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Tyad, Inc. v. Independent Contractor Central Unit

Court of Workers Compensation of Montana

April 8, 2005

TYAD, INCORPORATED, A MONTANA CORPORATION, d/b/a THE PLAYGROUND LOUNGE AND CASINO Petitioner
v.
INDEPENDENT CONTRACTOR CENTRAL UNIT Respondent/Insurer.

          Submitted: March 29, 2005

          FINDINGS OF FACT, CONCLUSIONS OF LAW AND JUDGMENT

          MIKE McCARTER JUDGE

         Summary: Five exotic dancers filed wage claims against the establishment where they danced. The claims were referred to the Independent Contractor Central Unit (ICCU) of the Department of Labor and Industry for a determination as to whether they were employees or independent contractors. After the ICCU determined they were employees, the establishment petitioned the Workers' Compensation Court for a de novo determination.

         Held: (1) Under a 2001 amendment to the Workers' Compensation Act, the Workers' Compensation Court has jurisdiction over independent contractor disputes involving not only workers' compensation and unemployment insurance issues but also those involving wage claims. § 39-71-415(3), MCA (2001-2003). (2) Where a strip club controls the daily times dancers perform, provides significant equipment and services essential to the dancers performing, and can terminate dancers at any time without liability simply by giving written notice, the dancers are employees, not independent contractors.

         Topics:

Jurisdiction: Independent Contractor Disputes. Under a 2001 amendment to the Workers' Compensation Act, the Workers' Compensation Court has jurisdiction over independent contractor disputes involving not only workers' compensation and unemployment insurance issues but also those involving wage claims. § 39-71-415(3), MCA (2001-2003).
Constitutions, Statutes, Rules, and Regulations: Montana Code Annotated: 39-71-415(3), MCA (2001-2003). Under a 2001 amendment to the Workers' Compensation Act, the Workers' Compensation Court has jurisdiction over independent contractor disputes involving not only workers' compensation and unemployment insurance issues but also those involving wage claims.
Independent Contractor: Right of Control. Where a strip club controls the daily times dancers perform, provides significant equipment and services essential to the dancers performing, and can terminate dancers at any time without liability simply by giving written notice, the dancers are employees, not independent contractors.

         ¶1 The trial in this matter was held in Great Falls, Montana, on March 29, 2005. The respondent was represented by Mr. Brian J. Hopkins. Its president, Mr. David Blackwell, was also present. Respondent was represented by Mr. Arthur M. Gorov.

         ¶2 Exhibits: Authentication objections made to some exhibits were withdrawn and all exhibits were admitted with the proviso that the Court will consider only relevant documents. The Court noted that many of the documents, such as the determinations of the Wage and Hour Unit, appear largely or wholly irrelevant to the present proceedings and also noted that the Court's jurisdiction in this case is de novo, thus the prior findings and conclusions of the Independent Contractor Central Unit are not entitled to weight or deference in the Court's deliberations and decision.

         ¶3 Witnesses and Depositions: David Blackwell, Sharon Peterson, Chad Taylor, Renne Smith, and Billy Young testified. No depositions were submitted.

         ¶4 Issues Presented: The issue, as stated in the Final Pretrial Order, is as follows:

Whether the exotic (topless and nude) dancers performing at the Playground Lounge in Great Falls were independent contractors or employees.

         (Final Pretrial Order at 5.) While the parties have further parsed that issue, that parsing simply invokes the independent contractor analysis required under section 39-71-120, MCA (2001-2003).

         ¶5 Having considered the Final Pretrial Order, the testimony presented at trial, the demeanor and credibility of the witnesses, the exhibits, and the arguments of the parties, the Court makes the following:

         FINDINGS OF FACT

         I. Background

         ¶6 The issue in this case is whether five "exotic dancers" who filed wage claims against the Playground Lounge and Casino (Playground) in Great Falls, Montana, were employees of that establishment. The Playground contends that the claimants, and other similarly situated dancers, were independent contractors.

