The Morning Report
Get the news and information you need to take on the day.
Strippers, including Stormy Daniels, have strutted to the forefront of the vibrant worker classification debate in California.
They have done so in part through lawsuits asserting exotic dancers should be treated as employees rather independent contractors, and San Diego Superior Court has been one key venue for the litigation seeking to expose strip clubs’ alleged unlawful practices.
A class-action complaint filed here last year targeted alleged worker misclassification by Las Vegas-based Deja Vu Services Inc., which operates dozens of strip clubs nationwide, including Deja Vu Showgirls on Midway Drive.
A judge rejected a settlement of that case in late 2018 after Shannon Liss-Riordan, an attorney who’s taken on prominent gig-economy companies, objected on behalf of dancers to what she alleged would be a paltry payout to the entertainers.
Liss-Riordan also represents dancers in a new class-action suit filed in San Diego claiming that even though Deja Vu clubs have now made their dancers employees, they retaliated against them for their prior legal activities by drastically cutting their pay.
The case, filed in late January, could be a harbinger of similar suits to come as companies grapple with how to comply with the California Supreme Court’s 2018 Dynamex decision that makes it more difficult to classify workers as independent contractors.
Meanwhile, legislation introduced by Assemblywoman Lorena Gonzalez of San Diego to codify the court’s decision has already sparked plenty of public discussion and drawn the ire of business groups. It even prompted Daniels, an adult entertainer best known for her claimed affair with President Donald Trump, to publicly advocate for allowing strippers to remain independent contractors.
Misclassification Class Action
The class-action lawsuit filed against Deja Ju Services last May in San Diego Superior Court was brought on behalf of exotic dancers at Deja Vu-affiliated clubs statewide. One of four initial class representatives, who were all unnamed, was a dancer who had performed at Deja Vu Showgirls in San Diego.
The suit alleged that under both the Dynamex decision and the federal Fair Labor Standards Act, the dancers had been miscast as independent contractors.
In its unanimous April 2018 Dynamex decision, the state Supreme Court adopted a so-called ABC test featuring three factors an employer must establish to demonstrate a worker is properly classified as an independent contractor. The three factors are:
- A. The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
- B. The worker performs work that is outside the usual course of the hiring entity’s business.
- C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
To make their case they should have been classified as employees, the exotic dancers cited multiple examples of how the defendants had control over their activities at work.
“Defendants dictate: the hours of operation; length of shifts dancers must work; the show times during which a dancer may perform; minimum dance tips; determine the sequence in which a dancer may perform on stage during her stage rotation; the format and themes of dancers’ performances (including their costuming and appearances),” the suit stated.
As part of a proposed settlement filed with the San Diego court last fall covering roughly 5,800 dancers with claims against 25 strip clubs, Deja Vu agreed to convert all the class members to employee status.
The $1.5 million settlement would have also provided about $900,000 to the dancers in the class, or roughly $300 per dancer if half of the dancers were located and cashed their checks as estimated.
“This settlement provides substantial benefits and monetary recovery for defendants’ alleged wage and hour violations,” the plaintiffs’ attorneys wrote in a court filing.
Objection and a Rejection
Enter Liss-Riordan, a partner at Lichten & Liss-Riordan P.C. in Boston, who has gained prominence for filing worker misclassification suits against gig-economy giants like Uber and Lyft.
She filed an objection to the San Diego settlement on behalf dancers at Deja Vu clubs, arguing that it would provide “minimal compensation” to the dancers.
While class counsel had estimated the full verdict value of the plaintiffs’ claims at $32 million, Liss-Riordan wrote that data she reviewed led her to calculate damages of more than $102 million for the 1.5-year period at issue. She said her calculation did not include additional penalties that could be recouped under the Private Attorneys General Act, known as PAGA.
The settlement proposed to provide just $20,000 to resolve dancers’ PAGA claims, while Liss-Riordan said in a different case dancers were “poised to obtain potentially millions of dollars in PAGA penalties against a single club.”
Overall, the settlement amount was “merely a fraction of the relief that has been obtained in judgments and settlements of cases brought on behalf of exotic dancers around the country,” Liss-Riordan alleged.
San Diego attorney Tammara Bokmuller, who represents Deja Vu in the case, defended the agreement in an interview.
“It was a fair, reasonable and adequate settlement,” said Bokmuller of the Clark Hill law firm.
