By: Hillel Cohen 

A person hiring another person often faces the question of whether the hiring person’s status is one of employer or independent contractor.  This is an important distinction because employer-employee relationships are bound to minimum wage laws under the Fair Labor Standards Act (“FLSA”), the Maryland Wage and Hour Law (“MHWL”), and the Maryland Wage Payment and Wage Collection Law (“MWPWC”). [1]  The recently decided Court of Appeals for the Fourth Circuit case, McFeely v. Jackson Street Entertainment, LLC, begins to provide a clearer understanding of the definition of an “employee.” [2]

          In McFeely, an exotic dance club requested all hired dancers to sign agreements entitled “Space/Lease Rental Agreement of Business Space” that classified dancers as independent contractors. [3] The dancers claimed that they were employees and sued the dance club for minimum wage. [4]  The court created an economic realities test that contained were six factors to determine whether dancers were employees or independent contractors. [5] The six factors are:

  1.  the degree of control that the putative employer has over the manner in which the work is performed;
  2. the worker’s opportunities for profit or loss dependent on his managerial skill;
  3. the worker’s investment in equipment or material or his employment of other workers;
  4. the degree of skill required for the work;
  5. the permanence of the working relationship; and
  6. the degree to which the services rendered are an integral part of the putative employer’s business. [6]

Yet, the court did note that this was not a bright-line rule, and, each case would be considered based on the totality of the circumstances. [7]

After applying the factors to the present case, the court concluded that the dancers qualified as employees. [8]  The dance club created the work schedule for the dancers, established operating hours that “controlled the stream of clientele,” and paid for all overhead expenses of the dance club, including wages for all non-performing staff.9  Moreover, the dance club warned the dancers not to charge too much money to their customers and enforced many restrictions on the dancers (i.e., no drinking, smoking, or having family or friends visit them during work hours).10  Accordingly, the dancers were entitled to minimum wage under FLSA, MHWL, and MWPWC. [11]

It is important to note that in this specific case, the dance club was successful in raising a “good faith defense” to liquidated damages after September 2011. [12]  In September 2011, the dance club sought legal advice in response to a lawsuit brought by the dancers, and the club was advised to require all dancers to sign an agreement to acknowledge their status as independent contractors. [13]  However, before that date, the court rejected the dance club’s defense because reliance on legal advice is distinct to ignorance of the law. [14]   The court reasoned that ignorance of the law was not a valid defense, because this would create a substantial disincentive to the employer, i.e., no employer would be motivated to learn and conform to governing labor law. [15]

Although, this case involved exotic dancers, it has relevance for all types of workers.  The court’s six factors will likely be cited as a way to determine if a worker is an employee or an independent contractor.  Therefore, a hirer should be keenly aware of how its instituted rules and regulations may alter the hiree’s status of “independent contractor” versus “employee.”


Hillel Cohen is a third-year day student at the University of Baltimore. He servHillel Cohenes as a Staff Editor for the UB Law Forum. His legal interests include real estate and commercial law. He can be reached at Hillel.Cohen@ubalt.edu. You can view his LinkedIn here.

 


See 29 U.S.C §§ 201-219; see also Md. Code Ann., Lab. & Empl. §§ 3-401 to 3-431; §§ 3-501 to 3-509.

2  McFeely v. Jackson Street Entertainment, LLC, 825 F.3d 235 (4th Cir. 2016).

3  Id. at 239.

4 Id.

Id. at 241.

Id.

Id.

Id. at 244.

Id. at 241-44.

10  Id. at 241.

11  Id. at 244.

12  Id. at 245.

13 Id.

14 Id.

15 Id.

 

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