         ¶7 The Playground is a bar and casino that offers adult entertainment, viz., strip shows where the dancers remove their clothes during their dances, concluding their dance routines either wholly nude or topless.

         ¶8 The Playground revenues are derived from cover charges for entrance into the establishment, from selling drinks to its customers, and from poker and other licensed gambling machines on the premises.

         ¶9 Since 2001, the Playground has been owned and operated by the petitioner herein, TYAD, Incorporated (TYAD). TYAD also owns and operates an adjacent establishment known as the Loading Zone Bar and Casino. Only the Playground is involved in the present case.

         ¶10 Since 2001, the Playground's overall operations have been managed by David Blackwell (Blackwell), a shareholder and the President of TYAD. However, Blackwell has had little contact with the dancers, delegating primary responsibility for dealing with dancers to the Playground's disk jockeys (DJs). The DJs play recorded music for the dancers' dance routines and have daily contact with the dancers. They are responsible for obtaining the signed rental agreements discussed hereinafter, enforcing the Playground's rules, and settling disputes among the dancers.

         ¶11 Since TYAD's takeover in 2001, the Playground has used the services of 100 to 125 dancers. Since it may have only a dozen or so dancers at any one time, it is apparent that the rate of turnover is high.

         ¶12 Upon taking over the Playground, TYAD employed dancers, paying them wages and withholding taxes from their pay. However, it encountered difficulty in hiring and retaining dancers. Some dancers wanted to work only for a couple of days and others did not wish to furnish sufficient identification to allow the Playground to file the necessary forms to effect employment. After approximately eight months of ownership, Blackwell and TYAD decided to move to a new arrangement with its dancers.

         ¶13 Under the new arrangement, as reflected in the written agreements found at exhibits 5, 6, 11, 12, 17, 22, 23, 28, and 42-44, the Playground rented its stage to dancers for a fixed fee per day paid by the dancers to the Playground. The fee structure changed over time, as discussed below in paragraph 34.

         ¶14 Between November 13, 2003, and January 20, 2004, five dancers who had worked at the Playground filed complaints with the Department of Labor and Industry (DLI) seeking payment of wages for all hours they worked. (See Exs. 34-38.) Based on the hours each individual worked, the wages sought ranged from $2, 782.00 to $16, 860.80. (Id.) The dates the dancers worked encompassed January of 2003 to November 2003. The Wage and Hour Unit referred the matter the Independent Contractor Central Unit (ICCU) for a determination as to whether the dancers were independent contractors.

         ¶15 On March 2, 2004, the ICCU determined that the five dancers were employees, not independent contractors. (Ex. 29.) TYAD requested a redetermination and then appealed the decision to mediation. (Exs. 30-31.) Following mediation, it filed a petition with this Court asking the Court to determine the status of the five complainants. Additional facts germane to the controversy are set out below.

         II. Rental Agreements Made Compulsory for Dancers

         ¶16 Upon deciding to utilize the stage rental agreement, the Playground required all of the dancers theretofore employed by it to sign the rental agreements and agree to work as independent contractors. Any dancer not agreeing to the arrangement was not allowed to work at the Playground. The terms of the agreements were dictated by TYAD and the Playground and were non-negotiable.

         ¶17 While utilizing the rental agreements with its dancers, other persons working at the Playground, including security personnel (bouncers), bartenders, and DJs, were treated and paid as employees. At present the Playground has thirty-two employees, a number that does not include any dancers.

         III. Facts Pertaining to Independent Trade, Occupation, Profession, or Business

         ¶18 The stage rental agreements in all of its iterations expressly provides that each dancer is an independent contractor, not an employee. (Exs. 5, 6, 11, 12, 17, 22, 23, 28, and 42-44, ¶¶ 6 and 9.) In the recitals, the agreements further state:

Renter is an exotic dancer, who offers her services as such to a variety of business establishments in Montana or elsewhere, and who desires to use a portion of TYAD's place of business for that ...

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