Penthouse Executive Club Settles Wage and Hour Lawsuit with Dancers for $8 Million

On January 1, 2014, the United States District Court for the Southern District of New York issued an order approving an $8 million settlement in a wage and hour lawsuit brought by adult entertainers Leslie Liwanag and Nicki Mpogiatzis, on behalf of themselves and others similarly situated, against the Penthouse Executive Club and its individual owners and executives. In their complaint plaintiffs note that while “entertainers in adult clubs like the Penthouse Executive Club have made some strides by winning recognition as employees and otherwise protecting their workplace rights…the adult entertainment industry in New York City and elsewhere remains largely out of compliance with basic worker protection statutes.” Plaintiffs alleged in their complaint that the Penthouse Club violated the FLSA and New York Labor Law by misclassifying them as independent contractors, failing to pay them the minimum wage, failing to pay them overtime for hours in excess of 40 per week, and requiring them to purchase and maintain their uniforms. In addition, the club withheld a portion of dancers’ tip money, partly by encouraging patrons to pay tips using fake “executive dollars” purchased from the club, and distributed some of this money to other employee. Finally, the Penthouse Club required dancers to pay “house fees” as if they were independent contractors renting their poles.

The 1,230 potential class members in the 2013 lawsuit are “all individuals who perform or performed at the Penthouse Executive Club as entertainers from on or about January 1, 2004 through June 12, 2012, including any individual who has signed an ‘Entertainer License Agreement’ or any other agreement containing a class or collective action wiaver,” and the Court agreed with the plaintiffs i) that collective action was appropriate in this case, ii) that the parties had engaged in extensive and sufficient negotiation with qualified mediators leading up to the agreement, iii) that settlement was preferable to the costs and risks associated with litigation, and iv) that objections to the settlement by class members were few and did not outweigh the interests of the majority.

From the settlement fund, each of the named Plaintiffs in the case will receive a $15,000.00 service award, and one opt-in Plaintiff will receive an $8,750.00 award in recognition of the services they rendered on behalf of the class. 27.1875% of the fund will be paid to Plaintiffs’ counsel, along with an additional $57,729.00 in litigation costs and expenses. This leaves about $5.7 million to be distributed among class members according to an agreed allocation plan.

In his order granting the Plaintiff’s Motion for Approval of the Class Action Settlement, the Judge noted that, if the case had gone to litigation, the Defense would have been likely to argue that the Plaintiffs were in fact independent contractors. However, in the Complaint the Plaintiffs preempt this defense with an impressive enumeration of the kinds of control the Penthouse Club exercises over its dancers–everything from gum chewing to shoe height to subjects they can discuss with customers. It is reasonable to infer from their willingness to agree to a large settlement that the Defense was not confident that a jury would agree that strippers are independent contractors rather than employees.

If you are an employee and you believe your employer has violated your rights under the FLSA, please contact The Harman Firm, LLP.