

2011

regarding

classifying

dancers

as

independent

contractors and thereafter reasonably believed that they were
not violating the FLSA. The court awarded liquidated damages to
each of the plaintiffs only for the period prior to September
2011. Defendants filed a motion for judgment as a matter of law
and/or for a new trial. Both motions were denied on May 5, 2015.
This appeal followed.
II.
Appellants seek review as to five questions: (1) whether
plaintiffs were employees or independent contractors under the
FLSA and related state laws; (2) whether defendants acted in
good faith prior to September 2011 and were therefore not liable
to pay liquidated damages for that time period; (3) whether the
district

court

erred

in

barring

defendants

from

presenting

evidence related to plaintiffs’ income taxes, performance fees,
and tips; (4) whether the district court erred in formulating
its jury instructions and verdict sheet; and (5) whether the
trial court erred in denying defendants’ motion for judgment as
a matter of law and/or for a new trial. We shall address these
issues seriatim.

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A.
Whether

a

worker

is

an

employee

or

an

independent

contractor under the FLSA is ultimately a legal question subject
to de novo review. Schultz, 466 F.3d at 304. We agree with the
district court that, based on the totality of the circumstances
presented here, the dancers at Fuego and Extasy were employees
covered by the FLSA and analogous state laws. They were not
independent

contractors.

Because

plaintiffs’

claims

under

Maryland labor laws run parallel to their claims under the FLSA,
our analysis of federal law extends as well to the state law
claims.
Congress enacted the FLSA to protect “the rights of those
who toil, of those who sacrifice a full measure of their freedom
and talents to the use and profit of others.” Benshoff v. City
of Va. Beach, 180 F.3d 136, 140 (4th Cir. 1999) (quoting Tenn.
Coal, Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590,
597 (1944)). In keeping with those “remedial and humanitarian”
goals, id. (quoting Tenn. Coal, Iron & R.R. Co., 321 U.S. at
597), Congress applied the FLSA broadly, as reflected in the
Act’s definitions of “employee” (“any individual employed by an
employer”),

“employer”

(“any

person

acting

directly

or

indirectly in the interest of an employer in relation to an
employee”), and “employ” (“to suffer or permit to work”). 29
U.S.C. §§ 203(d), (e)(1), & (g). The statute mandates a minimum
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wage and overtime pay for all covered employees. Id. §§ 206 &
207.
To
FLSA,

determine
courts

relationship
Schultz,

whether

look

to

between

466

F.3d

a
the

the

at

worker

an

“‘economic

worker

304.

is

The

and

the

employee

under

realities’
putative

touchstone

of

the

of

the
the

employer.”
“economic

realities” test is whether the worker is “economically dependent
on the business to which he renders service or is, as a matter
of economic [reality], in business for himself.” Id. Application
of the test turns on six factors:
(1)
(2)
(3)
(4)
(5)
(6)

[T]he degree of control that the putative employer has
over the manner in which the work is performed;
the
worker’s
opportunities
for
profit
or
loss
dependent on his managerial skill;
the worker’s investment in equipment or material, or
his employment of other workers;
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.

Id. at 304-05. “No single factor is dispositive,” id. at 305 –all six are part of the totality of circumstances presented. See
Baystate Alternative Staffing, Inc. v. Herman, 163 F.3d 668, 675
(1st Cir. 1998). While a six-factor test may lack the virtue of
providing definitive guidance to those affected, it allows for
flexible

application

relationships
words,

the

that

court

to

exist
must

the
in

adapt

myriad

different

the

national

economy.

its

analysis

to

8

the

working
In

other

particular

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relationship,

the

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particular

workplace,

and

the

plaintiffs

and

particular industry in each FLSA case.
B.
Here,
defendants

as

in

offer

so

many

competing

FLSA

disputes,

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/independent

contractor

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
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facts

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of

this

realities”

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case

test:

is

the

the

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first

degree

of

factor

control

of

the

that

“economic

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

little

that

support

described

and

perhaps

in
the

the

every
record.

district

worker
To

court

dreams

the

about

contrary,

found

the

--

finds

plaintiffs

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

Thursdays

once

there,

I
and

started
Mondays,

at

Fuego’s.

