Henderson et al v. 1400 Northside Drive, Inc.
Filing
105
OPINION AND ORDER denying 81 Motion for Summary Judgment, denying 82 Motion for Partial Summary Judgment, granting 84 Motion for Partial Summary Judgment, granting 85 Motion for Partial Summary Judgment, denying 88 Motion to Strike. Signed by Judge Thomas W. Thrash, Jr on 6/19/15. (dr)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
CLINTON HENDERSON, et al.,
Plaintiffs,
v.
CIVIL ACTION FILE
NO. 1:13-CV-3767-TWT
1400 NORTHSIDE DRIVE, INC.
doing business as
Swinging Richards, et al.,
Defendants.
OPINION AND ORDER
This is an action under the Fair Labor Standards Act (“FLSA”) for the recovery
of unpaid minimum wages. It is before the Court on the Defendants’1 Motion for
Summary Judgment Based on the Exemption Contained in 29 U.S.C. §213(a)(1) [Doc.
81], the Plaintiffs’ Motion for Partial Summary Judgment on the Creative Professional
Exemption Defense [Doc. 84], the Defendants’ Motion for Partial Summary Judgment
Based on the Issue of Set-off of “Service Charges” [Doc. 82], the Plaintiffs’ Motion
for Partial Summary Judgment on the Offsets Defense [Doc. 85], and the Defendants’
Motion to Strike [Doc. 88]. For the reasons set forth below, the Defendants’ Motion
1
The Defendants will be referred to collectively as “the Defendant.”
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for Summary Judgment Based on the Exemption Contained in 29 U.S.C. §213(a)(1)
[Doc. 81] is DENIED, the Plaintiffs’ Motion for Partial Summary Judgment on the
Creative Professional Exemption Defense [Doc. 84] is GRANTED, the Defendants’
Motion for Partial Summary Judgment Based on the Issue of Set-off of “Service
Charges” [Doc. 82] is DENIED, the Plaintiffs’ Motion for Partial Summary Judgment
on the Offsets Defense [Doc. 85] is GRANTED, and the Defendants’ Motion to Strike
[Doc. 88] is DENIED.
I. Background
The Plaintiffs are current and former male strippers who performed at an adult
nightclub (the “Club”) owned and operated by the Defendant 1400 Northside Drive,
Inc.2 Each Plaintiff signed an “Independent Contractor Agreement,” which stated:
“The Entertainer acknowledges that the Club will not be responsible for compensating
him in any way for the performances which he presents at the Club and that his
compensation will be provided directly by customers of the Club.”3 The Plaintiffs
brought suit, asserting that they were improperly classified as “independent
contractors,” and that the Defendant thus impermissibly failed to pay them minimum
2
Defs.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on
Creative Professional Exemption ¶¶ 1-2.
3
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative
Professional Exemption ¶¶ 33-34.
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wage as required by the FLSA. In response, the Defendant has argued, inter alia, that
(1) the Plaintiffs are not protected under the FLSA due to the “creative professional
exemption” (“CPE”), and (2) even if the Plaintiffs are protected under the FLSA, the
minimum fees that customers must pay for dances may be offset against the amount
that the Defendant owes the Plaintiffs. Both the Plaintiffs and the Defendant now
move for summary judgment on these defenses.
II. Legal Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show that no genuine issue of material fact exists
and that the movant is entitled to judgment as a matter of law.4 The court should view
the evidence and any inferences that may be drawn in the light most favorable to the
nonmovant.5 The party seeking summary judgment must first identify grounds that
show the absence of a genuine issue of material fact.6 The burden then shifts to the
nonmovant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist.7 A “mere ‘scintilla’ of evidence
4
FED. R. CIV. P. 56(c).
5
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).
6
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
7
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
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supporting the opposing party’s position will not suffice; there must be a sufficient
showing that the jury could reasonably find for that party.”8
A party may move for summary judgment on a part of a claim or defense.9 An
“order granting partial summary judgment from which no immediate appeal lies is
merged into the final judgment and reviewable on appeal from that final judgment. .
