Filing 81

ORDER granting 80 Motion for Reconsideration re the Court's oral ruling on 63 MOTION for Partial Summary Judgment filed by CHRISTIE BURRELL to the extent set forth in the Order. Ordered by US DISTRICT JUDGE CLAY D LAND on 04/18/2017. (CCL)

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IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA ATHENS DIVISION CHRISTIE BURRELL, individually and on behalf of all others similarly situated, Plaintiff, * * * vs. * TOPPERS INTERNATIONAL, INC., DARNELL LEWIS GARDNER, and SANDRA GARDNER, * Defendants. CASE NO. 3:15-CV-125 (CDL) * * O R D E R During the pretrial conference in this matter, the Court denied Plaintiffs’ partial summary judgment motion in an oral ruling from the bench. Min. Order, Apr. 4, 2017, ECF No. 78. Plaintiffs filed a motion for reconsideration. The motion (ECF No. 80) is granted to the extent set forth in this Order. I. Plaintiffs Are Employees, Not Independent Contractors Defendant Toppers International, Inc. is an adult night club. Plaintiffs are entertainers at the club, and they contend that Toppers improperly classified them as independent contractors and did not pay them minimum wage as required by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-219. It is undisputed that Toppers does not pay any wages to entertainers, and it does not include entertainers in payroll. Pretrial Order Ex. A, Material Undisputed Facts ¶ 7, ECF No. 79-1. Instead, entertainers rely solely on tips from customers to earn money for their work at Toppers. Id. ¶ 8. Plaintiffs argue that the undisputed facts demonstrate that they are employees within the meaning of the FLSA, not independent contractors. The Court agrees. “To determine whether an individual falls into the category of covered courts ‘employee’ look to the or exempted ‘economic ‘independent reality’ of the contractor,’ relationship between the alleged employee and alleged employer and whether that relationship demonstrates dependence.” Knight, Inc., 721 F.3d 1308, 1311 (11th Scantland v. Jeffry Cir. 2013). “This inquiry is not governed by the ‘label’ put on the relationship by the parties or the contract controlling that relationship, but rather focuses on whether ‘the work done, in its essence, follows the usual path of an employee.’” Id. (quoting Rutherford Food Corp. v. McComb, 331 U.S. 722, 729 (1947)). The courts consider six main factors in determining the economic reality of the parties, and the Court will address each factor in turn. A. Nature and Degree of Control The first factor is “the nature and degree of the alleged employer’s control as to the manner in which the work is to be performed.” Id. at 1312. It 2 is undisputed that Toppers exercised significant control over entertainers’ work was performed. the manner in which the Toppers set the entertainers’ schedules and would not permit entertainers to work busy shifts unless they also Facts ¶¶ 38-41. worked slower shifts. Material Entertainers were fined if they arrived late, left early, missed a shift, or missed a stage call. 43, 55. Undisputed Id. ¶¶ 42- Entertainers had to pay a mandatory “house fee” at the beginning of each shift, a mandatory “tip out” at the end of each shift, and various fees to other individuals who worked at Toppers. Id. ¶¶ 35, 37, 61-63. table dances and lap dances, Toppers set minimum prices for had rules on how entertainers danced on the main stage, and required entertainers to share tips with other entertainers who shared the main stage with them. Id. ¶¶ 5, 56-57, 59. apparel, hair, and nails. written policies and disciplined—including and procedures. Id. Toppers had rules on entertainers’ Id. ¶¶ 51-52. procedures, and terminated—for Toppers also had entertainers violating ¶¶ 66, 68-69. could those be policies Based on all of these undisputed facts, Toppers exercised significant control over the work of its entertainers. This factor weighs in favor of finding that the entertainers are employees. B. Opportunity for Profit or Loss The second factor is “the alleged employee’s opportunity for profit or loss depending upon 3 [her] managerial skill.” Scantland, 721 F.3d at 1312. Although the entertainers could negotiate the rate customers paid them for dances (above the minimum rate set by Toppers), they had limited opportunities to increase their profit. And, other than the mandatory fees they had to pay to dance at Toppers, the entertainers had no risk of loss. In contrast, Toppers had extensive control over the entertainers’ opportunity for profit because Toppers controlled the location, facilities, marketing, and inventory of beverages for the club. And Toppers had a much bigger risk of loss than the entertainers because Toppers was responsible for all rents, utilities, maintenance, insurance, and advertising for the club. Thus, this entertainers factor are weighs in economically favor of dependent finding on Toppers that the and are therefore its employees. C. Investment in Equipment The third factor is “the alleged employee’s investment in equipment or materials required for his task, or his employment of workers.” Scantland, 721 F.3d at 1312. At Toppers, entertainers are responsible only for their own makeup, hair, and apparel. responsible Material for all Undisputed other Facts investments ¶ 77. Toppers necessary for was the entertainers to do their work, including the facility, stage, marketing, bar, and security. This factor weighs in favor of 4 finding that the entertainers are economically dependent on Toppers and are therefore its employees. D. Special Skill The fourth factor is “whether the service rendered requires a special skill.” Scantland, 721 F.3d at 1312. It is undisputed that no prior experience or formal training is required to work as an entertainer at Toppers. 