Verma v. 3001 Castor, Inc. - 937 F.3d 221 (3d Cir. 2019)

Rule:

The U.S. Court of Appeals for the Third Circuit uses a six-factor test to determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act. Pennsylvania courts use the same test under the Pennsylvania Minimum Wage Act. Those factors are: (1) the degree of the alleged employer's right to control the manner in which the work is to be performed; (2) the alleged employee's opportunity for profit or loss depending upon her managerial skill; (3) the alleged employee's investment in equipment or materials required for her task, or her employment of helpers; (4) whether the service rendered requires a special skill;(5) the degree of permanence of the working relationship; and (6) whether the service rendered is an integral part of the alleged employer's business.

Facts:

Dancers at the Penthouse Club, a nightclub in Philadelphia operated by 3001 Castor, Inc., were classified into two categories: “Entertainers” and “Freelancers.” “Entertainers” were required to commit to working at least four days per week and submit a weekly schedule. Both “Entertainers” and “Freelancers” signed an agreement stating that they were independent contractors. Dancers at the Club worked in shifts, whereby each dancer had to “rent” stage time for each shift she worked. The rates for the “stage-rental” fees varied depending on the shift and were lower for Entertainers than for Freelancers. The Club did not pay dancers a wage; their compensation consisted entirely of “tips” they received when dancing on stage or fixed “dance fees” at rates established by the Club, which they received from giving "private dances" in the private dance rooms. The Club provided training to the dancers and closely reviewed their attendance, appearance, demeanor, and customer service. It also had a strict set of rules the dancers must follow. In 2013, Priya Verma, a dancer at the Club, filed the present action against Castor on behalf of herself and similarly situated current and former dancers at the Club. She alleged claims for minimum wages and overtime under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 206(a), 207(a), 216(b), analogous claims for minimum wages and overtime under the Pennsylvania Minimum Wage Act ("PMWA"), 43 Pa. Stat. §§ 333.104 & .113, a claim for non-payment of wages under the Pennsylvania Wage Payment and Collection Law, 43 Pa. Stat. § 260.9a, and a claim for unjust enrichment under Pennsylvania common law. The jury returned a verdict awarding the class more than $4.5 million: $2,610,322.61 for its minimum wage claims and $1,948,400.12 for its unjust enrichment claims. Castor filed post-trial motions asking the Court to dismiss the suit for lack of jurisdiction, to reconsider its summary-judgment rulings, and to enter judgment for Castor as a matter of law. The Court denied the aforementioned motions and entered final judgment on the verdict. Hence, the current petition.

Issue:

Were the dancers at the Penthouse Club “employees” of the Club rather than independent contractors, thereby entitling the dancers to minimum wages?

Answer:

Yes.

Conclusion:

The Court upheld the finding that a class of dancers were employees rather than independent contractors under the six-factor test because other than choosing shifts, the club exerted overwhelming control over the performance of their work; the dancers' skills were not the kinds of managerial skills that could weigh in favor of independent-contractor status; the dancers' investment was minor when compared to the club's investment; appearance, social skills, and hygiene did not qualify as special skills; the dancers rendered a service that was integral to the club's business; and permanence of the relationship did not cut so strongly in the direction of independent contractor status as to come close to outweighing the other five.