In a decision that may be useful to employers deciding whether workers should be classified as independent contractors or employees, the National Labor Relations Board (NLRB) found that an exotic dancer at the Centerfold Club in Columbus, Ohio, was an employee rather than an independent contractor. In Nolan Enterprises, Inc. d/b/a Centerfold Club, 370 NLRB No. 2 (July 31, 2020), the Board’s majority rejected Centerfold’s claim that the administrative law judge (ALJ) “failed to properly evaluate the common-law factors through the prism of entrepreneurial opportunity,” as required by prior Board precedent.

Background

Centerfold provides live adult entertainment in Columbus, Ohio. Its “dancers are not required to have any prior dance training or experience to perform at the [c]lub. However, they must fill out an application and audition. The application asks for the dancer’s personal information, employment history, and availability to perform during the week.” Following a successful audition, the dancers must choose whether they want to be classified as an employee or an “entertainer tenant.” Centerfold provides each dancer with a document that includes a “side-by-side comparison of their rights” and most, if not all, dancers choose to be entertainer tenants.

Under Centerfold’s policy, “[d]ancers who elect to be entertainer tenants ‘lease space’ at the [c]lub. They receive a set of lease documents, sometimes, referred to as a contract, that they review and sign.” With respect to compensation, “[d]ancers have four possible sources of income while performing at [Centerfold]: tips, dance performance fees, drink commissions, and the entertainer-tenant guarantee,” which was $100 per shift during the relevant time period.

Centerfold disciplines dancers for attendance and “for inappropriate behavior, such as failing to wear a garter, not having tips placed in the garter, or ‘excessive grinding’ during a dance.” Depending on the offense, discipline is usually a verbal warning or a fine. Severe offenses such as fighting may cause the dancer to be suspended or permanently banned from performing at the club.

Brandi Campbell began performing as a dancer in 2006, and applied to work at Centerfold in February 2018. She maintains a website where, among other subjects, she discusses the rights of dancers under the National Labor Relations Act (NLRA). In the past, Campbell has filed unfair labor practice charges, which she discusses on her website, against other live adult entertainment clubs. After discovering her blog and history, Centerfold began monitoring Campbell’s website, performances, and interactions with other dancers. Centerfold eventually terminated her lease agreement after videotaping Campbell allegedly performing several dances, which, according to Centerfold, were illegal under Ohio’s “no-touching” law.

Campbell filed an unfair labor practice charge with the NLRB. Because independent contractors are not protected under the NLRA, the NLRB analyzed whether Campbell and other Centerfold dancers were employees or independent contractors.

The NLRB’s Analysis

The NLRB affirmed the ALJ’s decision finding the dancers were employees—and not independent contractors. The Board began its analysis by noting that “Section 2(3) of the Act defines ‘employee’ as ‘any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice … but shall not include … any individual having the status of an independent contractor.’”

The NLRB further noted that Centerfold bears the burden of establishing independent contractor status under common-law agency principles.

The Board and courts apply the following factors from the Restatement (Second) of Agency §220 to determine whether the party arguing independent-contractor status has met its burden: (1) the extent of control over the details, means, and manner of the work; (2) whether the putative contractor is engaged in a distinct occupation or business; (3) whether the work is done under the direction of the principal, or by a specialist without supervision; (4) the skill required; (5) who supplies the tools and place of work; (6) the length of time for which the person is employed/contracted; (7) the method of payment, whether by the time or by the job; (8) whether the work is part of the regular business of the employer; (9) whether the parties believe they are creating an employment or contract relationship; and (10) whether the principal is in the same business. There is no “shorthand formula” and “all the incidents of the relationship must be assessed and weighed with no one factor being decisive.”

After evaluating these factors, the NLRB affirmed the ALJ’s decision that Campbell, and other dancers, were employees primarily because they “lacked sufficient opportunity for economic gain,” had “minimal economic risk,” and Centerfold “exercise[d] significant control over the dancers’ day-to-day work (through extensive rules, expectations, supervision, fines, and penalties), their work environment, and the customer base.” ”

Key Takeaways

Determining whether workers are employees or independent contractors under the NLRA (and other laws) is a highly fact-specific endeavor. This NLRB decision, however, provides additional useful guidance. Specifically, when applying the common-law factors used by the Board in the present case, employers also may want to evaluate this question through a prism of entrepreneurial opportunity and think critically about the degree of economic control they are exercising over their workers.