Most people would agree that being injured on the job would qualify an employee for workers’ compensation. But what if the person injured was an exotic dancer, who could be an independent contractor or an employee?
LeAndra Lewis worked as an exotic dancer, performing five to seven days a week throughout North and South Carolina, dancing at different establishments, including Studio 54 Boom Boom Room (the club) in Columbia, S.C. One night when Lewis was dancing at the club, a fight broke out and she was struck in the abdomen by a stray bullet, which caused severe damage to her internal organs and resulted in the loss of a kidney as well as substantial scarring—which could be devastating for a woman in her line of work.
Lewis filed a claim for workers’ compensation requesting temporary total disability benefits and medical treatment from the date of the accident. A representative of the South Carolina Uninsured Employer’s Fund disputed the claim, arguing that Lewis was an independent contractor not an employee.
At the hearing Lewis argued that the club exercised control over the manner in which her work was performed, and she was therefore an employee. She testified that she earned between $250 and $350 a night, but she had never filed a tax return and had no records of her income from the club or any of the other places where she danced.
A balancing act
The single commissioner holding the hearing found that Lewis was an independent contractor and denied compensation. The appellate panel of the South Carolina Workers’ Compensation Commission affirmed the commissioner’s decision. On appeal, the state court of appeals affirmed the ruling in a split decision, and the case went to the South Carolina Supreme Court.
The Supreme Court explained that in analyzing the nature of a work relationship the court examines four factors: direct evidence of the right to or the actual exercise of control, furnishing of equipment, method of payment, and the right to fire. Each factor is considered “with equal force,” the court said, “and the mere presence of one factor indicating an employment relationship is not dispositive of the inquiry.”
Right to or exercise of control. The court of appeals focused on whether the club dictated how Lewis danced and concluded that because she could choreograph her own routine, the club didn’t control her work. The Supreme Court disagreed, noting that although the club didn’t specify all the details of her movements, it did have requirements that Lewis had to meet before working each night. Before starting her shift, Lewis was required to pay a tip-out fee, undergo a search and review the club’s rule sheet. The club could refuse let her in if her appearance was undesirable. When Lewis began her shift, the club chose the music for all her performances and dictated when in the rotation of dancers she had to appear on stage. The club set the minimum for a VIP dance, which Lewis could not refuse when a customer requested one, and it specified an area for those to take place. If she didn’t perform on stage during her assigned time or left early she had to pay a fine. The court recognized that Lewis had no set schedule, and came when she chose with no other repercussion than the loss of income. Nevertheless, once the club engaged her for the evening, it exercised significant control over the performance of her work, the court said. This factor weighed in favor of a finding of an employment relationship.
Furnishing of equipment. The court of appeals concluded that Lewis’s body was all the “equipment” she needed in her work and she brought that equipment with her. The Supreme Court disagreed, noting that every person brings a body to work; in this case, other than her costume, Lewis brought no other equipment to the club. The club, however, supplied her with necessary performance space, including an area for VIP dances, a stage with a pole, tables and a sound system. Because the club, not Lewis, bore the risk of the capital investment in the equipment she used to perform her work, the court also found that this factor weighed in favor of an employee relationship.
Method of payment. The Supreme Court recognized that the facts of Lewis’s situation were distinct from most workers’ compensation cases in that the club didn’t directly pay her any of her earnings; it “facilitated” the payment she received from the customers. Typically, a court looks to whether the claimant was paid by the job or by the hour and how the claimant filed her taxes. Here Lewis never filed tax returns and didn’t appear to have ever been given a Form 1099, as an independent contractor, or a W-2, as an employee. The court noted that the club exerted some control over her payment, and it set the price of the tip-out fee and the minimum for VIP dances, giving Lewis no discretion to alter these amounts. Nonetheless, the court concluded, this factor indicated an independent contractor relationship.
Right to fire. In examining this factor, the Supreme Court found that the club ultimately had the right to terminate Lewis without risk of repercussions. Although Lewis had the right not to show up at all because she had not set schedule, the court acknowledged, when she was hired for the night, the club could end that relationship before her shift ended and leave Lewis with no recourse for that firing. On balance, the court said, this factor also indicates an employee relationship.
Grand finale: Employee status
The Supreme Court also emphasized that its analysis depended heavily on the particular facts of this case, a little more than usual. “Examining the totality of the circumstances,” the court said, “we hold the weight of the evidence weighs in favor of finding that Lewis was an employee of the club and was entitled to workers’ compensation benefits.”
Businesses—especially those that operate less formally—should be sure to categorize employees correctly. You should review your records and confirm that you can justify your categorization of workers in your organization. If you have any concerns, be sure to consult your broker or workers’ compensation carrier for a list of factors that government agencies, including the Internal Revenue Service, look at to make the employee status determination.
See Lewis v. L.B. Dynasty, 2015 WL 1223710 (S.C. March 18, 2015).