Jury awards $6.5 million to exotic dancers for tips taken & wages unpaid by employer

CUSTOMERS give tips in appreciation for the service of waiters, bellboys, hotel maids, valets, drivers, and even performers who sing and dance. Can employers demand a share of these tips from their employees?
Quincece Hills, a topless and nude dancer at the City of Industry nightclub, Paradise Showgirls, sued the nightclub and its owners, alleging that dancers were misclassified as independent contractors, and made to pay for “stage fees” and uniforms. The dancers also claimed, among other things, that the company failed to pay minimum and overtime wages, failed to provide rest and meal breaks, and that the company illegally took dancers’ tips.
Attorneys for the company argued that the dancers were simply “renting” space at the strip club in order to perform dances. A dancer who charged $40 for a lap dance had to pay $14 to the club, keeping the remaining $26. Dancers who performed in private rooms and charged $300 had to pay the club $100 while they kept $200 for themselves.  These fees supposedly went to pay for the club’s “overhead” such as club cover staffing, security, advertising and marketing.
The attorneys for the dancers countered that this is not how California law works.
California law prohibits employers and their agents from collecting, taking, or receiving any portion of a gratuity given or left for an employee by a patron. “Gratuity” means any tip or money that has been paid to an employee by a patron of a business over and above the actual amount due the business for services rendered or for goods, food, drink, or articles sold or served to such patron. Gratuity also includes any amount paid directly by a patron to a dancer.
Tips properly belong to the employee and not the employer. Although California law allows involuntary tip pooling, the employer can neither share in the tip pool nor credit the tips against the employee’s wages.
An employer may require employees to pool in their tips in order to share these with other staff that provide service.  If a tip pooling is in effect, the tips are to be distributed among employees who provide, for example, “direct table service” such as servers, busboys, bartenders, hosts/hostesses and maitre d’s. This may also apply to other businesses like parking facilities, where the parking attendants can share the tips with the cashiers. However, supervisors, managers and business owners are not allowed to share in the tip pool.
Furthermore, the employer has an obligation to pay the minimum wage plus any tips left for them by patrons of the employer’s business. It is illegal for employers to make deductions from tips or gratuities.
Additionally, an employer who permits patrons to pay gratuities by credit card must pay the employees the full amount of the gratuity the patron indicated on the credit card slip. The employer cannot deduct the gratuity amount for credit card payment processing fees or costs that may be charged to the employer by the credit card company.
Lastly, tips and gratuities are different from the mandatory service charge.  The latter is the amount that a guest is required to pay based on a specified service amount listed on the menu.  For example, the restaurant can charge an additional 10 or 15 percent for groups of 8 or more persons.  These charges are not gratuities or tips voluntarily given by customers to the employees but are owed by customers to the establishment itself.  If the employer chooses to distribute all or part of a service charge to its employees, this will be included in the regular rate of pay when calculating overtime payments for employees.
The issue of the illegal taking of tips from the dancers of Paradise Showgirls was brought before a jury. After the trial, the jury deliberated for about two days, and eventually decided in favor of the dancers, 9-3, awarding the dancers $6,552,477.50. The nightclub indicated it may appeal the jury verdict.

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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost.  Atty. Sayas’ Law Office is located at 500 N. Brand Blvd. Suite 980, Glendale, CA 91203. You can contact the office at (818) 291-0088 or visit  www.joesayaslaw.com. 

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C. Joe Sayas, Jr., Esq. is trial attorney who has obtained several million dollar recoveries for his clients against employers and insurance companies. He has been selected as a Super Lawyer by the Los Angeles Magazine, featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements, and is a member of the Million Dollar-Advocates Forum.