Tuesdays

and

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
10

hours.

J.A.

769-77

(clubs’

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rulebook).
banning

These

rules

drinking

while

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went

into

working,

considerable

smoking

in

detail,

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.

enforce

the

employer’s

Although

rules,

as

‘potential

the
the

defendants

district

power’

to

claimed

court

enforce

put
its

not

it,

to

“[a]n

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.

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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.
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
wherever

services
you

with

want,

an

and

insouciant
however

you

“Do

whatever

please.”

A

you

company

want,
that

leases space or otherwise invites independent contractors onto
its property might at a minimum wish to prohibit smoking and
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or

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to

set

the

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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
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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,

‘hustle’

to

universally

however,

“[t]his

increase

their

rejected.”

J.A.

argument
profits

999

---

that
has

(collecting

dancers
been

cases).

can

almost
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

skill

and

from

the

managerial but simply good salesmanship.
Here,
investment

the

lion’s

normally

share

of

the

managerial

expected

of

employers

came

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 14

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ability

to

make

a

profit.”

Id.

In

terms of investment, defendants paid “rent for both clubs; the
clubs’

bills

insurance;

such

and

as

for

water

radio

and

and

electric;

print

business

advertising,”

liability

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 decisionmaking

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

contractors are often themselves companies or small businesses
with employees of their own. Therefore, they have most likely
invested

in

the

labor

business,

taken

on

managerial

skill

in

and

capital

overhead
ways

that

necessary

costs,
affect

and
the

to

operate

exercised

the

their

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
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contribution

to

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managerial

decision-making

and

investment relative to the company’s. In this case, the ratio of
managerial
towards

skill

the

and

operational

clubs

to

support

support

an

tilts

too

heavily

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

an

employee

classification. J.A. 1003-04. Moreover, even the skill displayed
by

the

hardly

most
by

accomplished

itself

be

dancers

in

sufficient

to

a

ballet

denote

company
an

would

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
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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

especially
food.”

of

entertainment

considering

J.A.

1006.

that

for

neither

Considering

all

customers

club
six

served

.

.

.

alcohol

factors

.
or

together,

particularly the defendants’ high degree of control over the
dancers,

the

totality

employer-employee

of

circumstances

relationship

speak

between

clearly

to

plaintiffs

an
and

defendants. The trial court was right to term it such.
III.
A.
Based

on

their

view

that

they

were

employees

and

not

independent contractors, the dancers sued defendants for unpaid
wages and liquidated damages. The clubs tried to avoid liability
in two ways. First, they raised a good faith defense to shield
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themselves from liquidated damages. Second, they characterized
performance

fees

and

tips

that

patrons

paid

to

dancers

as

offsets to any compensation the clubs were obligated to pay.
Other than the good faith and offset defenses, the amount of
monetary relief awarded to each plaintiff is not in dispute.
We review the district court’s award of liquidated damages
for abuse of discretion. Perez v. Mountaire Farms, Inc., 650
F.3d 350, 375 (4th Cir. 2011). The FLSA allows covered employees
to sue for “their unpaid minimum wages, or their unpaid overtime
compensation, as the case may be, and in an additional equal
amount

as

liquidated

damages.”

29

U.S.C.

§

216(b).

This

provision for liquidated damages is an additional penalty on
non-compliant employers. If an employer were instead liable for
only unpaid wages and overtime pay, it might roll the dice by
underpaying employees, reasoning all the while it would be no
worse off even if the employees eventually prevailed in court.
As

a

potential

defense

to

liquidated

damages,

however,

employers may seek to show that they acted in “good faith” and
“had

reasonable

grounds

for

believing

that

[their]

act

or

omission was not a violation of the [FLSA].” 29 U.S.C. § 260.
Here, the district court held that defendants had a valid good
faith defense after September 2011 but not prior to that date.
In

September

consulted

an

2011,

Offiah,

attorney

in

the

owner

response
18

to

of
a

Fuego
lawsuit

and

Extasy,

by

dancers

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claiming to be employees rather than independent contractors.
The

attorney

agreements

onward

Offiah

designating

acknowledging
Offiah’s

advised

the

reliance
to

to

require

themselves

therefor.

on

attorney’s

constitute

good

dancers

independent

reasons
the

all

faith

The

and

sign

contractors

district

advice

to

and

court
that

from

found
point

reasonable

belief

of

compliance with the FLSA.
Defendants now claim the good faith defense for the period
prior

to

September

2011.