In November, San Diego Superior Court Judge Timothy Taylor denied a motion for preliminary approval of the settlement, writing that there would need to be an “enhanced showing” for him to approve such a pact.
His denial was without prejudice, meaning the parties could try to seek approval again after modifications or supplying additional information.
In December, Liss-Riordan’s clients were granted intervenor status in the case and filed their own complaint. Just days later, Deja Vu removed the case to federal court. Bokmuller said Deja Vu did so because of the federal Fair Labor Standards Act issues in play.
Liss-Riordan said her clients will try to move the case back to San Diego Superior Court.
“Deja Vu is clearly trying to get away from the state court judge who granted our clients intervenor status and declined to approve their settlement,” she wrote in an email.
‘Collusion’ Among Attorneys
Liss-Riordan said in a recent interview that the San Diego settlement was part of Deja Vu’s pattern of “trying to rid themselves of liability for wage violation to these dancers by entering into extremely lowball settlements with willing plaintiffs’ lawyers.”
One of the other examples she cited was a $6.6 million settlement Deja Vu reached in Michigan to resolve misclassification claims covering more than 28,000 dancers at 60-plus clubs nationwide.
Liss-Riordan said the 2017 settlement provided less than $1 million to the dancers.
“No matter how many dancers or how many clubs are involved, somehow it always comes out to just under $1 million for the dancers,” she said.
The Michigan settlement was approved by a federal judge, but Liss-Riordan’s firm has appealed to the U.S. Court of Appeals for the Sixth Circuit.
In her successful objection to the San Diego settlement, Liss-Riordan noted that the plaintiffs’ counsel in the Michigan case were also involved in the case here. One of the section headers in her objection filing says, “The Appearance of Collusion between the Parties Raises Serious Red Flags.”
Jason J. Thompson, a Michigan attorney listed as one of the plaintiffs’ lawyers, did not respond to requests for comment. Trenton Ross Kashima, a San Diego-based lawyer for the plaintiffs, also did not respond to requests for comment.
Bokmuller denied there was any collusion in crafting the settlement.
“This same attorney has made the same allegation in numerous class actions,” she said. “There is no credibility to it.”
She said Liss-Riordan’s tactic of objecting to the settlements Deja Vu has reached causes delays that hurt the dancers who would receive payments under the deals.
Retaliation Class Action
Even though the 2018 settlement in San Diego was denied, Deja Vu made its California dancers employees late last year.
Notices about the change posted in the dressing rooms at Deja Vu Showgirls mentioned the misclassification lawsuits strip clubs had been fighting in what it said were efforts to protect dancers’ rights.
The notice also said, however, that as a result of the lawsuits and “unrelenting demands by the attorneys, the club is now FORCED to make all entertainers become EMPLOYEES and end your right to be an independent contractor.”
But if Deja Vu hoped the change would put an end to the litigation, it was wrong.
In late January, Liss-Riordan filed a class-action lawsuit in San Diego Superior Court alleging dancers at Deja Vu clubs in California were retaliated against for filing the earlier lawsuit.
The new lawsuit claims that the retaliation consisted of reducing the dancers’ pay “far beyond any amount that would be arguably justified to offset their increased costs in classifying the dancers as employees.”
SFBSC Management LLC, which the complaint says has “management authority and control” over the operations of a number of Deja Vu clubs in California, is a named defendant in the suit along with two Deja Vu clubs in San Francisco.
Ryan Carlson, director of operations for Deja Vu Services, denied the company engaged in any retaliation.
“A business simply can’t pay an employee dancer as much as a contractor dancer could earn, because it incurs substantially increased taxes, benefits, and costs to pay an hourly employee,” Carlson wrote in an email.
“Dancers are earning an hourly wage plus a commission on their sales, and always earning more than minimum wage,” he wrote. “Effectively, they are earning the same percentage of money as before in most cases, but more of it is actually going toward taxes and costs.”
The independent contractor-to-employee transition also generated thousands of dollars in extra administrative costs, Carlson said, causing many of Deja Vu’s clubs to become unprofitable during the change.
“Some of the smaller clubs will have to close because the cost is simply too great,” he said.
Quieter Times at San Diego Club
On a recent Friday afternoon at Deja Vu Showgirls in San Diego, “God’s Plan” by Drake played over the speakers to a near-empty club.