. .An order granting [summary] judgment on certain issues is a judgment on those
issues. It forecloses further dispute on those issues at the trial stage. An order denying
a motion for partial summary judgment, on the other hand, is merely a judge’s
determination that genuine issues of material fact exist. It is not a judgment, and does
not foreclose trial on the issues on which summary judgment was sought.”10
III. Discussion
A. Creative Professional Exemption
The FLSA states that the minimum wage requirement “shall not apply with
respect to . . . any employee employed in a bona fide . . . professional capacity . . . as
such term[] [is] defined and delimited from time to time by regulations of the
8
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir.1990).
9
FED. R. CIV. P. 56(a).
10
Lind v. United Parcel Serv., Inc., 254 F.3d 1281, 1284 n.4 (11th Cir.
2001) (quoting Glaros v. H.H. Robertson Co., 797 F.2d 1564, 1573 (Fed. Cir.1986)).
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Secretary.”11 The applicable regulations define “employee employed in a bona fide
professional capacity” to mean “any employee . . . [1] [c]ompensated on a . . . fee
basis at a rate of not less than $455 per week . . . and . . . [2] [w]hose primary duty is
the performance of work . . . [r]equiring invention, imagination, originality or talent
in a recognized field of artistic or creative endeavor.”12 Additionally, the Eleventh
Circuit “has recognized the Supreme Court’s admonition that courts closely
circumscribe the FLSA’s exceptions.”13
Here, based on the undisputed facts, the Plaintiffs’ primary duties did not
require sufficient creativity, and so the Plaintiffs are entitled to judgment as a matter
of law on the Defendant’s CPE defense. To “qualify for the creative professional
exemption, an employee’s primary duty must be the performance of work requiring
invention, imagination, originality or talent in a recognized field of artistic or creative
endeavor as opposed to routine mental, manual, mechanical or physical work” and
“[t]he exemption does not apply to work which can be produced by a person with
general manual or intellectual ability and training.”14 Further, the “exemption . . .
11
29 U.S.C. § 213(a).
12
29 C.F.R. § 541.300(a).
13
Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1269 (11th Cir.
2008) (internal quotation marks omitted).
14
29 C.F.R. § 541.302(a) (emphasis added).
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depends on the extent of the invention, imagination, originality or talent exercised”
and so “[d]etermination of exempt creative professional status . . . must be made on
a case-by-case basis.”15
The testimony of Matthew Colunga – the Club’s General Manager16 –
establishes that little creativity is required to be a dancer at the Club. For example,
Colunga testified that the dancers did not need original dance moves.17 In fact, he
stated that most of the dancers do not “kn[o]w how to actually dance,” and that
“knowing how to dance is not necessary to perform the job.”18 He clarified that no
special training was needed.19 Indeed, he even went as far as to say that he generally
makes hiring decisions by simply looking at the applicants.20 Based on this evidence,
the Plaintiffs are correct when they state that creativity is not a requirement, and that
the job may be performed by anybody with general ability and training.
15
29 C.F.R. § 541.302(c) (emphasis added).
16
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative
Professional Exemption ¶ 8.
17
Id. ¶ 19.
18
Id. ¶ 18.
19
Id. ¶ 24.
20
Id. ¶ 28.
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Further, a nearly identical question arose in Harrell v. Diamond A
Entertainment, Inc.21 There, the plaintiff was an exotic dancer seeking minimum wage
and overtime protections under the FLSA.22 The defendant argued, inter alia, that the
plaintiff was not protected under the FLSA because “she was a ‘professional’ within
the meaning of the § 213 exemption.”23 In rejecting this defense, the court relied on
several factors found in the case at bar: “Defendant presented no criteria or standards
for Plaintiff’s ‘try out’ or her performance . . . Plaintiff did not have any prior dancing
experience . . . [the Defendant] did not require or encourage any specific dance steps
. . . [h]aving failed to meet its burden of showing that Plaintiff’s work required
‘invention, imagination, or talent,’ the Court cannot say that Plaintiff is a professional
artist within the meaning of [the statute].”24
In response, the Defendant first argues that the dance routines are unscripted.
But this does not mean that the dance routines must exhibit a sufficient degree of
creativity. As noted, aesthetic appeal is the only requirement. The Defendant then
argues that exotic dancing is protected expression under the First Amendment. But it
21
992 F. Supp. 1343 (M.D. Fla. 1997).
22
See id. 1345-46.