When

defendant

Offiah

took

over

management of the Fuego and Extasy dance clubs in 2007 and 2009,
respectively, he changed nothing about the way they had been
operated.

Since

the

dancers

had

always

been

classified

as

independent contractors, Offiah assumed that classification was
appropriate. He made no effort to look into the law or seek
legal advice until he faced a lawsuit in September 2011. If mere
assumption

amounted

to

compliance,

no

itself

proactively

and

employer

good

faith

and

reasonable

would

have

any

incentive

conform

to

governing

belief
to

labor

of

educate

law.

The

district court did not err in rejecting defendants’ good faith
defense

for

the

period

prior

to

September

2011

and

awarding

plaintiffs liquidated damages for that period.
B.
Appellants’ second attack on their liability for damages
targets the district court’s alleged error in excluding from
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Appeal: 15-1583

trial

Doc: 85

evidence

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regarding

Pg: 20 of 24

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 the FLSA 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
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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
offset

two
to

prerequisites
an

to

employer’s

counting

minimum-wage

“service

charges”

liability.

The

as

an

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
531.55(b).

by

the

These

employer

requirements

to

its

are

employees,”

necessary

to

29

C.F.R.

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

21

FLSA,

especially

on

small

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businesses,

but

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some

such

Pg: 22 of 24

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.
C.
The clubs object next to the jury instructions and verdict
sheet used during trial. They argue that the trial court should
have instructed the jury on the purpose of the FLSA as they
requested and should have given the jury a more detailed verdict
form. In denying both requests, the district court acted well
within its discretion. The jury instructions given included the
relevant components of the FLSA and corresponding Maryland laws.
The verdict form used informed the jury of how to calculate the
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unpaid wage damages owed to plaintiffs. A general statement of
the FLSA’s purpose or more detail in the verdict form would not
have aided the jury in reaching a sounder outcome.
Finally, the clubs fault the district court for failing to
grant their motion for judgment as a matter of law and/or for a
new trial. A new trial is appropriate if the verdict is “against
the clear weight of the evidence” or “is based on evidence which
is false” or “will result in a miscarriage of justice.” Buckley
v. Mukasey, 538 F.3d 306, 317 (4th Cir. 2008). Here, the sole
basis for appellants’ demand for a new trial is the district
court’s alleged skepticism about certain plaintiffs’ testimony
regarding dates and hours worked. Mere challenges to witness
credibility on appeal, however, fall well short of the standard
for granting a new trial. Moreover, the district court found
that “[n]either party has provided financial records,” and so
the

best

evidence

recollection,

which

available

came

from

the

duly

considered

jury

plaintiffs’
along

own
with

defendants’ objections to its accuracy. J.A. 1018-19. It would
impede the goals of the FLSA to penalize employees for their
employers’
grounds

for

inadequate
reversal

recordkeeping.
in

the

clubs’

In

short,

quibbles

we

with

find
the

no
jury

instructions, the verdict sheet, or the denial of its new trial
motion.

23

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IV.
We

must

be

mindful

in

the

end

that

we

are

applying

a

statute which Congress thought was necessary to provide “fair
labor

standards”

for

employees,

including

those

marginalized

workers unable to exert sufficient leverage or bargaining power
to

achieve

adequate

wages

in

the

absence

of

statutory

protections. To rule for the clubs under the circumstances here
would run too great a risk of undercutting the Act’s basic aim.
Accordingly, and for the reasons given above, the judgment of
the district court is
AFFIRMED.

24