One of the two exotic dancers present waited on stage for more guests to arrive, while the other entertained a visitor in the Hookah lounge.
A dancer who goes by the stage name “Alyssa” said the afternoons have always been slower than the evenings, but they have been even quieter since entertainers like herself transitioned to being employees.
That is because the club can’t afford to pay too many dancers receiving an hourly rate to be on hand if they are not generating a steady flow of money for the club. And Alyssa said guests are less likely to drop by if they are not going to see a variety of dancers.
“There was a customer here the other day who said, ‘Why do I always see you?’” she said.
The mother of three, who has danced at Deja Vu for three years, said she keeps showing up to perform because she has bills to pay and regulars who expect to see her.
But while the dancers used to take home their pay with them as independent contractors each day they performed, they now are paid by check every other week, causing Alyssa to have to monitor her spending much more closely.
“I have to be saving money and waiting for the check,” she said. “I preferred being an independent contractor.”
Dave Sieckman, a manager at Deja Vu Showgirls, said the sentiments expressed by Alyssa were common among the entertainers.
He said a number of dancers have left to perform at other clubs locally and elsewhere that allow them to work as independent contractors. Deja Vu Showgirls used to have upward of 70 dancers it would feature, Sieckman said, but that figure is now in the mid-to-high 30s.
Even before converting the dancers to employees, the dancers were given the option of being employees rather than working as independent contractors, he said.
“The entertainers didn’t take the option,” Sieckman said.
For the dancers who have remained at Deja Vu, Sieckman highlighted that they are benefiting from new flooring, lighting and counters in their dressing rooms.
He also said he has maintained an optimistic outlook about the club’s future amid disappointment about the worker classification changes.
“We are figuring out how to make money in this structure and staying positive,” Sieckman said.
Lively Debate About Gonzalez Legislation
Meanwhile, Liss-Riordan said the dancers’ retaliation suit in San Diego could have resonance beyond what happens at Deja Vu’s clubs and in the broader exotic dancing industry.
The alleged retaliatory conduct at issue could give pause to other employees seeking their rights to proper classification, she said, and undermine the public interest in correct worker classification recognized by the California Supreme Court in Dynamex.
Gonzalez, a San Diego Democrat, wants to codify the court’s decision through legislation, and she has written AB 5 to achieve that goal. She said it is important to take action supporting the decision because others, including fellow lawmakers, have proposed altering its provisions.
“What we are trying to ensure is that working-class and middle-class workers don’t get squeezed by companies coming in wanting to do away with this decision,” Gonzalez said.
An updated version of AB 5 will provide exemptions for certain groups of professionals that have long operated as independent contractors, Gonzalez said, though she does not anticipate exotic dancers will be among them.
Daniels, who is normally in the news for her legal battles with Trump, argued in a recent Los Angeles Times op-ed that exotic dancers need legislation giving them the option of working as independent contractors.
“Many dancers are raising kids, attending school, or engaged in some other demanding pursuit, and we need to be able to work when we want, where we want, making reliable money paid at the end of each shift,” she wrote. “That’s the way it has always worked — until now in California, that is.”
Daniels identified herself in the piece as a spokeswoman for Deja Vu.
Gonzalez responded on Twitter: “Dear @StormyDaniels – if you’d like to really weigh in this bill, come see me. (I’m the author.) Or let’s do a live debate, if you prefer. But this is poppycock. Let’s protect all women. #AB5.”
Other business interests also are planning to fight against Gonzalez’s legislation, arguing that applying the ABC test broadly would hurt both employers and workers desiring flexibility.
The San Diego Regional Chamber hasn’t taken a position on AB 5, but its Small Business Roundtable has raised several concerns about the Dynamex case, said chamber spokeswoman Alison Phillips.
Gov. Gavin Newsom announced during his State of the State speech Tuesday he will appoint a Commission on California’s Workforce & Future of Work tasked with developing “new ideas to expand worker opportunity without extinguishing innovation or flexibility.”
“This, respectfully, is much bigger than Dynamex,” he said.
Liss-Riordan said she fears any legislative action in Sacramento could water down worker protections in Dynamex, including through carve-outs for certain industries. She would prefer to see issues arising from the decision sorted out in the courts.
That is likely to be exactly what happens in San Diego in the coming months as the legal claims she has filed on behalf of strippers move forward.