23
Id. at 1346.
24
Id. at 1357.
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is not enough to show that the Plaintiffs engaged in a form of artistic expression.
Again, that expression must reflect a sufficient degree of creativity in order for the
Plaintiffs to fit within the narrow creative professional exemption. Because the
undisputed facts show that it does not, the Plaintiffs are entitled to judgment as a
matter of law on the Defendant’s creative professional exemption defense.
B. Offsets
The Defendant argues that payments made to the dancers by the customers were
not “tips,” but rather “service charges,” and so they may be used to offset the
monetary amount owed to the Plaintiffs under the FLSA. Under the applicable
regulations, “[a] tip is a sum presented by a customer as a gift or gratuity in
recognition of some service performed for him.”25 However, “[s]ervice charges and
other similar sums which become part of the employer’s gross receipts are not tips for
the purposes of the Act” and “[w]here such sums are distributed by the employer to
its employees . . . they may be used in their entirety to satisfy the monetary
requirements of the [FLSA].”26 Thus, at minimum, for a fee to constitute a “service
25
29 C.F.R. § 531.52.
26
29 C.F.R. § 531.55(b).
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charge,” it must be (1) recorded in a company’s gross receipts, and (2) distributed by
the company to the employee.27
Here, the fees received by the dancers for entertainment provided on the main
stage, the main floor, the VIP lounge, and the VIP rooms were obviously “tips,” and
so they may not be used to offset the Defendant’s minimum wage obligations under
the FLSA. To begin, many courts have considered this question in the context of adult
entertainment and have agreed with the Plaintiffs’ position.28 Indeed, the Defendant
fails to cite to a single case, with similar facts, in which a court has found that the fees
paid to the dancers constitute “service charges.” Multiple factors lead the Court to the
same conclusion here.
27
See Hart v. Rick’s Cabaret Int’l, Inc., 967 F. Supp. 2d 901, 930 (S.D.N.Y.
2013) (“[F]or Rick’s NY to succeed on its claim that the performance fees are service
charges countable towards its wage obligations, the performance fees must have been
[1] recorded in its gross receipts and [2] distributed to plaintiffs by Rick’s NY.”).
28
See id. at 933 (“[T]he Court finds that the performance fees charged by
Rick’s NY were not service charges. They were, instead, tips. Accordingly, the fees
cannot be used to satisfy Rick’s NY’s statutory wage obligations.”); Thornton v.
Crazy Horse, Inc., No. 3:06-CV-00251-TMB, 2012 WL 2175753, at *10 (D. Alaska
June 14, 2012) (“[T]he table dance fees at both Crazy Horse and Fantasies were ‘tips’
which cannot be used to off-set the clubs’ minimum wage obligations.”); Reich v.
Priba Corp., 890 F. Supp. 586, 595 (N.D. Tex. 1995) (“[T]he fees the entertainers
receive for table and stage dances are appropriately classified as tips.”); Reich v.
ABC/York-Estes Corp., No. 91 C 6265, 1997 WL 264379, at *6 (N.D. Ill. May 12,
1997) (“This court . . . agrees . . . that the table dance fees are more closely related to
a tip than a service charge and, as a result, plaintiff’s motion for partial summary
judgment should be granted.”).
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First, as noted above, “for a fee to constitute a service charge and therefore be
properly applied against an establishment’s statutory minimum-wage duty, it must
have been included in the establishment’s gross receipts.”29 Here, most of the
payments made by the customers to the dancers were not recorded in the Club’s gross
receipts. To be clear, for performances on the main stage, the main floor, and the VIP
lounge, the customers could only pay by cash.30 For entertainment provided within the
private VIP rooms, they could either use cash or a credit card. None of the cash
payments were recorded in the Club’s gross receipts.31 Thus, these payments may not
be classified as “service charges.” However, the Defendant points out that the credit
card payments for entertainment provided in VIP rooms were included in the Club’s
gross receipts.32 But as another court has found, that “[a club] [does] not treat all of
the tips received as gross receipts of the company” is “fatal to [the club’s]” argument
29
Hart, 967 F. Supp. 2d at 929; see also ABC/York-Estes Corp., 1997 WL
264379, at *5 (“[A]n employer must include payments in its records as gross receipts
as a prerequisite to ‘service charge’ classification under the FLSA.”).