79. Rather, entertainers it are appears selected willingness to disrobe. Material Undisputed Facts ¶¶ 78- that are the only physical criteria on attractiveness which and a This factor weighs in favor of finding that the entertainers are employees. E. Permanency and Duration of the Relationship The fifth factor is “the degree of permanency and duration of the working relationship.” Scantland, 721 F.3d at 1312. general, a longer working relationship finding that the worker is an employee. militates In toward a Here, there is evidence that many entertainers worked at Toppers for at least a year. Material Undisputed Facts ¶ 83. indicate Toppers whether was the The present record does not entertainers’ exclusive, and it working does not relationship establish that with the entertainers had a contract with Topers for a specific term. The Court finds that this factor is neutral. 5 F. Integral Part of Business The sixth rendered is factor an is “the integral extent part of to the business.” Scantland, 721 F.3d at 1312. which the alleged service employer’s Toppers agrees that entertainers are integral to the operation of Toppers; without the entertainers, Toppers cannot operate its business as a strip club. Material Undisputed Facts ¶¶ 86, 88. This factor weighs in favor of finding that entertainers are employees. G. Summary As discussed above, the undisputed facts and the Scantland factors weigh in favor of finding that the entertainers were economically dependent on Toppers. for” themselves; rather, they They were not “in business were employment in the business of others.” “dependent upon finding Scantland, 721 F.3d at 1312 (quoting Mednick v. Albert Enters., Inc., 508 F.2d 297, 301–02 (5th Cir.1975)). For these reasons, the Court concludes that, as a matter of law, Plaintiffs were employees within the meaning of the FLSA. II. Defendants are Not Entitled to an “Offset” Defense Plaintiffs argue that to the extent that Defendants are asserting an Defendants “offset” did not defense, they are not entitled to it. respond to this argument or present evidence to create a genuine fact dispute on this issue. 6 any Under the offset defense, an employer may offset its minimum wage obligations with “service charges" that become part of the employer’s gross receipts and are distributed by the employer to its employees. 29 C.F.R. § 531.55(b). On the other hand, tips do not count toward the offset defense.1 Here, it is undisputed that the entertainers at Toppers rely solely on tips from customers to earn Undisputed Facts ¶ 8. and Toppers does money for their work. Material The tips go directly to the entertainers, not include these amounts in its gross receipts; no one at Toppers tracks how much entertainers receive in tips. Id. ¶¶ 93, 96. For these reasons, the tips received by Toppers entertainers do not qualify as “service charges” that can be counted Plaintiffs the to satisfy federal Defendants’ minimum wage. obligation Plaintiffs’ to pay summary judgment motion on this issue is therefore granted. III. Remaining Issues Plaintiffs also sought summary judgment on two additional issues: (1) whether Darnell Lewis Gardner and Sandra Gardner are “employers” Defendants within acted the meaning willfully. of the Because 1 FLSA the and Court (2) whether finds that In general, tips cannot be counted toward an employer’s minimum wage requirements unless the employer meets the requirements for a tip credit under 29 U.S.C. § 203(m). Those requirements are: (1) the employer must pay a “tipped employee” a cash wage and (2) if the cash wage plus tips are not enough to meet the minimum wage, the employer must pay an additional amount to meet the minimum wage. Id. Neither requirement is met here. 7 genuine fact disputes exist on both of these questions, the Court declines to reconsider its prior ruling on these issues.2 CONCLUSION As discussed above, Plaintiffs’ motion for reconsideration (ECF No. 80) is granted to the extent set forth in this Order. Based on the undisputed evidence, Plaintiffs are entitled to summary judgment on their claim that entertainers at Toppers are employees, not independent contractors. Plaintiffs are also entitled to summary judgment on Defendants’ offset defense. But genuine fact disputes preclude summary judgment on the remaining issues. IT IS SO ORDERED, this 18th day of April, 2017. S/Clay D. Land CLAY D. LAND CHIEF U.S. DISTRICT COURT JUDGE MIDDLE DISTRICT OF GEORGIA 2 The Court further notes that Darnell Gardner has filed a Chapter 13 bankruptcy petition. Thus, the case is automatically stayed as to him, and the Court cannot rule on these issues as to Darnell Gardner at this time. 8

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