30
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative
Professional Exemption ¶ 40.
31
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative
Professional Exemption ¶ 71.
32
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative
Professional Exemption ¶ 68.
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that the payments are “service charges.”33 Indeed, it would make little sense to classify
otherwise similar payments differently simply because they occurred through different
mediums.
Second, “service charges” must be “distributed by the employer in order to
count toward wages.”34 Here, most of the payments – those made in cash – were made
directly to the dancers.35 They were not distributed by the Club. Accordingly, those
payments may not be classified as “service charges.” And again, because there is no
meaningful difference between these payments and those made by credit card, the
latter should not be classified differently. Accordingly, the Plaintiffs are entitled to
judgment as a matter of law on the Defendant’s offsets defense.36
33
Priba Corp., 890 F. Supp. at 594-95 (emphasis added).
34
Hart, 967 F. Supp. 2d at 929.
35
Pls.’ Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative
Professional Exemption ¶ 35.
36
In its Response Brief, the Defendant appears to largely abandon its
offsets defense. It only pursues the defense in relation to payments made for VIP room
sessions – many of which were included in its gross receipts. Defs.’ Br. in Resp. to
Pls.’ Mot. for Partial Summ. J. on Offsets, at 4 (“[D]efendants rely in these motions
for setoff only on the amounts paid by customers for the VIP Room minimum session
charges.”). However, based on the evidence in the record, the Defendant has thus far
only included credit card payments for VIP room sessions in its gross receipts. Pls.’
Statement of Facts in Supp. of Mot. for Partial Summ. J. on Creative Professional
Exemption ¶ 70. Thus, the cash payments may not be classified as service charges.
And as the Plaintiffs have correctly noted, “money does not change from being a ‘tip’
to being a ‘service charge’ just because customers choose to pay by credit card and
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C. Motion to Strike
On July 22, 2014, the parties filed a joint stipulation, stating in part: “Plaintiffs
shall not . . . request that the Court determine as a matter of law that they are and/or
were Defendant 1400's employees, that Defendant 1400 is and/or was their employer;
or that Plaintiffs were misclassified as independent contractors.”37 The Defendant
argues that the Plaintiffs, in their Briefs, made multiple “arguments and assertions
concerning the plaintiffs’ supposed status as ‘employees’ of the defendants and
[asked] the Court to grant them summary judgment . . . based (at least in part) on such
arguments.”38 The Defendant thus requests that the Court strike the Plaintiffs’ Briefs.39
The Court disagrees with the Defendant. The Plaintiffs did not violate the stipulation.
True, in moving for summary judgment on the Defendant’s two defenses, the
Plaintiffs mention the basis for their claims – their contention that they were
improperly classified as independent contractors. And they rely on several facts which
are also relevant to the issue of whether they are “employees” under the FLSA. But
they never ask the Court to make a legal determination regarding their “employee”
the employer happens to record . . . credit card money in its gross receipts.” Pls.’
Reply Br. in Supp. of its Mot. for Partial Summ. J. on Offsets, at 14.
37
[Doc. 66].
38
Defs.’ Mot. to Strike, at 2.
39
Defs.’ Mot. to Strike, at 4.
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status. In addition, in this Order, the Court has made no such determination.
Accordingly, the Motion to Strike is denied.
IV. Conclusion
For these reasons, the Court DENIES the Defendants’ Motion for Summary
Judgment Based on the Exemption Contained in 29 U.S.C. §213(a)(1) [Doc. 81],
GRANTS the Plaintiffs’ Motion for Partial Summary Judgment on the Creative
Professional Exemption Defense [Doc. 84], DENIES the Defendants’ Motion for
Partial Summary Judgment Based on the Issue of Set-off of “Service Charges” [Doc.
82], GRANTS the Plaintiffs’ Motion for Partial Summary Judgment on the Offsets
Defense [Doc. 85], and DENIES the Defendants’ Motion to Strike [Doc. 88].
SO ORDERED, this 19 day of June, 2015.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
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